The Spirit Level written by Richard Wilkinson and Kate Pickett argues that almost every social problem common in developed societies – reduced life expectancy, child mortality, child well-being, drugs, crime, homicide rates, mental illness and obesity – has a single root cause, inequality of income and wealth.

They measure equality (or inequality) as the difference between the richest and the poorest 20% of the population. New Zealand has the sixth biggest gap between the richest and the poorest out of 23 rich countries that were included in the authors’ study. It was embarassing to read that New Zealand rates highly in many of the social problems above.

The other English-speaking democracies – UK, USA, Canada and Australia – are highly unequal as well with the USA not only having the highest inequality but also rating highest on most of the social problems studied.

The countries with the least inequality – such as Norway, Sweden, Denmark and Japan – also have the lowest rates of social problems.

Whilst most of the book is given to describing and explaining how the social problems correlate to income inequality, which makes for sobering reading, the part that interested me most was their opinion on solutions.

Their belief is that economic growth not only creates inequality it also hides it. Right-wing apologists often pontificate that ‘a rising tide raises all boats’. This might be true but it hides the real problem which is that it doesn’t raise all the boats equally. The problems of society are not caused by average or total wealth but by relative wealth. Wilkinson and Pickett go to lengths to explain that the problems they describe are caused by inequality and that there is no correlation between average per capita income and their index of social problems.

A solution they suggest is to get rid of the ideology of growth and the profit motive which only benefits the rich minority. Instead wealth should be distributed within a steady-state economy. They suggest that redistribution could be achieved in a number of different ways such as having more equal incomes in the first place (like Japan) or through increasing welfare benefits and progressive taxes, and by plugging tax loopholes for businesses (as in Sweden, Noway and Denmark). An example would be the so-called Robin Hood Tax where a tiny tax is put on all financial transactions. The ultimate solution would be a combination of solutions.

The authors suggest that one way to equalise incomes is through the democratic employee ownership of businesses. They quote Robert Oakeshott, a British authority on employee-ownership who says it ‘entails a movement from business as a piece of property to business as a working community’. An employee-owned business provides greater equality by extending liberty and democracy. In other words it is a bottom-up approach as distinct from a top-down approach like increasing taxes and welfare benefits.

The authors make the point that a democratic employee-owned business may allow for the CEO to receive several times the average wage of all the employees but they wouldn’t agree to a CEO salary which is hundreds of times the average as is the case in many large corporations of today – which are obviously far from democratic.

From a sustainability perspective a more equal, steady-state economy would have much higher levels of well-being at the same time as using less resources and generating less waste.

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Read the NZ Herald article: Wealth gap divides nation