Inequality harms our economy
During the referendum debate, a Yes vote was commonly thought of as a vote from the heart whereas a No vote was a vote from the head. In the final weeks, when the polls began to tighten, this feeling was compounded by the intervention of business leaders, international officials and celebrity economists. Many of these perceived voices of wisdom were coerced by a panicky UK government, their voices amplified by a defunct and subservient media. Even just before the vote there were a substantial number of undecided voters. One suspects that those who were torn may have opted for the perceived safe option based on economic worries.
I’m not going to discuss the relative risks of a Yes v No vote as these issues we discussed in detail before the referendum. An extensive risk assessment of each choice can be found here. There is no doubt that the Yes campaign should have presented a stronger economic plan, especially with regards to currency. That said, there were plenty of prominent neutral, influential and under-reported voices saying that an Independent Scotland would be a success. Joseph Stiglitz and Martin Gilbert to name but two. The truth is there was no way to know for sure if Scotland would be better off or not in standard measures of wealth. The future is unpredictable and economic forecasts are notoriously inaccurate. However, by focusing on comparing rUK finances with Scottish finances post referendum the Yes campaign may have played into the hands of Better Together. It may have been more expedient to acknowledge a more fundamental truth, it’s not the size of your economy that matters but what you do with it.
There is no dichotomy between heart and head. All decisions are made in the brain and those decisions are a culmination of an interplay between reason and emotion. One common thread running through most of the Yes campaign was moving towards a country that was more equal. This was to be achieved by having a more representative and less corrupt political system. The desire of Yes voters to live in a fairer society may have a strong emotional element. However, there is growing scientific evidence to show that the more equal a country is, the better off its citizens are. This short video explains this.
We worry too much about growth in this country. What is the point of increasing GDP if most of the wealth is in the hands of a few people? GDP also increases when negative things are happening. War and natural disasters can raise GDP but not many would think these to be a good thing.
In more equal nations like Japan and the Scandinavian countries, the standard measure of income inequality is half of what it is in the UK. This is a measure of how much more the top 20 percent earn compared to the bottom 20 percent. There is a strong correlation between being more equal and performing well in term of life expectancy, homicide rate, trust, education, imprisonment, obesity, infant mortality, teenage pregnancy and mental illness.
When a similar graph is drawn between indexes of health and social problems and the GNP of a country(per head) then there is no relationship at all. Above a certain level a country’s overall wealth is less important than how that wealth is distributed.
What is interesting is that, while the poorest benefit most from reducing inequality, research has shown that society as a whole can benefit.
Due to the growth centric economic model we follow the UK has become more and more unequal over the last three decades. This is ironic as there is evidence that inequality stunts growth. The Yes campaign was defeated at the ballot box, although the dream of independence is still alive and kicking for many. This dream will grow as the gap between the top and the bottom widens. There are two ways to decrease the gap; you can tax the rich more, as in Sweden, or you can have less of a pay gap, as in Japan. It is unlikely that the UK will make the radical changes it needs in order to stop support for Scottish Independence increasing. If a second referendum happens we need to have a stronger economic plan, especially in terms of currency. More importantly, in the intervening years we also need to push the scientific case for more equality being better for all. This is a topic where heart and mind can work in perfect harmony.
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Image by kaptainkobold