Two of the most brilliant economic journalists who write regularly for the FT are Michael Prowse and Amity Shlaes (both around 40 years-of-age I would judge from their photos). Michael Prowse used to write from America until a year or so ago but is now based here; Amity Shlaes is American (I think). Michael Prowse used to be right-wing but is now a leftie; Amity Shlaes might have been a leftie when younger for all I know, but is certainly a rightie now. This is by way of saying that their views are totally opposite from each other's! I've been busy for the last few days and have only just got round to reading a feature in the week-end issue, "Is inequality is good for you?", in which they both put forward their own answer to the question.
<<<< Is inequality is good for you? -- No Michael Prowse We have grown accustomed to the health warnings issued by surgeon generals. "Smoking causes lung cancer" is no longer a controversial proposition. But recent epidemiological researhc suggests that finance ministers, too, may some day be required to issue health wranings. There are good reasons to believe that policies that promote great economic inequality -- such as budgets that slash top tax rates -- cause higher rates of sickness and mortality. The adverse physiological consequences of absolute poverty have long been understood. We know poor nutrition, damp housing, lack of heating, excessive working hours and pollution cause a higher incidence of many diseases and chronic disorders. Policymakers understand the argument for trying to eliminate these gross forms of material deprivation, even when they lack the will or capacity to enact the necessary legislation. By contrast, the argument that economic inequality in itself causes sickness and premature death remainas controversial. But the case is persuasive enough to deserve a wider public hearing. It implies that governments need to rethink their policy objectives: to worry less about the sum total of material output and more about the way that income and wealth are distributed. It implies that if greater efforts are not made to counter growing inequality, the incidence of cancer, heart disease and other chronic disorders will remain needlessly high, regardless of the lebvel of gross domestic product. In Britain these arguments are most closely associated with Richard Wilkinson, a professor at Nottingham University's medical school. Wilkinson has spent much of the last two decades painstakingly assembling the evidence for a link between inequality and sickness. But researchers elsewhere, such as Ichiro Kawachi and Bruce Kennedy of the School of public health at Harvard University, have independently confirmed many of his claims. Those who would deny a link between health and inequality must first grapple with the following paradox. There is a strong relationship between health and incomes within countries. Within any nation you will find that people on high incomes live longer and have fewer chronic illnesses than people on low incomes. Yet, if you look for differences between countries, the relationship between income and health largely disintegrates. Rich Americans, for instance, are healthier on average than poor Americans, as measured by life expectancy. But, although the US is a much richer country than, say, Greece, Americans on average have a lower life expectancy than Greeks. More income.it seems, gives you a health advantage with respect to your fellow citizens, but not with respect to people living in other countries. We lack data on the the relative health of the richest tiers in different countries, but it would not be surprising if even the wealthiest Americans paid a personal price for their nation's inequality. The solution to the paradox, argues Wilkinson, cannot be found in difference in factors such as quality of healthcare, because this has only a moderate impact on health outcomes in advanced nations. It lies rather in recognising that our income relative to others is more significiant for our health than our absolute standard of living. Relative income matters because health is importantly influenced by "psychosocial" as well as material factors. Once a floor standard of living is attained, people tend to be healthier when three conditions hold: they are valued and respected by others' they feel "in control" in their work and home lives; and they enjoy a dense network of social contacts. Economically unequal societies tend to do poorly in all three repsects: they tend to be characterised by big status difference, by big differences in people's sense of control and by low levels of civic participation. In market societies, the wealthy regard themselves as "winners" in life's race. They enjoy high social status and considerable autonomy, both in the workplace and in their domestic lives. By contrast, people on low or loderate incomes are made to feel like "losers". They have no symbols of affluence to flaunt, they occupy subordinate positions in thenworkplace and face a great deal of unc ertainty and insecurity. The way this humiliating lack of status and control weakens their health is by putting them under much higher levels of stress than the better-off. One of the signs that people are under intense stress is the prevalence of behavioural pathologies such as obesity, alcoholism and drug addiction. Sweet and fatty foods may well serve as natural anti-depressants. That millions of prescriptions for Prozac and other mood-altering drugs ar also sold just confirm that unequal, competitive societies generate high levels of anxiety. A steep social health gradient is statistically visible even among the relatively privileged. In a study of british civil servants (where rank is precisely defined by a grading system), researchers found that junior support staff were four times as likely to die of heart disease as the most senior administrators. EWven allowing for all the usual risk factors such as smoking, alcohol consumption, high blood pressure and cholesterol, some 60% of the difference in death rates were unexplained. The sheer number of different illnesses in which health inequalities are rcorded is another reason for believing that psychosocial effects are real. Some 65 of the 78 most common cause of death in men are more common in manual than in non-manual workers. A factor that adversely affects all manual workers -- such as lack of social status and autonomy -- seems more likely to explain their greater vulnerability to so many different illnesses than any physical cause. Experiments with other primates also appear to support Wilkinson's arguments. For instance, researchers have manipulated the social status of macaque monkeys, while golding diet and other factors constant. They have put high-status monkeys from different troupes together so that some would have to decline in status. The stressed-out socially-downgraded monekys got ill and and died prematurely in just the same way as socially marginalised humans. A quirky item of medical history -- uncovered by Robert Sapolsky, the biologist -- is also suggestive. In the century to 1930, corpses dissected in Lodnon medical schools were nearly always those of paupers. On the basis of these dissections, anatomists estimated the size of the human adrenal gland. When they occasionally saw the adrenal glads of the better-off, they found that they were often oddly small, and they invented a new disease -- "idiopathic adrenal atrophy" -- to explain the discrepancy. It was, of course, the adrenal glands of the paupers that were artificially enlarged: a result of lives lived under unremitting stress. Inequality is associated with higher mortality in another strriking way: through its impact on hiomicide rates. Internation studies have confirmed what the casual tourist has always know: uneual societies tend to be violent. Thuis Sweden and Japan have among the most egalitarian income distributions of developed countries, and they have correspondingly low homiide rates. The US is one of the most unequal and also the most violent. Kennedy and Kawachi, of Harvard University, found the same close correlation between violence and inequality among the 50 US states. The greater the disparity in hosehold incomes, the higher the state homicide rate. Significantly, the relationship between property crime (such as burglary) and inequality is much weaker than the relationship between violent crime and ineuality. Why is this? The answer, according to Wilkinson and his US collaborators, is that violence is a social crime in a way that others are not. It reflects not a desire for personal gain but a perverse expression of the universal human desire for respect. They quote American prison psychiatrist, James Gilligan, who wrote in a book on violence: "I have yet to see a serious act of violence that was not provoked by th experience of feeling shamed and humiliated, disprespected and ridiculed." Violence is thus frequently an attempt to assert status on the part of those who feel they have no non-violent ways of commanding the respect of others, often because they are unskilled and illiterate and so incapable of advancing economically and socially. Covernsely, greater income equality is linked, internationally and within the 50 US states, with increased levels of social trust. In his influential research on civic participation, Robert Puttnam, the US sociologist, uncovered a strong correlation between equality and "social capital" (his composite measure of the degree to which people bond together socially). The link makes sense. If people think of themselves as the equals of others, they are surely more likely to be public-spirited and to participate in civil and political projects. Participation matters because research indicates that people's vulnerability to illness increases with social isolation. There is one piece of the puzzle still missing: how and why does socially induced stress ansd anxiety cause higher rates of cancer, hear tdisease and other degenerative disorders? The answer comes in two parts. Our pre-human ancestors evolved methods for coping with sudden physical threats -- the so-called "fight or flight" response. This mobilises energyu for muscular exertion by diverting resources from biological "house-keeping" functions -- tissue maintenance and repair, immunity, growth, digestiona dn reproduction -- inessential for a rapid response to danger. When the threats are short-lived, theis liversion of physiological effort does lasting harm. But with the chronic stress caused by feeling of social and economic inferiority, the body is put onto a war footing for months or years. The health cost of neglecting the house-keeping functions escalate rapidly. In effect, stressed-out social inferiors epxerience faster ageing than their more fortunate rivals. But why didn't our ancestors evolve ways of coping with socially induced stress? A possible answer is that stark differences in wealth and status are relatively recent. They probably date from only the beginnings of agriculture. Today's highly-competitive world reflects something that has emerged, metaphotically speaking, only tin the last few minutes of humand history: capitalism. For the great majority of human pre-history we were bunters and gatherers, and we lived in small egalitarian groups. We shared food and we reached decisions in a consensual manner. No wonder, then, that capitalism makes people feel so ill. The significance of these ideas shouldn't be underestimated. They reveal the true poverty of the "don't mind the gap" argument that now finds favour even with centre-left political parties such as New Labour: the argument that inequality as such does not matter so long as we do something for the poorest. Economic inequality is correlated with status differentials, with declining civic participation, and with lack of control for those at the bottom of hierarchies. Such adverse social environments create high levels of stress, anxiety and insecurity as well as feelings of shame and inferiority. And these, in turn, cause higher rates of serious illness and death, including death as a result of violent crime. Unequal societies, in other words, will remain unhealthy societies -- and also unhappy societies -- no matter how wealthy they become. Their advocates -- those who see no reason whatever to curb ever-widening income differentials -- have a lot of explaining to do. >>>> <<<< INEQUALITY IS GOOD FOR YOU By Amity Shlaes "More even distribution of wealth is key to growth," read the headline from this autumn's Latin American business summit in Brazil. The speaker whose words it described was Felipe González of Spain. The former prime minister went on to say that this was not a moral issue but a practical one. The developing world needed to become more "equal" like the developed one. But the idea that growth is necessarily associated with economic equity is a fallacy. And, despite the picture González sought to project, all is not entirely equal within each developed nation. Indeed, the most developed of all developed nations, that growth powerhouse, the US, is actually a veritable model of social and economic inequity. The ineuity starts with the most obvious of measures, income: in New York city today, there are people who cannot afford $1.50 for a subway ride and people who can order up a trip to the Turks and Caicos on the old Gulfstream with their mobile. Then there are disparities in healthcare: the nprosperous cancer sufferer may survey the rooftops of the city from his blanketed deathbed on Memorial Sloan-Kettering's marbled upper floors, whereas the poor cancer sufferer may have trouble getting his foot in the door and on to the grimy floor of a Brooklyn emergency room. Still, such evidence, so often rehearsed by America's critics, begs and important question: Is this inequality actually bad? No, one can argue. In fact, US inequality has been good. That is to say that inequality has benefited all of US society, first the fat cats and then, eventually, the poorer members. One can even argue that American inequality has benefited the rest of the world, including many of America's habitual critics. The line of reasoning here is a straightforward one. The US has been, and remains, a society that is based upon the very Jeffersonian notion of equality of opportunity. The US is also genuinely committed to the possibility of social mobility. This, however, does not mean the country usually endorses or works to generate equality of result, especially not for individuals. And the very same features that make individual Americans' results so disturbingly unequal are the ones that promote growth, which is the best social welfare programme of all. Inequality, for starters, means that somebody is on top. And the opportunity for somebody to be on top, especially in a big way, especially in the richest country in the world, is a powerful draw. Any talent that has the poor luck not to be born in the US therefore considers, at least at one or the other point in his life, the possibility of immigration to the States. These talents are not always the sweetest and calmest of people. One of the mottos of Andy Grove, the Hungarian-born immigrant who built Intel, is "Only the Paranoid Survive". This is not the motto of an egalitarian. In addition to this draw, the raw meat of the opportunity to compete, we can count a number of other opportunities that attract the sharks of innovation to the US. None of these advantages is linked, in the international brain, with the idea of economic equity throughout life. Rather the reverse. The first is the US tax regime. America's tax regime is seriously progressive. The top 5% of earners pay more than 50% of all the income taxes in the States. The bottom 50% of the earners pay only 4% of such taxes. Still, what matters here is relative position. Overall, when you count every sort of tax, the US regime is simply less confiscatory than that of Europe or neighbouring Canada. This has the (highly unfair) consequences of allowing people who are rich to keep more of their money. But it also makes teh States an investor's destination. And this ensures that growth tends to happen more in the US than elsewhere. The notion of relative tax competitiveness is not merely blithe Reaganite theory. Indeed, the US in recent decades saw a rather dramatic dmonstration of the role tax rates play in growth. In the late 1980s, US tax rates were high. Capital gains were taxed at an effective rate of 49%. Venture capital was dead in the water. And the economic forecasters so uniformly predicted Japan's future technology dominance that the Japanese national image of a rising sun was a cliché of the business press. But then the US cut tax rates -- both the crucial capital gains tax, and individual rates as well. The capital gains rate cut was followed by an explosion of venture capital in high-tech Silicon Valley. The individual rate cuts helped US business across the land. The technology revolution occurred in the States and not in Japan. The there are America's regulatory and legal regimes, again not necessarily the fairest in the world, at least of you use the word "fair" in the Continental sense. US patent and trademark law to protect private property pretty rigorously. This has had the "unfair" consequence of making many products expensive to poorer citizens. The most famous of such products are the costly components of the Aids cocktail. Still, America's opportunity for profit afforded by patents is why the great share of Aids drugs were first invented and marketed in the USD and not elsewhere. Next comes the ineffable matter of culture. In Europe and Japan both, the schools are openly and officially elitist: track systems ensure that the best talents are concentrated together from an early age. In the US, by contrast, the system for pre-university education is nominally egalitarian. Tracking exists, but American schools are still more like UK comprehensive schools than like a German gymnasium. Still, US schools fo have one highly inegalitarian feature that promotes innovation. It is, oddly enough, neglect. Specifically, neglect that permits play. When, as in Europe or Japan, you have a rigorous elementary school system with a "rap on the knuckles" approach towards mistakes, you end up producing mor or less one kind of student: the cautious but uninspired thinker. Everyone is soemwhat well-trained -- perhaps not as well-trained as in the past, regretfully. But nonetheless.generally meeting a basic cultural standard. But what about when you have a system like America's, wildly uneven and often outright neglectful? Then, you generate, as America does, many painfully uninformed idiots who cannot run a cash register. But you also generate a few creative geniuses. That's because intelligent American teenagers do not have to spend their teen years bent over books preparing for a uniform national exam as they would in Europe, the UK or Japan. Instead they find their way by themselves, playing Ninetendo games, building fighter robots and generally getting up to mischief wile their inefficient schools and indifferent parents are not looking. This, as it turns out, is the ideal preparation for software writing and other growth fields. How very profitable for the economy, and how very unequal. The growth that America's innovation-friendly environment generates benefits innovators in the first order. But there are only so many TiVos and Vail homes that a rich fellow in a rich economy can accumulate. He therefore uses the rest of his money to create jobs. The net effect ebenefits all players in America's famously variegated society. In other words, as hackneyed as it may sound, the old saying is true: in American waters, a rising tide does lift all boats. The lifting has been especially visible in the area of health. In 1968, the average life expectancy for the 65-year-old American was 15 more years: he would reach the age of 80. By 1970, that had risen to the age of 81, and by 1966 our old man could expect to live to 83. At the other end, US infant mortality rates in 1970 hung at around 20 per 1,000 live births. Thirty years later, that figure was closer to 10 per 1,000. US teen drinking rates were as high as 50% back in 1979; in 1997, they are 21%. One in three US teens smoked 30 years ago; in 1997 something like 20% did. America's poor have a terrible problem, but it is not -- except in some tragic pockets -- having too little to eat. It is obesity. As last month's lawsuit against McDonald's reflects, the majority of poor Americans are too fat. Great gains in personal wealth have accompanied these health gains. In 1947, the year wealthy America was putting together the Marshall Plan for an impoverished Europe, the median US household income was $20,107. (These figures are adjusted for inflation.) In 1972, the median income for the family was closing in on $40,000. By 1997, it was $44,568. America, in other words, is not a petrified society, where income striations are set for eternity. Mr or MsEveryday has, quite simply, done better. US minorities, to be sure, are not as wealthy as white. Again, we may ask: does this really matter? The answer is "Yes" but not nearly so much as another, more important question: How are minorities doing relative to how they have done before. And here the data are more than encouraging. Black home ownership rose to 47% of households in 2000, up from 42% in 1990. Today, half of black cancer patients survive five years or longer, compared with only one third of blacks in the early 1960s. Black infant mortality rates are now around 20 per 1,000 live births, or half the 40 per 1,000 of the 60s. There has also been astounding progress for black peope in the area of education. While in the 1840s blacks had on average about half of the number of school years behind them as whites, today the median number of school years completed for 25 year olds of the two ethnicities is, at 13, identical. For women there is a similar story of narrowing gaps. The domestic benefits of US inequality are, of course, not the only benefits. The innovations that the US generated are valuable to the rest of the globe. We see a particularly spectacular demonstration of this in the current battles over Aids drugs. At issue is whether the unfair old US will release the patents of these drugs so that poorer nations may have access to them to slow the wild spread of the disease. But it is important to remember that the world would probably not have Aids drugs at all if US health care did not have a large private health sector compoentn and ifthe US did not have secure patent and property rights. These drugs were mostly not developed in Europe, the land of rpice controls and regulation; and they were certainly not developed in India, where patent rights are so weak. When it comes to drugs, the rest of the world is a free rider beneficiary of America's notoriously unfair, selfish pharmaceutical industry. But that, in a way, is merely the micro argument. The macro argument is one that has only become indisputably clear since the mid-1980s, with the recognition that the Soviet Union was growing anywhere near as fast asd the official data suggested. What became clear in that period, and afterwards, is that free markets are the only path to growth. A country may strike compromises along the way, as the nations of Europe have done. But this also means recognising that growth has been sacrificed in that compromise. What this means is that America's inegalitarian system of free markets has been its greatest export. And that very inequality that leaders such as Mr González complains of is due not to insufficient redistribution of extant wealth, but to insufficient penetration of free market systems in the developing world. Or, as the Danish author, Johan Norberg, put it recently: "The uneven distribution of wealth in this world is above all due to uneven distribution of capitalism." In other words, Europeans and Japanese who desire to perpetuate their own egalitarian cultures may also want to do what they can to support America's very different one. And, from time to time, raise a glass to the States -- that land that is so arrogant, so rich, and so gloriously unequal. >>>> ---------------------------------------------------------------------------- ------------ Keith Hudson, General Editor, Handlo Music, http://www.handlo.com 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________