Fraser Nelson

Stiglitz, Piketty - Jeremy Corbyn’s star ‘advisers’ are, like him, wrong about UK inequality

Stiglitz, Piketty - Jeremy Corbyn’s star ‘advisers’ are, like him, wrong about UK inequality
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A new leader with little credibility asks famous economists to ‘advise’ him on economic policy. It’s an old trick. News that Jeremy Corbyn is seeking the counsel of Thomas Piketty and Joe Stiglitz is not surprising – both are in the business of selling books suggesting the world is becoming more unequal than ever, and that a crisis is looming. The problem is that this ain’t so - not in Britain, at any rate.

Piketty’s central thesis was brilliantly dismantled by Chris Giles, the FT’s economics editor, who won an award for his expose. But at least Piketty published data that could be scrutinised: Stiglitz seems to make his up on the spot. Here he is on Radio 4’s Start The Week, falsely claiming that

“Inequality has gotten much worse in the United Kingdom”.

Now, there are several measures of UK inequality. Not one shows it getting any worse over the last quarter-century (see graph, above). It got worse in the 1980s, when Corbyn's world view was cemented. But I doubt he has looked at the recent data. Why let the facts get in the way of a good applause line? All this matters, because it’s a real challenge for the left. As the Independent's John Rentoul has brilliantly argued, the left needs to accept that income inequality has not been getting worse. Yes, we’ve had cuts. But inequality, or ‘child poverty’ to use its more emotive name, has been improving under David Cameron.

It's not quite as simplistic as the left seems to think. For example, David Cameron cut the tax for the best-paid - and what happened? They now shoulder a greater share of the income tax burden then at any time in UK history. Screen Shot 2015-09-27 at 19.04.45 So yes, the 1pc have never earned more - but they've never paid more tax. The redistribution system is working - and, under the tax-cutting Tories, working better than ever. This helps explain why UK income inequality metrics do not go the way that Piketty and Stiglitz think they ought to. Now, I'm not denying that inequality is an issue – I made a Ch4 documentary about the subject last year (you can view it here). But not in the way that Corbyn and Piketty seems to think. The problem with

the new left is that they can't see beyond the financial dimension of inequality. And they even get that wrong. I've spoken about income inequality here because there isn't enough comparable data on wealth income. But CoffeeHousers may remember Victor Burgin's 1966 poster, Possession (right). It used a figure from The Economist that "7% of our population own 84% of our wealth" - a statistic so powerful it inspired the 7:84 Theatre Company. I suspect that Burgin is glad he's not making such posters today: the latest ONS figures, for 2010-12, are far less arresting. They show the wealth of the 10pc has just 44pc of the wealth. No wonder the 7:84 Theatre Company has folded: 10:44 doesn't have quite the same ring to it.

Of course, the data is almost certainly not comparable, but no one - especially not Piketty - has managed to find a set of figures that genuinely are. The below chart shows what is, in my opinion, the most pernicious form of inequality in Britain - the way that UK state schools give out the best education to the richest, and the worst to the poorest. When Labour starts to worry about this, they’ll be getting serious about solving genuine British problems. But don’t hold your breath. Screen Shot 2015-09-27 at 18.48.10 UPDATE Nassim Taleb, the 'Black Swan' writer, points out the flaws in the Gini index, which most left-wing politcians use to claim that the UK is one of the world's most unequal countries. The Gini index is, he says, simply unfit for international comparisons.

Econs don't know how to measure inequality @FraserNelson

— NassimNicholasTaleb (@nntaleb) September 27, 2015

Written byFraser Nelson

Fraser Nelson is the editor of The Spectator. He is also a columnist with The Daily Telegraph, a member of the advisory board of the Centre for Social Justice and the Centre for Policy Studies.

Topics in this articlePoliticsjeremy corbyn