How can we reduce health problems in society? Should we tackle poverty and social problems such as crime and drug abuse, or is the problem inequality in itself? If we reduce the income in a middle class neighborhood, will this in itself improve the health of poor people living in the same city?
The latter form of reasoning is perhaps not so popular in the US, but quite so amongst European social democrats. A new book highlights how the European left is as concerned with fighting wealth as it is with fighting poverty.
One year after its publication, the “The Spirit Level: Why More Equal Societies Almost Always Do Better” - by social epidemiologists Richard Wilkinson and Kate Pickett - has been embraced by many European intellectuals and politicians. The Social Democratic Party leader Mona Sahlin relies on the book as one of her main arguments during the current Swedish election campaign.
Even conservative British Prime Minister David Cameron has praised the book, which claims that income inequality in itself causes more or less every problem in society. The argument goes: if your neighbor’s income increases, so does you chances of catching cancer.
The authors of the book, Wilkinson and Pickett, seemingly make as strong argument for the notion that social ills are caused not by poverty but rather by inequality itself. Inequality, they say, acts like a “pollutant spread throughout society,” with rich and poor equally susceptible to its toxic effects.
The book will likely soon appear also on the bookshelves of many US intellectuals, not least amongst the left. It is interesting then to note that its notions are dismissed by current research.
Last year for example, the “Oxford Handbook of Economic Inequality” was published. There we could clearly read that income inequality in itself is not the cause of health problems or lifespan: "The preponderance of evidence suggests that the relationship between income inequality and health is either non-existent to too fragile to show up in a robustly estimated panel specification."
The same conclusion has been drawn in research conducted by Professor Angus Deaton, one of the world’s leading health economists. After a comprehensive survey of the scientific literature he concludes:
“[I]t is not true that income inequality itself is a major determinant of public health. There is no robust relationship between life expectancy and income inequality among the rich countries, and the correlation across the states and cities of the United States is almost certainly the result of something that is correlated with income inequality, but is not income inequality itself.” (Published in Journal of Economic Literature, 2003).
One could say that one of the main theses of the European social democracy – that inequality in itself is the problem – has been proven wrong by recent scientific studies. Social problems in themselves do cause inequality.
If there are problems with drug abuse, racial tensions, unemployment, etc., in one neighborhood for example, this will decrease the income of the citizens. Thus income inequality arises compared to the middle class. Reducing social problems will also reduce inequality. But inequality in itself does not cause social problems.
The socialist approach – to shrink the income of the middle class instead and hope this will aid the poor – is simply based on a skewed analysis of the correlation between social problems, poverty and inequality.
A comparison between Sweden and the US is often used to argue that the European social democratic approach will reduce social problems and expand life span. As noted in a previous New Geography article, this reasoning is misleading.
Sweden was characterized by an even income distribution, low poverty and long life spans already before the introduction of high-tax welfare policies. The difference in lifespan between Swedes and Americans was the same (2.6 years) in 1950 as it is today (2.7 years). And lastly, the 4.4 million Americans with Swedish origin are not only 50% more rich than Swedes living in Sweden, but also have the exact same level of poverty.
It is simply wrong to assume that high tax welfare state policies automatically improve health. In 1960 Sweden was a low-tax country, with the third highest lifespan in the world. Switzerland was ranked on the sixth position. 45 years later, it was Switzerland that had the second highest lifespan, whilst Sweden was ranked on sixth position. Evidently, retaining a low-tax system did not hinder Switzerland from catching up to and surpassing Sweden.
Low taxes might however explain why the poorest fifth of Swiss citizens have a considerably higher purchasing power compared to the same group in Sweden (the US figure is slightly, but not much, lower than in Sweden).
And it is simply not true that socialist policies always lead to low income distribution, whilst free-markets increases inequality. Reforming away from communism to a very free-market oriented approach has for example allowed the Czech Republic, Slovakia and Slovenia from gaining a high living standard. But these nations do not have a low, but rather relatively high level of income equality. Moving away from socialism has benefited not only a small handful of capitalists, but rather the population as a whole.
History teaches us that one society simply cannot change to another by simply changing its policies. Much can be achieved by focusing on the root of social problems – such as unemployment, crime and drug abuse – but society has little to gain and much to lose from thinking that we should hinder those who strive towards success in the name of social equality.
Nima Sanandaji is president of the Swedish think tank Captus. He is the author of the book ”Entrepreneurs who go against the stream – what the 90s successful entrepreneurs can teach us” (Swedish title: ¨”Entreprenörer som går mot strömmen – vad 90-talets succéföretagare kan lära om dagens utmaningar”) for Fores.
Photo by: JavierPsilocybin