The Spirit Level: Why Greater Equality Makes Societies Stronger (33 page)

Figure 15.2
Human wellbeing and sustainability.
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The fact that at least one country manages to combine acceptable living standards with a sustainable economy, proves that it can be done. However, because the combination is achieved without access to the greenest and most fuel-efficient technology means it could be done more easily in countries with access to more advanced technology than Cuba has. With the advantages of power generation from renewables, environmentally friendly new technologies and greater equality, we can be confident that it is possible to combine sustainability with a high quality of life. Before leaving Figure 15.2 it is worth noting that much of the reason why the highest scores on the HDI are achieved by countries with the largest ecological feet is merely a reflection of the fact that Gross Domestic Product per head is one of the components of the HDI.

REDUCING CARBON EMISSIONS FAIRLY

Improving the real quality of our lives at lower levels of consumption is only one of the contributions equality can make to reducing carbon emissions. There are two others. First, if policies to cut emissions are to gain public acceptance, they must be seen to be applied fairly. The richer you are and the more you spend, the more you are likely to contribute to global warming. The carbon emissions caused by the consumption of a rich person may be ten times as high as the consumption of a poorer person in the same society. If the rich are the worst offenders, then fair remedies must surely affect them most. Policies that squeezed the poor while allowing the rich to continue to produce much higher levels of emissions would be unlikely to gain widespread public support.

A system of individual carbon rations has been proposed as one way of reducing carbon emissions fairly. The total permissible level of emissions can be divided by the population to give an equal share, or quota, of allowable emissions per head. There is an obvious parallel here with the egalitarian policies implemented in Britain during the Second World War: to gain public co-operation in the war effort, the burden had to be seen to be fairly shared. Titmuss regarded this as the rationale for the introduction of rationing and more progressive income taxes, as well as for subsidizing necessities and taxing luxuries.
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One suggestion now is that people should use an electronic card to cover payments for fuel, power and air travel. Those using less than their ration would be able to sell their unused allocation back to a carbon bank, from where it could then be bought by richer people wanting to use more than their allocation of fuel and power. Under such a system of ‘tradeable carbon quotas’ high consumers would be compensating low consumers, and income would be redistributed from rich to poor. In 2006 the then Minister for the Environment in Britain, David Miliband, proposed such a system and a small trial was begun in Manchester in 2007. To safeguard the poor it may be necessary to prevent people selling unused parts of their ration till the end of the period it covers, so only allowances already saved could be traded.

NEW TECHNOLOGY IS NOT ENOUGH ON ITS OWN

We might hope that new technology will save us from the rigours of carbon rationing. However, although green innovations which reduce fuel consumption and carbon emissions are an essential part of the change we need to make, they cannot solve the problem on their own. Imagine that a new generation of car engines is introduced which halve fuel consumption. Driving would then be cheaper and that would save us money, but it is money which we would almost certainly spend on something else. We might spend it on driving more, or on buying a bigger car, or on more power-hungry electrical equipment – perhaps a bigger fridge-freezer. But however we spend the money put back in our pockets by more efficient car engines, our additional consumption will probably add to carbon emissions elsewhere and lose much of the original environmental benefit. The same logic applies in almost all areas. More power-efficient washing machines or better insulated houses will help the environment; but they also cut our bills, and that immediately means we lose some of the environmental gain by spending the saved money on something else. As cars have become more fuel-efficient we have chosen to drive further. As houses have become better insulated we have raised standards of heating, and as we put in energy-saving light bulbs the chances are that we start to think it doesn’t matter so much leaving them on.

Because energy-saving innovations mean that we can buy more, they are like economic growth. Though they give us higher material living standards for any level of carbon emissions, much of the carbon savings get swallowed up by higher living standards. The only question is how much of the benefits of greener technology get eaten up in higher consumption. As many countries have adopted smaller, more fuel-efficient cars, national emissions have usually continued to rise despite the increased efficiency.

A STEADY-STATE ECONOMY

It is clear that we have to move to something more like the steady-state economy first proposed by economist Herman Daly.
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But how do we do that when, as Murray Bookchin, the American social ecologist and libertarian philosopher, said, ‘Capitalism can no more be “persuaded” to limit growth than a human being can be “persuaded” to stop breathing’?
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When Daly developed the concept of a steady-state economy people were more concerned about using up the earth’s finite mineral and agricultural resources than they were with global warming. He suggested that we should have physical quotas on the extraction of minerals and that the use of the world’s resources should be prevented from growing. Limiting world oil and coal production might turn out to be a very effective way of limiting global warming. Innovation and change would then be concentrated on using finite resources more effectively for the benefit of humankind.

Think of material living standards as given by the stock of goods in use, rather than the rate of flow from consumption to waste. The faster things wear out and need replacing, the more they contribute to the flow and to waste. If material living standards depend on the goods we have in use, then each thing that wears out is a subtraction from that. Rather than serving as consumers, helping business to keep sales up, we need incentives to build and maintain longer-lasting goods of every kind.

Clearly any system for tackling these problems has to treat rich and poor countries differently. India, producing 1.6 tonnes of carbon per person annually, cannot be treated the same as the USA, producing 24.0 per person. Any regulatory system has to include policies for ‘contraction and convergence’ or ‘cap and share’. Both approaches propose a year-on-year contraction in permitted emissions levels, leading to an eventual convergence on equal per capita emissions across the planet.

It would be a mistake to think that a steady-state economy would mean stagnation and lack of change. Most economic development and progress comes from innovation, from consuming different things, rather than more of the same things.
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Fixing limits on resource consumption would not reduce the speed of scientific discovery and technical innovation. Indeed, as we shall see in the next chapter, continued rapid technological advances, such as digitization, electronic communications and virtual systems, creating ‘weightless’ sectors of the economy, make it very much easier to combine high living standards with low resource consumption and emissions.

INEQUALITY AND CONSUMERISM

The second link between greater equality and the prevention of global warming involves the consumerism which makes it so much harder to contain economic activity within sustainable levels. Our addiction to shopping and spending makes many people think that we have already lost the battle against global warming. As well as leading most of us into an ostrich-like denial of its implications for our way of life, the strength of our consumerist tendencies has reduced governments to a state of paralysis, too nervous of the electorate to implement any policy capable of making a real difference. How are we to transform this culture and make it possible to reduce the threat to the planet?

Greater equality gives us the crucial key to reducing the cultural pressure to consume. In a period when people seem to have been less guarded, Henry Wallich, a former governor of the Federal Reserve and professor of economics at Yale, said: ‘Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable.’
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But this relation holds both ways round. It is not simply that growth is a substitute for equality, it is that greater equality makes growth much less necessary. It is a precondition for a steady-state economy.

A great deal of what drives consumption is status competition. For most of us it probably feels less like being competitive and more like a kind of defensiveness: if we don’t raise our standards, we get left behind and everything starts to look dowdy, shabby and out of date. Robert Frank, an economist at Cornell University, has described how standards are inherently relative and involve comparisons with others. In his book,
Falling Behind: How rising inequality harms the middle class
(2007), he puts it like this:
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No one denies that a car experienced in 1950 as having brisk acceleration would seem sluggish to most drivers today. Similarly, a house of given size is more likely to be viewed as spacious the larger it is relative to other houses in the same local environment. And an effective interview suit is one that compares favorably with those worn by other applicants for the same job. In short, evaluation depends always and everywhere on context. (pp. viii–ix)

The problem is that second-class goods make us look like second-class people. By comparison with the rich and famous, the rest of us appear second-rate and inferior, and the bigger the differences, the more noticeable and important they become. As inequality increases status competition, we have to struggle harder to keep up. While the rich may believe their willingness to spend huge sums on a watch, a car or some other luxury item reflects their appreciation of the ‘attention to detail’ or ‘craftsmanship’, what really makes the difference is what their purchases say about them relative to the rest of us. As every advertiser knows, it serves to set them apart as people of distinction – social distinction. Only the best people can have nothing but the best.

The other side of this coin is that the consumption of the rich reduces everyone else’s satisfaction with what they have, by showing it up as inferior – as less than the best. In his book,
Happiness
, Richard Layard, founder of the Centre for Economic Performance at the London School of Economics, treated this dissatisfaction as a cost which the rich impose on the rest of society.
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Rather as if it were smoke from a factory chimney, he estimated the cost that the rich should pay for it. He was, however, unaware of the effects of inequality on the health and social problems which we have outlined. He based his calculations solely on the loss of satisfaction, or happiness, among the rest of the population and concluded that a 60 per cent tax rate on the better-off might cover that cost (presumably that should be over and above the tax rates other people pay).

The idea that inequality ratchets up the competitive pressure to consume is not just speculation. It has observable effects. While inequality has been rising in the USA and Britain, there has been a long-term decline in savings and a rise in debt. Robert Frank notes that in 1998, even though the American economy was booming as never before, one family in sixty-eight filed for bankruptcy – four times the rate in the early 1980s before the most dramatic rises in inequality.
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By 2002, unpaid credit card debt was $9,000 for the average card-holder. Looking at changes over a ten-year period, Frank found that bankruptcy rates rose most in parts of the USA where inequality had risen most.
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The growth of inequality made it harder for people to maintain standards relative to others. The increased pressure to consume led people to save less and borrow more to such an extent that the expansion of consumer demand became one of the main drivers of the long economic boom and financial speculation which ended in crisis. This fits well with the fact that spending on advertising also varies with inequality – in more unequal countries a higher proportion of Gross Domestic Product is spent on advertising, with the USA and New Zealand spending twice as much as Norway and Denmark.

Another indicator of how inequality increases the pressure to consume comes from the way working hours vary in different countries in relation to inequality. A study of working hours in OECD countries by Sam Bowles, professor emeritus of economics at the University of Massachusetts, showed not only that more unequal countries tend to have longer working hours, but also that differences in working hours changed in line with changes in inequality over several decades.
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The relationship between greater inequality and longer working hours is shown in Figure 15.3. People in more unequal countries do the equivalent of two or three months’ extra work a year. A loss of the equivalent of an extra eight or twelve weeks’ holiday is a high price to pay for inequality.