After the publication of Thomas Piketty’s book on inequality ( Capital in the Twentieth Century , 2014), it has never been the same. It is rather difficult to evaluate any book without referring to Piketty’s. However, we may say, “If Piketty’s book is a fiery manifesto on inequality, Prof. Atkinson’s book is an enduring testament.”
Atkinson has spent a lifetime doing research on inequality. Over five decades, he published 50 books and more than 350 scholarly articles, some co-authored with Nobel Laureates. Perhaps, among contemporary economists, he is a pioneer who brought about a transformation in the broader field of studies encompassing distribution of wealth, inequality and poverty. For too long, inequality and income distribution were the works of statisticians for economists to draw on. He liberated it from the grip of data matrices and gave a new life, more as a social phenomenon embedded in history, production relations or functions. No wonder, he inspired Piketty as his teacher during undergraduate years.
There are repeated references to Piketty’s book and views, which Atkinson incorporates and elevates in the book. He is not a passionate egalitarian or an Occupy Wall Street campaigner. Rather, he conforms to the sober tradition of early English socialists like Sydney Webb and Lord Beveridge. He is not an idealist pleading for total equality. He would be satisfied if, through his studies and suggestions, he leaves behind a world which is less unequal than it is now. He is an optimist and hopes that it can be achieved.
Part one of the book is quintessential Atkinson and synthesises years of work done by economists on inequality. He narrates how inequality was falling in the post-war years in the U.K., Europe, Asia and Latin America. His account is somewhat similar to the account given by Piketty, such as state intervention, progressive taxation, etc. Around mid-1980s, there was a reversal with the withdrawal of the state, substantial lowering of taxes (from 80 to 40 per cent or below) and ascendancy of the market. Atkinson dubs this period as “Inequality Turn.” It led to extreme inequality which began to threaten social stability and breed violence and protests. Even the IMF conceded that it was a threat to long-term growth.
The standard remedy suggested by most economists, radical or otherwise, was to introduce progressive taxation. Experience suggested partial success for such tax reforms or income transfer measures. However, Atkinson goes deeper into the sources of inequality and posits it in the working of the market. Piketty also related it to the capitalist mode of production but, rather, to the rate of return on capital rising above the rate of economic growth. His formula appeared somewhat unidimensional. In Atkinson, the prognosis goes deep down and sets it in the operation of the market per se. In analyzing ‘the economics of inequality’ and ‘economics of technological change’, he dismisses the conventional textbook views or theories about the benefits flowing from the free market.
He explains how the market is a part of society and does not operate outside of it. Governments play an important role in shaping the direction of technological change and corporate strategies lean heavily on those technologies as also on funding. By the same token, it is possible for governments to change the technology choices of corporates and thereby redress the imbalance. For instance, trade unions have lost their power and, as a result, wages have been reduced. Similarly, competition policy can be tuned more to promote welfare and employment rather than mere “efficiency” which creates more profits for companies. These ideas are radical and go deep into the sources of technology.
In part two, Atkinson enumerates 15 proposals that would substantially reduce the extent of inequality. The direction of technology change should be the concern of policy-makers so that innovation encourages employability of workers and ensures human dimension of service provision. There should be proper balance of power among stakeholders while handling competition policies and trade union representation. There need to be guarantees regarding employment as also a wage policy. Progressive taxation should be a part of the package. He recommends capital transfers through issue of bonds with positive interest rates. Lastly, he advises the rich countries to raise the Official Development Assistance (ODA) to developing countries to one per cent of GDP. To ensure operation of these proposals or prescriptions, he suggests the establishment of a Social and Economic Council and visualises Industrial Democracy to govern growth. It is significant that Atkinson’s proposals do not end with progressive taxation as advocated in the past by most economists, but go deeper into sources which breed inequality and, accordingly, provide for wealth sharing.
These suggestions may appear to be ambitious. But Atkinson, a doyen of economic science, narrates them in such a balanced and elegant way — heavily drawing on latest research documents on the subject and with such sweet persuasiveness — that even a diehard Republican from the Heritage Foundation or Tea Party will listen to him attentively. Atkinson thinks these can be done. We feel that his agenda may become the testament for future action. As he ends: “But the solution to these problems lie in our own hands. If we are willing to use today’s greater wealth to address these challenges, and accept that resources should be shared less unequally, there are indeed grounds for optimism.”
This book is the end product of a lifetime’s work on issues governing inequality. It is in the highest scholastic tradition. The coverage is breathtaking as also the reliance on research efforts done by many other scholars. Atkinson takes us on a journey that is encyclopaedic in range, balanced in analysis and humble in suggestions. It is no wonder that it is already acclaimed as a classic on the subject of inequality.
Inequality: What can be done?; Anthony B. Atkinson, Harvard University Press, Rs.1,250.
