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Conservative ideology and the Intergenerational Report: why Hockey had to remove all reference to inequality

Why did Joe Hockey and Tony Abbott remove all reference to inequality and income and wealth distribution in the Intergenerational Report? Warwick Smith investigates.

A search of the government’s recently released Intergenerational Report for the word “inequality” yields zero results. The same is true for “income distribution” and “wealth distribution”. This is not surprising because conservatives are basically forced by their other beliefs to play down the importance of inequality.

As many others have pointed out, the Intergenerational Report is an inherently political document and is much more informative about the current government than it is about the actual future of the country. The very short treatment of climate change in the report is a case in point. Another important element that was present in the 2010 report that is entirely absent from the 2015 version is any mention of wealth and income distribution. Instead, the 2015 report relies entirely on averages for reporting income and wealth.

Using the average (or mean) value for income and wealth can conceal very important information. Distributions can be measured and modelled just as averages can be measured and modelled. Not reporting on or modelling distributions is therefore a deliberate choice.

If you have 100 people in your economy and 99 are in abject poverty while one is a millionaire, average wealth is about $10,000. If that millionaire doubles their wealthy to $2 million the average wealth also doubles to $20,000. Based purely on averages it looks like things are going really well despite 99 percent of the population living in poverty and nothing improving for them. This is not an entirely unrealistic scenario. In the United States, since the 2008 financial crisis, a staggering 93% of income growth has gone to the top 1% of income earners. The average income has grown but the bottom 99% of income earners have mostly seen wages stagnate or fall. If we only heard about average incomes during that period we could be fooled into thinking US incomes are recovering from the financial crisis.

Equality of outcome is required for equality of opportunity

The negative consequences of extreme inequality have been very well documented by numerous studies in a variety of fields. Nations with high levels of inequality have poorer outcomes across a huge range of health and wellbeing measures, from teenage pregnancies to drug and alcohol problems.

warwick

Income inequality has a huge impact on health and well-being even among wealthy western nations. Graph from ‘The Spirit Level’.

Conservatives, by definition, tend to defend the status quo with respect to institutional structures. This means that if current structures are resulting in increased inequality then they are driven to dismiss or play down the importance of inequality. In fact, many conservatives consider inequality to be essential in order to provide incentives for hard work. However, there is only value in an incentive to climb the ladder if climbing the ladder is possible.

The reality is that the more unequal a country is, the lower equality of opportunity they tend to have. Equality of opportunity relies, to some extent, on a degree of equality of outcome. Parents in poverty cannot provide their children with the same opportunities that wealthy parents can no matter how intelligent, well intentioned or well informed they are. Similarly, children in poor communities will likely attend schools with poorer student outcomes and lower teaching standards than those in wealthy neighbourhoods.

When it comes to inequality, conservatives are trapped between conflicting articles of faith; small government and meritocracy. The data imply you cannot have both. Meritocracy requires considerable government intervention, particularly in education, health and welfare.

The policy leaders in this area are the Nordic nations of northern Europe and we would do well to pay more attention to their successes. Not only do these nations have relatively low levels of inequality, they have high income mobility and score very well on measures of life satisfaction and wellbeing. They achieve this through a complex web of legislation but it is underpinned by well-funded universal healthcare, education and welfare systems. The effect of these is to provide more than just a safety net but rather a baseline standard of living such that everyone can live a dignified life. This seems to me the very essence of a civilised society and is certainly within reach of all wealthy western nations.

We can see why Hockey and Abbott chose to remove references to inequality from their Intergenerational Report. Honest discussion of inequality reveals the incoherence of their broader social vision. When reduced to outcomes, the conservative political agenda of defending current structures and institutions manifests as simply protecting the interests of wealth and power at the expense of the rest. That’s all it ever has been – the rest is smoke and mirrors.

Warwick Smith is a research economist and social commentator. He blogs at reconstructingeconomics.com and tweets @RecoEco.

18 comments

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  1. Pingback: Conservative ideology and the Intergenerational Report: why Hockey had to remove of all reference to inequality – » The Australian Independent Media Network | winstonclose

  2. Margot

    They are probably listening to people like this.
    World-renowned economist and adviser to Ronald Reagan, Dr Arthur Laffer, speaks to the Institute of Public Affairs in Melbourne on Wednesday 18 March 2015. Dr Laffer was in Australia as a guest of the Australian Chamber of Commerce and Industry
    https://www.youtube.com/watch?v=knmmvj9NUPk&list=UU0VXp0q5i8o-CxL_8Q3HOtQ

  3. Sad sack

    How sad was it to see Dr Karl take the money?
    I don’t know how much he got, from the boys, but it has knocked an edge of my respect for him!!!

  4. Lee

    Good article, Warwick and you have another subscriber to your blog.

  5. xiaoecho

    We are governed by a gang of cons, chancers and spivs. They are dishonest. They are trying to put it over the public by lying by ommission. The government have no integrity. How did we end up with this bottom of the barrel Government? The media lied by ommission. The Australian public were conned by that oldest of tricks, the bait and switch; where one product is offered to the mark and after payment a lesser product is produced. They could not have achieved this without their accomplices, the Corporate Media. This is a truth that no-one in the Corporate Media are permitted to utter.

  6. stephentardrew

    No matter how they spin it large disparities in income leads to gross inequality. Warwick I notice the graph comes form Spirit Level which was challenged by conservatives however more recent research supports Wilson and Pickett’s conclusions. After a series of virulent attacks their research was replicated and similar conclusions between wealth distribution, inequality and lack of opportunity have been confirmed.

    However these facts are largely ignored by MSM and as the intergenerational report demonstrates have no place in L-NP consciousness or IPA dogmatism.

    Below is a classic example of rorts for the rich and the misleading justifications that are forced down the electorates throat without sound supporting evidence. There are a dozen more examples we could refer to.

    Negative gearing: a legal tax rort for rich investors that reduces housing affordability: Greg Jerico

    http://www.theguardian.com/business/grogonomics/2015/mar/19/negative-gearing-a-legal-tax-rort-for-rich-investors-that-reduces-housing-affordability

  7. paul walter

    Essay of the week! Well done AIM…for this excising of context is THE Orwellian facet of “their” , ABC also. Welcome to Revisionism 101.

    Also, Margot for the snapshot of the real enemy.

  8. @RosemaryJ36

    It has long been recognised that in income comparisons, the median not the mean or average is the better comparator. When the frequency distribution has a strong skew, the median is way smaller a Vaud than is the mean. Also the mode or most frequent is well to the left of the graph.

  9. stephentardrew

    @RosemaryJ36:

    There have been extensive analysis of the methodologies utilised by Wilson and Pickett however, though their original analysis required some reassessment, the core aspects of the results have been replicated and verified using different statistical methodologies. The material is extensive and readily available on-line (Google).

  10. Stopthemadness

    As always JKG has summed it it up wonderfully.

    The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.
    – “Stop the Madness,” John Kenneth Galbraith in an interview with Rupert Cornwell, Toronto Globe and Mail (6 July 2002) (see http://wist.info/galbraith-john-kenneth/7463/ )

  11. Kerri

    Did Laffer get a Nobel Prize???
    I’m sticking with Joseph Stiglitz.
    Sad Sack can you post a link about the Dr Karl thing please? I only saw a grab on ABC and wasn’t quick enough to remember the link. Have searched for last 20mins and can’t find the talk in the grab.

  12. Harquebus

    The pillaging of our resources and the theft of future generations income can not last. The physical realities of our finite planet are already trumping economic and political ideology. Things will get worse and then everything collapses.
    Avagoodweegend.

  13. Kerri

    Kaye Lee thanks for the link. Karl has dropped in my opinion. Came across this propaganda on youtube.
    http://youtu.be/7ONaw6ouQwE

  14. philgorman2014

    The IGR is a fairy floss confection concocted for the purpose of propping up the corpocracy that’s running the country. Its failure to mention inequality is egregious. Its failure to account for the inevitable effects of global warming renders it meaningless.

  15. Psychokaraoke

    I’m glad you reminded me of the omission of inequality the I.G.R as I was a bit blinded by upbeat, optimistic Dr Karl. I agree it’s very unfortunate that income disparity and climate change weren’t mentioned. However I’m not really keen on either major party in Aust. Labour ignores it’s part in racking up huge debts and unsustainable population growth which is the ‘elephant in the room’ as far as many of us are concerned.

  16. Pingback: Growth Rate Indicators – Australia Awaken – ignite your torches

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