#313      34 min 00 sec
The new inequality: Researching the widening gap in wealth and income

Social policy researcher Prof Karen Rowlingson discusses the growing inequality in income and wealth in the developed world, how it’s researched, and its implications for society and individuals. Presented by Lynne Haultain.

"There's quite a lot of research which suggests that in countries with higher levels of income inequality, actually have higher levels of infant mortality, higher levels of mental illness, lower levels of life expectancy." -- Prof Karen Rowlingson




Prof Karen Rowlingson
Prof Karen Rowlingson

Karen Rowlingson is Professor of Social Policy and Director of the Centre on Household Assets and Savings Management (CHASM) at the University of Birmingham, UK. Karen's research interests lie in the financial security of individuals and families including: poverty, wealth and inequality; social security policy; personal finance; financial capability/education; wealth taxation and asset-based welfare;.

Current/recent work includes:

  • Responsibilities, ethics and the financial crisis (AHRC project)
  • University of Birmingham Policy Commission on the Distribution of Wealth
  • Monitoring financial inclusion in the UK from 2013-2017 (Friends Provident Foundation project)
  • Inter-generational justice and wealth inequality (Leverhulme project)
  • Wealth and the wealthy (book for The Policy Press, published 2011, with co-author Stephen McKay)

Credits

Host: Lynne Haultain
Producers: Eric van Bemmel, Kelvin Param
Audio Engineer: Gavin Nebauer
Voiceover: Nerissa Hannink
Series Creators: Kelvin Param and Eric van Bemmel

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VOICEOVER 

This is Up Close, the research talk show from the University of Melbourne, Australia. 


LYNNE HAULTAIN 
I'm Lynne Haultain. Thanks for joining us. Inequality is a term of the times. We're hearing the word a great deal at the moment in intellectual as well as political circles, as we grapple with the big questions for both the economic and social futures, and what part government can play in shaping that. In the public discussion of big picture economics, inequality is a hot topic, with both Thomas Piketty in his recent book Capital in the 21st Century and Economics Nobel Laureate Joseph Stiglitz raising it as a critical factor. A great deal of attention is focused on the US and the UK in terms of rising inequality, contrasting with countries like Denmark and Norway, which have until now at least been in top ranks of OECD data on equality. But Piketty has recently warned the Nordic nations that they're not immune from the widening gap, as they debate the abolition of inheritance taxes and other measures. 
But what do we mean by inequality? Understanding the definition clearly is vital if we're going to have an informed and productive public dialogue about how unequal our societies are, what that leads to, and how to address the problems. Professor Karen Rowlingson is a renowned sociologist and historian who's been looking at inequality for a number of years, especially at the social consequences of the disparity. She's Professor of Social Policy in the Institute of Applied Social Studies at the University of Birmingham, as well as director of the Centre on Household Assets and Savings Management. And she has a particular interest in looking at the financial security of families and individuals. Professor Rowlingson is visiting the University of Melbourne as a guest of the Melbourne Social Equity Institute, and she's kindly agreed to join us today for Up Close. Welcome. 

KAREN ROWLINGSON
Thank you.

LYNNE HAULTAIN
Karen, my sense is that inequality as a concept is perhaps not as well understood as it should be given how frequently we hear the term these days. We hear about income inequality and wealth inequality. Can you give us a couple of clear definitions?

KAREN ROWLINGSON
It's really at heart quite simple. Inequality's about how much of the share of the cake different people have. So if you think about income, how is that cake divided? We can do a similar thing looking at wealth. There are different measures we can use to look at that, and the common one that's used - it sounds complicated - but it's the Gini coefficient. But quite simply if the Gini coefficient is zero, everyone in that society has exactly the same portion of the cake, has exactly the same income. If the Gini coefficient is one, then one person has all the cake and nobody else has anything at all. So we have a measure of inequality which can be applied to income or wealth, and the higher that figure, the more unequal a society is. So just to give you a couple of statistics for different countries, Australia's Gini coefficient for income inequality is just over 30. That's a little bit less than the UK which is 35, so we're more unequal. If you look at the US which is a very unequal country their Gini coefficient is 45, and China 47. 

LYNNE HAULTAIN
So China is very unequal.

KAREN ROWLINGSON
Yes. And then if you look at the Nordic countries at the other extreme, we have Sweden and Norway currently at 25, 26. So we can measure inequality on this scale of zero to one, or zero to 100 in the way that I've presented it here, and you can see how different countries are more unequal than others. Now there are problems with all these kinds of measures in terms of the data that we have, so particularly in China perhaps, quite difficult to get good reliable income data. But in those other countries the income data is pretty clear, and we can be pretty sure about the differences between different countries. With the wealth data - and this is where Thomas Piketty's book has been quite controversial - the data on wealth is much more difficult to get hold of and to look reliably at. So we have some idea of different levels of wealth inequality. There's more disagreement about that. But income inequality we can clearly chart the trends over time and we can quite clearly compare different countries. 

LYNNE HAULTAIN
We'll pick apart wealth and income inequality in more detail in a moment, but let's just track it over the recent period of time. We have seen a spike, it would seem, in the '80s where inequality started to increase in the developed world at least, and then we've seen a continuation of that, or at least certainly not a regression. Is that the case?

KAREN ROWLINGSON
Yes. Certainly in the 1980s and 1990s income inequality grew dramatically, but particularly in the English speaking countries, so the US, the UK, to some extent Australia. In other countries - so in continental Europe, in France, in Germany - we didn't see income inequality grow so much. So it does depend on which countries you're looking at. 

LYNNE HAULTAIN
And why do you think that's the case? Why is it an English speaking disease?

KAREN ROWLINGSON
It's a very good question and actually most of the recent research has looked more at the consequences of inequality than the causes. So we don't really understand the causes so much. I think it's to do with the political and economic structures in different countries, the different ways that we regulate capitalism, the US being very much a free market capitalist country and the UK, whereas in Sweden, France, Germany, much more regulated economies, so they don't allow those inequalities to grow so much. They tax more, they look at the differences between the low and high paid. And culturally as well if you go to Sweden, Norway, perhaps not so much now but in the past, you didn't want to exaggerate your wealth, you didn't want to show your wealth. 
There weren't any Porsche dealers in Sweden until quite recently because you didn't want to show how wealthy you were, whereas in America and other countries wealth is a sign of success which people are proud of. And people don't celebrate inequality in the Scandinavian countries to some extent in the same way that we do in the English speaking countries. So I think there's cultural differences, there's political and economic differences. 

LYNNE HAULTAIN
Let's just pick up on that political, because I suppose the whole notion of inequality got a massive kick along with the Occupy Movement across the world, and the now famous quote from Joseph Stiglitz in which he said in terms of wealth rather than income - so speaking here very specifically about wealth inequality - the top one per cent control 40 per cent. As a result the top one per cent have the best houses, the best educations, the best doctors, and the best lifestyles. And that concept of the top one per cent has become the mantra now; we are the 99 per cent, we are the rest of the people on the planet. It seems to me that we have always had a top one per cent. The world has always had mega-wealthy people and then the rest of us. But is that divergence getting worse? Are people in the 99 per cent worse off now than they were say 20-30 years ago?

KAREN ROWLINGSON
Yes. I think the terms the top one per cent, 99 per cent, have been very helpful to focus attention on that very, very top, and in fact it's not just the top one per cent, but the top 0.1 per cent, the top 0.01 per cent, the very small number at the top who have seen their wealth escalate even more than they had in the past. In fact they've got the similar share of wealth as they perhaps had in the 1930s if not in the Victorian times. We did see in the 1960s that that group lost their wealth to some extent, so we're seeing a return to Victorian levels of inequality with that top one per cent or top 0.1 per cent. But if we look at the 99 per cent they're not all the same. They don't all have the same kind of level of income and wealth. 
There are differences and we might see I think a bottom third in the US, UK - I'm not so sure about Australia but US and UK particularly - where they are really struggling. Their incomes just do not give them enough to make ends meet at all. They're getting into debt, suffering food poverty. In the UK we're seeing food banks increasing, people turning to food banks and charity to get food, fuel poverty and so on. So really severe levels of poverty. The middle third are also struggling to some extent. We talk about the squeezed middle in the UK. They're in work mostly but the wages are not going up and they're not keeping in line with living costs. Previously that group would have been used to some more financial security, and now that's really being hit. 
And even those that are in that top third, they are still much better off than others, but their living standards are not going up to the extent they would have expected, and they're concerned about their children going to university having to pay increasing fees - and I know that's coming into Australia as well - and also housing, how are their children going to get a foot on the ladder. So I can understand why we talk about the 99 per cent. I think they do have common interests and concerns about financial security. But equally there are some parts of that - the bottom are really, really struggling. Others are keeping up but facing greater difficulties than they were in the past.

LYNNE HAULTAIN
Is this very much a western preoccupation given that we talk about the developed world and the way it's been defined, I suppose by Stiglitz and Piketty and others. But if you're looking at it through a developing world's view, income equality is probably rising in that a lot of people are moving out of poverty. The stretch might be as great between the poorest and the richest, but the poorest are better off. Is that fair to say?

KAREN ROWLINGSON
I think again it depends what part of the world we're talking about. If we look at some of the rising powers like Brazil, Russia, China, we do see very high levels of inequality. So in Brazil in the World Cup in 2014 we saw protests on the streets around the inequality, the amount of money being spent by some on the stadiums and [unclear] where you've got the favelas, the very poor areas. You see in Russia great levels of inequality now. Whereas if you compare say parts of Africa, okay you might have a very small political elite that are very rich, but the majority are very poor. But that level of poverty is reducing over time, so perhaps less inequality in those countries. So quite a different picture depending on what region of the world you're looking at.

LYNNE HAULTAIN
That's certainly I suppose the impression we have of the rising middle class of China, for example, that people are moving out of the villages, moving into the cities, that their overall levels of comfort are higher even if the richer are perhaps even ever richer than they were.

KAREN ROWLINGSON
Yes. So there's quite a lot of variation in some countries between the rural parts and the cities, and the rural parts are generally much poorer than the cities, and in the cities you do have this rising middle class. Also China is looking at its wealth estate, its health provision. There is now health insurance covering I think something like 96 per cent of the population in China which is quite incredible. So that government is definitely looking at how it can support its population better and reduce the inequalities, both the income inequalities but also the services, the access to services that we might take for granted in the west. So there is quite a lot of change going on in China and other parts of the world, but even though as we saw in the statistics earlier, there's still quite a lot of inequality in China and other countries. 
LYNNE HAULTAIN
Is it fair to say that the majority of us are preoccupied with income equality because we tend to live on our wages and have to save to buy houses or put kids through education, all that sort of stuff, whereas the broader picture of wealth inequality is something that's slightly more difficult to grasp because it captures all these others elements including inheritance and access to the sorts of money channels that many of us would never consider? Wealth inequality seems to me to be a slightly more difficult concept for us to grasp.


KAREN ROWLINGSON
Yes, there's been much more attention on income inequality for all those reasons you give, but also because we've had better data on income. So if we're looking at wealth, and if we mean by wealth things like financial wealth, money in the bank, stocks and shares, bonds, gilts, all those kinds of things, but also housing wealth, so if you own a home, if you've got equity in your home, and even private pension wealth; if you're saving in a private pension that can be considered a form of wealth. So there are more people now that have those forms of wealth, particularly housing and pensions. If we put all that together, we do have some data looking at the inequalities, but we haven't got long histories of data on wealth and they're not as high quality. 
Particularly on the very rich, because most of our data comes from surveys and the very rich don't respond to surveys; we can't get them to fill in the questionnaires and to give us all their information. In fact many of the wealthy don't even know how wealthy they are if you ask them. They'll refer you to their accountants and their accounts will have to check. So it's actually very difficult to get those figures on the very wealthy. 

LYNNE HAULTAIN
What about the inter-relation between the two? One can imagine that wealth inequality increases over time, that people accumulate sources of wealth, property and the like, and stocks and shares and that sort of thing, as opposed to income inequality being very much a temporal experience. Is that how you see it?

KAREN ROWLINGSON
That's absolutely right. There are differences but generally people with high levels of income also do accumulate high levels of wealth, so the two are linked. But as you say there's a time factor. You do also have a number of people in - say just recently retired who might be on quite low incomes but have high levels of wealth, and then there's a question about how they can unlock that wealth, particularly if it's in their housing. There are different policies, different products available for people to release equity in their homes. But they haven't been so far as popular and widespread as we suspect they might be in the future with our aging populations.

LYNNE HAULTAIN
Why do you think we're talking about inequality so much now?

KAREN ROWLINGSON
I think because we've seen that big increase of the last 10-20 years, and because of the global financial crisis which has really put a spotlight on this. Now during the crisis and the couple of years afterwards inequality probably actually reduced slightly because the stock market went down. Many wealthy people had money in that. Actually in the last couple of years between 2010-2014 we've actually seen levels of wealth go up again. The stock market has rebounded, the billionaires now own vast amounts, and there are more of them around. We know from studies by the UN that there are about 85 families in the world who own as much as the poorest half. It's quite staggering the differences. In the UK there are five of the richest families who own more than 12 million of the poorest Britons. So these are quite staggering levels of inequality which our data now can tell us a bit more about and then start to point to whether this is a problem or not, and that's where again the research has started to investigate. 

LYNNE HAULTAIN
I'm Lynne Haultain and you're listening to Up Close. In this episode I'm discussing the concept and consequences of inequality with social scientist and researcher Karen Rowlingson. Karen that notion of the vast differences between the top 0.01 per cent and 50 per cent at the other end of the spectrum is really gobsmacking. I mean, you hold your breath with data like that. But there are those who say it's not a particularly relevant measure. There are some economists who say inequality, it's not a big deal?

KAREN ROWLINGSON
It's good to throw that question out to people, why does it matter? I think there are a number of different research projects that have looked at this. So there's quite a lot of research which suggests that in countries with higher levels of income inequality, actually have higher levels of infant mortality, higher levels of mental illness, lower levels of life expectancy. So actually it's a problem for those countries. So the US stands out: very high levels of inequality and high levels of social problems of those kinds. There's also quite a lot of argument in the US particularly around the impact on political engagement and the political democratic process. If you have - again in the US - a country where you can buy political power, buy political influence, are you truly a democratic country? So what does that say for your democracy?

LYNNE HAULTAIN
But how direct is that link, or are we saying there is a whole bunch of social experience out there in terms of education levels or health or employment and the like, those sorts of indicators, and we have inequality. How directly can those be correlated, what does the data tell us?

KAREN ROWLINGSON
That's quite difficult in the data. You can show the correlation, the link. That's quite clear. But whether one causes the other is the problem, so again there are some critiques of this field of research who say that we don't know it's income inequality, it might be levels of poverty, it might be the welfare institutions in different countries if they're not strong enough, they might be causing the problem. It may be a culture of individualism, it might be about neoliberalism. There's a whole lot of discussion about what is causing these social problems. We can definitely see a link but whether one is causing the other is a bit less clear.

LYNNE HAULTAIN
You've done quite a lot of work in this both in income and in wealth inequality, and the work you did for the Joseph Rowntree Foundation on income particularly, and then you've done some more recent work with the Policy Commission on the Distribution of Wealth. In terms of income equality we've talked briefly about the sorts of consequences, but what did you see in terms of the social fallout of inequality? Certainly David Cameron, the Prime Minister of the UK, has said that these are the indicators and this therefore shows that unequal societies do worse on almost every indicator. So clearly there's a political appetite for this kind of connection. What did you see when you looked at it?

KAREN ROWLINGSON
I tried to look at whether the studies could disentangle that link between inequality and the social problems, and some have tried to do this through quite sophisticated methods, they call it multi-level and modelling, looking at different levels of data and trying to show what the independent effect of inequality is. Now again, not everyone accepts the findings or these studies. They are controversial. But one study did show or suggested that inequality led to as many deaths as lung cancer, diabetes, car accidents, and murder combined all together. So if you accept that study - which was a very rigorous peer reviewed study - the impact of inequality is really quite considerable. Again there are other studies which show perhaps less of a link, others that say it's not necessarily just about inequality. But I think there's some evidence and there are enough studies to say there is something in this, perhaps not as high as some of the academics might suggest. But there is something about income inequality which does seem to be causing these negative impacts. 
It isn't just on those health issues either. There's the political dimension. There's also the social cohesiveness for society. J.K. Galbraith talked about public squalor amidst private affluence, the fact that people if they're very poor may start to feel they're not part of a society, they're excluded. More recently Nick Hanauer who's a Seattle-based entrepreneur has talked about the pitchforks will be coming for billionaires like him if people don't feel they can be part of that society, if they feel so far excluded and they see a small group at the top with quite excessive amounts of wealth. So there is an issue about social cohesiveness as well as about the social consequences, the health problems, and so on. 

LYNNE HAULTAIN
So if we're to look the work that's been done on this, the commentary that abounds, it's contentious, it's quite blurry, the data is not all that rigorous and robust. Is there an improvement, if you like, or an increasing understanding of this as an area of research, or are we still grabbing at a fistful of indicators to try and make a case?

KAREN ROWLINGSON
I think academics will always argue about data. That's what we're in a job to do I suppose. And also it does partly depend on your political views. If you come at this from a different dimension, you'll look for the data that support your cause to some extent. So there's always going to be disagreement about this. We are political beings as well as academics. But there has been over the last ten years, say, much better research, and research which does seem to point to this problem. I think there's also an issue about the moral dimension of this, as well as the data. You can argue, I think - and most people would agree - that if you work hard you perhaps deserve to get more than somebody who doesn't work so hard, and if you do an important job you deserve more than somebody in a job that's not so important. But what do we mean by an important job? So is a banker more important than somebody who cares for older people? 
They certainly earn a lot more, but is that more important? And how much more do we think that certain jobs should be paid? We might agree they should get more, but do they deserve to get ten times, 100 times, 200 times? Certainly in the UK a chief executive officer of a big company can earn at least 100 times more than somebody who's working in the same company at the bottom of the rung. So do they deserve that? Who really deserves to earn so much? I think we should look at that moral dimension, and in democratic nations, we shouldn't necessarily just leave that to the markets. We should think about what we think is right. So a minimum wage, perhaps looking at fair pay at the top, looking at taxation to redistribute to some extent. Those are decisions for a democracy for people to make judgments and not just necessarily leave it to a free market. 

LYNNE HAULTAIN
Which is interesting because that's the spectrum, I suppose that you see in the literature and in the public debate around this, is that the free marketeers who are saying it's fine, leave it to the market, it will all do its own work, and those who are saying no we have a moral obligation in order to more actively shape the society in which we want to live, and you can see that borne out in government policy around the world. But I suppose as you've pointed out there is this divide between how governments see their place in all of this, and we see a spectrum too on that score. You've mentioned the Scandinavians versus the Americans. It would seem from David Cameron's comments at least that there is a shift in the mind of some politicians towards a greater engagement with this. Do you think that's convincing? 

KAREN ROWLINGSON
I think in America we've seen Barack Obama who's taken a different view from previous American administrations, and again after the global financial crisis he was looking at pay restraints on those very top earners. But obviously those top earners are quite powerful and it's quite difficult to get that through in practice. In the UK we had the Labour government just before 2010 introduce a tax on people earning over £150,000 of 50 per cent, and that was quite radical for the UK to bring in a new income tax level, first time in 20-30 years. In France you have a socialist president who brought in again a tax on high incomes. So we have seen some movement but then we also see this backlash. So in the UK now we have coalition government of Conservative Liberal-Democrat, and they have reduced that tax to 45%. So there was some move after the GFC to introduce these higher taxes on people on higher incomes but some of that has been lost I think and we've seen now again increased accumulation of income and wealth at the top. 

LYNNE HAULTAIN
Karen, the work that you did on the Policy Commission on the Distribution of Wealth you made some recommendations around this, which included things like inheritance tax or at least a discussion thereof, which is one of those really contentious issues, no matter where it comes, and I notice that the Scandinavian nations have started to wind back from inheritance taxes. That is front and centre, but what other sorts of recommendations can you make in a policy context that might actually address some of these issues?

KAREN ROWLINGSON
So in our policy commission we looked at three groups really: those at the top, the very wealthiest, and what policies might be appropriate for them; those in the middle; and those at the bottom. So if we look at those at the top taxation is obviously a key issue, so inheritance tax, and actually reforming inheritance tax. At the moment in the UK at least inheritance tax is really a tax on the estate of the person who leaves the money, the wealth, whereas if you have a tax on the people who receive it you can almost treat it like income then, because they're receiving it. If they're already wealthy you might have a higher rate of tax than somebody who's poorer. That can be quite redistributive and seem fairer as well, rather than taxing somebody who's died - which always seems wrong, really - if somebody who's living - they're receiving that money, you can tax them when they receive it. So there are things you can do perhaps to make inheritance tax a little bit more understandable and - it'll never be popular - but people, if they have to compare that to income tax, they might think it's fairer.

LYNNE HAULTAIN
And that's the debate, as Piketty has put this as well, which would you prefer? 

KAREN ROWLINGSON
Yeah.

LYNNE HAULTAIN
To live your life and have your estate taxed or to pay income tax throughout your days. 

KAREN ROWLINGSON
Yeah.

LYNNE HAULTAIN
Is that the support of debate that you think we should be having?

KAREN ROWLINGSON
Yes. We've actually commissioned some research just as we speak that's happening in the UK to give people that choice. Because a lot of research just says what do you think about inheritance tax should we increase it or not, and no, people don't like it. But if you give them a real choice the indication is that about half say actually we'd rather have lower inheritance tax and higher income tax, and the other half say no we want higher inheritance tax and lower income tax. So we're just trying to say whether that does actually pan out across the whole population. We haven't actually got the findings yet, but we're very keen to look at that. I think unless you give people real choices, the research evidence isn't very clear.

LYNNE HAULTAIN
Are there other key recommendations that you think government should be grappling with?

KAREN ROWLINGSON
So we also are concerned about people at the bottom who have no wealth at all, and that's between about a third and half of the UK population who have very little wealth and in fact have more debts than they have savings. So we would think it's important to tackle that to help people get out of debt, to help them to save for unexpected expenses rather than having to turn to the expensive payday lenders and other forms of lending that we have in the UK, to give them encouragement to save. So there are different kinds of saving schemes where you can match what people save to try and help them to save. So we think that's important as well as looking at curbing the very high levels of wealth at the very top. And then those in the middle, obviously housing wealth is important to them, and pensions, and we have seen some reforms in the UK on pensions to try and encourage people to save for the future. We again made recommendations about how they could be increased further. 

LYNNE HAULTAIN
To bolster that self-maintenance, I suppose, in older age. Is that the...

KAREN ROWLINGSON
Yes, because at the moment in UK as in many countries people don't save enough for the long-term. It's very difficult to just make ends meet in the short-term, so to think about 30-40 years ahead is quite hard. So you need to give people that kind of support, and one of the mechanisms that the UK have used borrowing US ideas is to enrol people into a pension at work automatically and they can opt out if they want to do so, but they're in there to start with. Actually most people - and it's about 90 per cent at the moment - are staying in those pensions. That will mean that they will save and be far better off in later life. 

LYNNE HAULTAIN
In the Australian context that's superannuation which is mandatory, and in the US the equivalent is 401K. You're listening to Up Close. I'm Lynne Haultain, and in this episode we're exploring inequality and its impact with Professor Karen Rowlingson of the University of Birmingham. Karen, once we've proposed various options to people and to government to discuss we then have to think okay well do we want to get to? In terms of inequality what are we aiming for? What do we want to be the outcome of all of this? What is fair in the end?

KAREN ROWLINGSON
I think that's a very good question. I think there are very few people who would argue for complete equality. There are some people who would but I think it's unusual to find those people. So I don't think that's really the end most people would aim for. Very few people are arguing for the level of inequality we see in the UK, US today. We carried out a Policy Commission on the Distribution of Wealth in the UK and no-one we spoke to from across the political spectrum said that the current levels of wealth inequality were okay. They all said there's a problem here. There are different ideas about how to reduce but nobody was arguing for that level of inequality. So yes, what do we aim for? 
I think we should be thinking about aiming for something realistic which was what we had in the 1960s, early 1970s in the UK, a much lower level of inequality but still some inequality around. If we go back to this measure, the Gini coefficient, it's around about not far off where Australia is now actually in terms of about 30% Gini coefficient. That seems to be achievable, it's a level of inequality we've actually had in the UK in the 1960s, and it does seem from the research studies that once you get to that level of Gini coefficient the social problems are much lower in relation to inequality. So it's quite difficult to give a figure and say this is what we should aim at. I think we certainly want less than we have now. Very few people would argue for the zero inequality, but if we can get back to the level we had in the 1960s early 1970s that seems to be a reasonable target.

LYNNE HAULTAIN
Just to go back to our comments regarding Stiglitz and Piketty at the beginning of this interview, they both are fairly gloomy about the prospects if this sort of trend continues. To finish the quote that I started earlier from Stiglitz, he rounds that off by saying: there's one thing that money doesn't seem to have bought: an understanding that their fate - i.e. the one per cent - is bound up with how the other 99 per cent. Throughout history this is something that the top one per cent eventually do learn too late. Piketty has a similarly bleak view of the sort of political unrest and discontent that can rise up and as you mentioned pitchforks will be headed for the billionaires. What do you think? Are we on a slippery slope? Is there potential to turn this around? How seriously can we expect our political leaders to take this?

KAREN ROWLINGSON
Well I try to be an optimist but it is quite difficult in this field. I did think with the global financial crisis and the Occupy Movement that we would see quite a radical change, and I thought we'd see elected parliaments and governments that were going to try and change this. And briefly we saw that, very briefly, and it does seem to have turned around again. But it's very hard to see this continuing. I don't know how it will be resolved, whether hopefully it'll be peacefully and through democratic means and through gradual but quite quick change, or through something more substantial. Again Nick Hanauer, the Seattle-based IT entrepreneur is arguing that billionaires like himself really need to have this change for their own benefit as well as for everybody else. He's concerned about his position and his fellow billionaires if things don't change and he's trying to put the case to them. So I think if we get people like that making the case and also see Microsoft's Bill Gates and others...

LYNNE HAULTAIN
And Warren Buffett.

KAREN ROWLINGSON
Warren Buffett, who talk about they don't want to just leave all their wealth to their children, they are putting lots of money into good causes. There are some very good people out there who have made a lot of money who do argue for a different kind of society. 

LYNNE HAULTAIN
And ironically that movement seems to have come out of the US.

KAREN ROWLINGSON
Yes, well that's again where the levels of inequality are so great, so I think they can see that there is an issue here, and there's much more of a tradition of philanthropy in the US than there is in many other countries. So that's a good thing and we need to harness that. But we do also need the mainstream political parties to take this onboard. At the moment there seems to be more of a consensus - a kind of centre-right consensus - in many countries - not in all but in many countries - and even in the UK our Labour Party is not really challenging this very much at all. So we're not having mainstream leaders standing up and making the case. We've seen it a bit in France, in some countries, but not in a widespread way. But that's what we really need if we're going to get serious change that's more gradual, otherwise we might see popping up more radical alternatives.

LYNNE HAULTAIN
Is it a bit like the debate around climate change where we see this urgency from a well-informed group of people and then a great hesitance on the part of those who are in the positions of power?

KAREN ROWLINGSON
Yes. I think there's a lot of denial, which we do see in relation to the Thomas Piketty book, a lot of people picking it apart and saying the data's not strong enough. I agree there is, as I've said, quite a lot of contention around data. But I still think the overall picture is quite convincing and there are parallels there with environmental change. I think there are deniers out there that this is a problem and that the scale of the problem is as such that we think it is, but the evidence is accumulating and I think we can't ignore it any further really, we do need to take some action.

LYNNE HAULTAIN
Finally Karen if you could do one thing what would you introduce tomorrow?

KAREN ROWLINGSON
That's a very good question. If I could it would be a wealth tax. Thomas Piketty talked about a global wealth tax. It's something as you say that many countries are actually falling back from rather than increasing. But we don't tax wealth very much at all. It's not just inheritance that we need to tax but wealth more generally. We could do that quite easily if you look at housing wealth. It's very easy to tax housing wealth. It's hard to hide your house so you can find it. It's harder to tax other forms of wealth, the financial wealth, because people can hide that and move that around. But if we did that on the global scale and governments got together to agree about that it would be much harder for billionaires to find offshore places and squirrel it away. So I think a wealth tax really is a key part of the solution.

LYNNE HAULTAIN
Which as you say, that sort of global or at least high number of countries agreeing to that is the critical factor given that countries are paranoid about wealth escaping over borders - or overseas in our instance in Australia - if a tax is introduced here which is not imposed elsewhere. So there's that great competition between nations which drive these things as well. Karen Rowlingson it's been a great pleasure speaking with you. Thanks for being with us.

KAREN ROWLINGSON
Thank you.

LYNNE HAULTAIN
I've been talking about inequality and its consequences with Karen Rowlingson of the University of Birmingham, Professor of Social Policy in the Institute of Applied Social Studies, and who established the 2012 Policy Commission on the Distribution of Wealth. You'll find more details of her publications on the Up Close website, together with a full transcript of this and all our other programs. Up Close is a production of the University of Melbourne, Australia, created by Eric van Bemmel and Kelvin Param. This episode was recorded on 24 July 2014, produced by Kelvin Param and Eric van Bemmel, with audio engineering by Gavin Nebauer. I'm Lynne Haultain, thanks for listening, and I hope you can join us again soon. 

VOICEOVER
You've been listening to Up Close. We're also on Twitter and Facebook. For more information, visit upclose.unimel.edu.au. Copyright 2014 the University of Melbourne.


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