Prosperity and Inequality: from the Enlightenment to BREXIT and Donald Trump

 

Professor Sir Angus Deaton FBA, HonFRSE

Dwight D. Eisenhower Professor Emeritus of Economics and International Affairs, Princeton University

Monday 10 October 2016

Report by Jane-Frances Kelly

Nobel Laureate Professor Sir Angus Deaton has researched the areas of poverty, inequality, health, wellbeing and economic development for many years, transforming many of those fields in the process. In his David Hume lecture, he explored the nature of inequality over the last few centuries, before considering its role in the challenges facing the US and the UK today.

 Introduction

Although he has lived much of his adult life in the United States, Sir Angus was born and brought up in Edinburgh, “a wonderful city in which to read, and to dream of and to explore (even though it was still very grimy and dirty in those days)”. When he was ten, his family moved to the Borders, where he spent some time at Hawick High School. There, along with another former pupil, the theoretical physicist Sir David Wallace (who was in the audience), he was one of the ‘two brightest boys in the class’ – but not the smartest pupil; that was a girl, “with whom we were locked in competition”. She became a doctor.

Sir Angus was accompanied by his wife, Anne Case, the Alexander Stewart 1886 Professor of Economics and Public Policy, also at Princeton University.

Presentation

President of the Royal Society of Edinburgh, Professor Dame Jocelyn Bell Burnell, admitted Sir Angus to Honorary Fellowship of the Royal Society of Edinburgh and presented him with an RSE 2016 Royal Medal.

Lecture

The lecture and Q&A were chaired by Anton Muscatelli, Principal of the University of Glasgow and Honorary President of the David Hume Institute.

Sir Angus described today’s world as a difficult and uncertain place, characterised by continued faltering growth in the OECD and China, and breakdowns in familiar political arrangements in Europe and the US. Recovery from the Great Recession has been slow, or non-existent, in many places, and many countries are experiencing rapidly rising inequality.

Our current circumstances should be placed in historical context, however: since the Enlightenment, human progress has moved many of us from destitution, ill-health and premature death to long life and high material living standards.

Sir Angus commented that we sometimes forget how recent a phenomenon increases in life expectancy are. For example, he was born in Edinburgh in 1945, when infant mortality in Scotland was what it is in India today. When his father was born in Yorkshire in 1918, child mortality rates in Britain were higher than it currently is in many countries in sub-Saharan Africa.

Other global advances over the last few centuries include large-scale reductions in violence (for example murder rates), large increases in education participation, and the increased spread of democracy around the world.

But as in the film The Great Escape (from which Sir Angus borrowed the title of his recent book), progress has allowed only some to escape, leaving others behind: progress itself has been an engine of inequality.

Inequality in the US today

Focusing further on global progress over the last fifty years, Sir Angus described the further increases in life expectancy and decreases in poverty and inequality, particularly in developing countries: “it’s the much-hated globalisation that has taken a billion people out of absolute poverty over the last 25 years”, he said.

This global progress was then contrasted with the current role of inequality in his two home countries, where Sir Angus commented that in the US (as in the UK), inequality is increasing alongside low economic growth. Low growth means that fewer people prosper and flourish, and more get left behind, with scant prospect for advancement.

Progress is not just about money, of course. Health is just as important, if not more so, and the rich live longer than the poor in all countries, including ours.

Sir Angus then provided an analysis of the causes of mortality for different age and ethnic groups in the US since 1990, published last year in a paper co-authored with Professor Anne Case. A forensic drilling down into the data drew audible gasps as it revealed that, contrary to the trends for Hispanics and African Americans, mortality has been sharply increasing among middle-aged whites in the US.

The increase in deaths, particularly pronounced in those with only a high school education or less, has primarily been caused by suicide, drug and alcohol poisoning (particularly from opiate overdose) and alcoholic liver disease. Sir Angus called these “deaths of despair”, and spoke of the many people who are dead who would otherwise be alive today.

Following the publication of their paper, the Washington Post compared the location of the deaths with voting patterns in the US Primaries, and showed that they are geographically correlated with votes for Donald Trump.

Sir Angus explored some of the many competing explanations of the mortality trends which have been put forward. These include that mid-life non-Hispanic whites with high school education or less are leading a ‘much worse’ life than they expected. Contrary to the promise of the ‘American Dream’, they are worse off than their parents and see a decline in opportunities for their children. Their jobs may have moved overseas, or been replaced with robots (while manufacturing has continued to increase as a proportion of the economy in the US, the number of people employed in manufacturing has greatly reduced). In contrast, African Americans and Hispanics perceive their lives to be improving and are much more optimistic about the future.

Other possible explanatory factors include: the lack of a good safety net in the US; declining religiosity; and Charles Murray’s argument that ‘American virtues’ have declined among the white working class. It is clear that much more work is required.

Sir Angus referred to the economist Albert Hirschman’s story of a two-lane tunnel:

‘‘Suppose that I drive through a two-lane tunnel, both lanes going in the same direction, and run into a serious traffic jam. No car moves in either lane as far as I can see (which is not very far). I am in the left lane and feel dejected. After a while the cars in the right lane begin to move. Naturally my spirits lift considerably, for I know the jam has been broken and that my lane’s turn to move will surely come at any moment now. Even though I still sit still, I feel much better off than before because of the expectation that I shall soon be on the move.

 But suppose that the expectation is disappointed and only the right lane keeps moving: in that case I, along with my left lane cosufferers, shall suspect foul play, and many of us will at some point become quite furious and ready to correct manifest injustice by taking direct action (such as illegally crossing the double line separating the two lanes)’’[1]

Initally, there is a tolerance for inequality: people accept, and even like, others getting ahead, if they see that the same opportunities might become available to themselves. But if those opportunities never materialise and/or are are seen to be shut off, anger and resentment can result. Sir Angus explained that these are not ‘crazy’ fears. He gave a US example where high-achieving white middle class students have little chance of getting into many elite universities, as half the intake consists of the children of the super-wealthy and the other half consists of minorities on quotas and scholarships aimed at righting historical wrongs.

The role of inequality in the UK and Europe

While the situation of white non-Hispanics in the US is extreme, Sir Angus pointed out that increasing dissatisfaction of those left behind can also be seen elsewhere. He pointed to the rise of left-wing and right-wing parties throughout Europe, and to the scapegoating of immigrants and/or Europe in the recent BREXIT Referendum.

How do these increased mortality findings compare to our experience in Britain? Sir Angus cautioned against over-facile comparisons between the US and the UK; in particular, racial and ethnic issues are very different. Health data show that in the UK there has been an increase in drug and alcohol poisoning since just after 2000, but the effect is much smaller than that in the US.

Conclusion

When growth is so slow, countries cannot afford to leave so many people behind, for everyone’s sake. Policies designed to keep opportunities open are important, as are safety nets (which are so weak in the US).

At the very minimum, Sir Angus called for greater sympathy for those who have been left behind. While many do not like the ‘solutions’ put forward, (for example, Trump or leaving the European Union), there is genuine grievance which must be recognised and addressed. We must also do a better job of persuading people that the institutions of the past fifty years can continue to serve everyone well, or we risk their destruction through toxic politics.

Q&A

A member of the audience asked whether a reduction of community spirit and a decline in community support mechanisms might be contributing to the situation. Sir Angus agreed, saying that areas with high mortality rates were also experiencing an increase in divorce and a decline in social association. Hispanics also tend to have tighter social networks, which may be acting as a protective factor. In addition, places which have high suicide rates tend to have low population densities. He commented that suicide is not a well-understood phenomenon – indeed, we have not progressed very far from Durkheim’s work on the subject a century ago.

Another member of the audience wondered whether the recent increase in political engagement in Scotland might be a protective factor, pointing out that Scotland voted to remain. On the other hand, the Scottish Independence Referendum itself provided an opportunity to vote against the status quo. Further research is clearly required, and the Scottish context was suggested as fertile ground for inquiry.

At one point, Sir Angus reflected that it is possible that the last 250 years since the Enlightenment will prove to be a flash in the pan. To the relief of many in the audience, however, he declared himself to be optimistic, since ideas are the basis of our prosperity and it’s hard to kill ideas off.

Sir Angus wondered whether unfairness, rather than inequality per se, makes people most dissatisfied, and whether the widespread rent-seeking that characterises our economies is one of the major causes of the kind of discontent that results in voting for BREXIT or Donald Trump.

Vote of Thanks

General Secretary of the Royal Society of Edinburgh, Professor Alan Alexander, offered the Vote of Thanks. He remarked that both the centrality of data to the analysis and the challenging of conventional wisdom are to be welcomed in age of ‘post-fact politics’.

Opinions expressed here do not necessarily represent the views of the David Hume Institute, the RSE, nor of its Fellows.

[1] Albert O. Hirschman, 1973 ‘The Changing Tolerance for Income Inequality in the Course of Economic Development’, Quarterly Journal of Economics 87, p. 545.