Once a professor of economics, Andrew Leigh is now the MP for Fenner and one of the leading intellectual lights of the Labor Party. Having reached the shadow cabinet without the backroom benefits of factional alignment, he brings a vision beyond simple pugilistic politics to parliament. Andrew is also a prolific author, so I picked up his Battlers & Billionaires to see what insights could be gleamed from the unaligned man.
It is clear that Leigh genuinely cares about rising inequality in Australian society. He focuses this book tightly on it, providing a brief history of its colonial expansion, post-war contraction and recent explosion peppered with graphs and anecdotes. The conversational style he employs gives Battlers & Billionaires an easy-reading style which is sorely lacking in many books on the dismal science. The style may be new, but the story is instantly familiar to anyone who has read Piketty’s wildly popular Capital in the 21st Century, albeit localised to Australian conditions.
Leigh points at the globalised labour market, declining union membership and lowering of top tax rates as drivers, all of which are reasonably argued. However, in his assertion of insufficient education as a key driver of inequality, Andrew demonstrates an uncritical approach to economic theory which pervades this work. Consider how Leigh puts forth Goldin & Katz’s theory of the race between education and technology:
One of the most intriguing explanations of what drives inequality was put forth recently by the Harvard academic super-couple Claudia Goldin and Larry Katz. They suggest that we should think of inequality as a ‘race’ between technology and education. In eras when technological advances outpace schooling attainment, the gap between rich and poor widens. But in times when the quantity and quality of education increases, so too does inequality.
In the past generation, US educational attainment has stagnated while technology has continued to advance. Technology is winning the race, and US inequality is skyrocketing.
How does Thomas Piketty consider the same theory?
The most widely accepted theory is that of a race between education and technology. To be blunt, this theory does not explain everything. In particular, it does not offer a satisfactory explanation of the rise of the supermanager or of wage inequality in the United States after 1980. The theory does, however, suggest interesting and important clues for explaining certain historical evolutions.
In order to understand the dynamics of wage inequality, we must introduce other factors, such as the institutions and rules that govern the operation of the labor market in each society. To an even greater extent than other markets, the labor market is not a mathematical abstraction whose workings are entirely determined by natural and immutable mechanisms and implacable technological forces; it is a social construct based on specific rules and compromises.
This is the difference between one author who questions everything in order to rebuild from the empirical data and another who cannot see past the ideology embedded in orthodox economics. Perhaps comparing Leigh’s book with one which was published a year afterwards is unfair, but Piketty has rightly established himself at the heart of any modern discussion of inequality.
Andrew’s uncritical approach colours the remainder of the book and the prescriptions he draws. Any actions which swim against the orthodoxy are dismissed out of hand, as Leigh suggests that “capping CEO salaries might sound tempting until you recall reports from the 1980s and 1990s that bemoaned the low quality of Australian managers” and “few people would argue for reinstating the 60 per cent top income tax rate that prevailed a generation ago, which surely deterred some entrepreneurs”.
Without confronting the ideological backing for economic shibboleths like these, Leigh has little ammunition left with which to deal with the problem. Any conservative would be proud of the way he derails the book for a chapter bemoaning the decline of traditional families, trying to argue that unstable families are a cause of poverty rather than a consequence. He completely fails to grasp the purpose of private schools, suggesting that unintentionally “by privileging the children of ‘old boys’ and ‘old girls’, such schools are reducing the amount of social mobility in Australia”. That is of course the entire point of private schools – to segregate the rich from the poor and entrench existing class hierarchies.
So after demonstrating both the importance of and public support for reducing inequality, we finally reach his solutions. Andrew asserts that in order to reduce inequality, we need to:
- Maintain the policy of open markets and encouraging innovation which have delivered economic growth over the past decades.
- Improve our education system, particularly for those from poor backgrounds. There should be incentives for the best teachers to work in the most disadvantaged schools.
- Encourage relationship stability with light-touch programs that encourage more ‘concerted cultivation’ in the most disadvantaged households.
- Recognising the role of trade unions, perhaps with laws that give them the chance to pursuade new employees to sign up.
- Make sure that welfare spending continues to be targeted at those most in need. Ensure that everything is means-tested.
- Maintain a progressive income tax system.
- Evaluate social policies more accurately with randomised trials.
- Keep egalitarianism at the heart of our national story.
Despite his thorough history of inequality and genuine passion for reducing it, Andrew has become so boxed-in by orthodoxy that he can’t offer any meaningful solutions. The underlying assertion is that as long as we don’t actively make things worse, inequality will fix itself. Never mind that expanding means-testing will only serve to stigmatise recipients, if structural change or even raising taxes on the rich have been ruled out by ideology then these limited measures become the only option. Leigh exemplifies the problems inherent in the modern Labor Party’s vision, which is so wedded to neoliberal economics that no matter what concerns they may have with the outcomes, the policy prescription cannot be changed.
I can’t entirely condemn Andrew Leigh. On a fundamental ethical level he gives a damn about inequality and its growth in this country. This book may even convince those on the centre-right to care about it. Given the paucity of public intellectuals willing to commit to policy discussions rather than backroom gossip, his intent to spark a discussion with this book is laudable. But without a willingness to confront one’s own ideology, intent can only go so far.