Skinning the Tiger Claw by Claw.

A Review of Anthony B. Atkinson, Inequality: What can be done? (Harvard University Press, 2015)

The 970 pages of Thomas Picketty’s Capital in the Twentieth Century have been summarised in the three characters: r > g.  Meaning that, in recent years, the rate of return on the capital of the wealthy (r) is greater than the rate of growth of the economy (g).  Thus the proportion of wealth owned by the richest becomes greater and inequality grows.

Picketty has little to say about how this rate of return, and thus inequality, might be reduced.  His main proposal is for a global wealth tax which is, in his own words, utopian.  Tony Atkinson’s new book is an attempt to address this, although one that is resolutely on the centre ground of politics – he is, after all, Sir Tony and a long time member of government, parliamentary and EU advisory bodies.

Atkinson has spent his life studying the economics of inequality and income distribution with publications stretching back to his 1969 Poverty in Britain and the Reform of Social Security and in the past he has collaborated with Picketty, on whom he has been a major influence.  His latest work is separated into three sections looking in turn at the nature of inequality; proposals to mitigate it; and an assessment of whether these policies are practicable.  In each case, the focus is largely on the UK.

The section on the nature of inequality draws on Picketty.  Atkinson argues that when inequality fell from the 1930s to the 1970s it was the result of a number of factors including workers organised in trade unions being able to increase the working class’s share of the social product and that social-democratic policies by the state had some effect in redistributing resources.  The growth of inequality from the 1970s has been associated with systematic attacks on the unions and the welfare state.

This is a strongly grounded analysis.  Atkinson is highly critical of mainstream economic theory, and particularly its more overtly neo-liberal exponents, who largely ignore issues of inequality.  Atkinson continues to assert, as he has for nearly fifty years, that this is an area economics should have a greater focus on while cataloguing that in economic theory (as in so much else) it is neo-liberal ideas of the market determining wage levels that dominates.

For all of this, Atkinson himself remains in the mainstream, although his neo-Keynesian and redistributive views means that his is a minority voice.  There is no criticism of the market economy as such.  Rather, two things are taken as axiomatic.  First, that it is human intervention through government economic policy and the norms of corporate governance that shape that economy.  Just as neo-liberalism is at heart a political choice the benefits the owners of property so alternative choices that create greater social justice could be made.

Second, Atkinson takes it for granted that policies which redistribute wealth and create greater equality are best.  It is telling that the basis for this is the work of the liberal philosopher John Rawls, whose Theory of Justice was first published in 1971.  There is a strong “back to the seventies” feel about many of the proposals in the book, the last time policies sought to any degree to promote social justice rather than the free market.

The second part of the book is its greatest weakness.  This consists of a series of proposals for decreasing inequality although none fundamentally challenges the power of capital, rather all attempt to work against unequal outcomes that the private ownership of much of the productive forces of society creates without fundamentally challenging that private ownership.  Atkinson is clear in his understanding that inequality in contemporary Britain is underpinned by there being a group of people who either receive large incomes from the capital that they hold or in the form of multi-million pound salary packages (and, as he notes, the two are increasingly the same people) but has no policy for correcting this other than taxing this income.

Many of the policies that are proposed are desirable – who on the left would disagree with raising the level of child benefit or increasing the minimum wage.  But others are much more questionable.  Thus, the proposal to replace inheritance tax on estates left with a life-time capital receipts allowance on anyone receiving an inheritance or equivalent gifts from the living is a recipe only to cushion the richer sections of the middle class from inheritance tax.  The proposal to establish a corporatist governmental body, the Social and Economic Council, in which various social “stakeholders”, including the trade unions, look at issues such as pay rate, is reminiscent of many tripartite institutions that were created in Britain between 1962 and 1979 and were much more of way of co-opting the trade union bureaucracy than empowering the working class.

This, again, gives the proposals a 1970s feel.  They seek to roll back the film of British politics to a point, somewhere between the Labour government’s move away from Keynesian policy at the time of the 1976 IMF crisis and the Conservatives 1981 budget.  This was a fork in the road where the British state moved from a moderate accommodation with organised working class to an attack on it, marginalising it economically with an attack on the welfare state, Keynesian economic policy and trade union power.  In effect, Atkinson proposes that state policy should return to that fork in the road and take the route of mitigated capitalism with a human face.  In effect this is a plea for a more European social market economy.

There are two problems with this.  The first is a poverty of ambition.  By his own admission, Atkinson’s proposals could hope to do no more than turning Britain from one of the more unequal European states to one with middling inequality.  Particularly, when it comes to considering policies that might constitute real restraint on capital, such as higher corporation tax or a wealth tax on individuals, Atkinson is ambivalent believing that they may be impracticable.  The second problem is of agency, what force is going to wind the clock back to the 1970s and march capital down a different path?  Atkinson’s answer is that the gun to capital’s head will be a combination of the European Union and the force of his own arguments.

Instead of dealing with either of these problems, the third part of Atkinson’s book deals with the criticism that such a set of policies are not practicable in terms of the state’s ability to raise the revenues in a globalised economy while retaining growth.  Although Atkinson’s arguments are persuasive the logic is dangerous: this approach makes policies to address inequality conditional on the ability of the capitalist system to be pliant enough to deliver them.  So, for example, he accepts the logic of the Laffer Curve.  Arthur Laffer suggested that there is a rate of tax that maximises income, arguing that if tax were 100 per cent receipts would be nil (no one would have a motivation to work), and if tax were nil then tax receipts would also be nil.  He suggested therefore that there had to be a single point between these two extremes that maximises tax revenues, particularly for the highest earners and purported to show that this point was a tax rate of around 40 per cent.  Atkinson argues that the rate might be somewhat higher, 65 per cent, but the truth is that no-one knows.  The point is that even in this most central policy, the degree of equality that may be obtained is limited by the marginal rate of taxation that is consistent with the super-rich getting out of bed to exploit the working class.


There is a saying, often attributed to the social democratic theoretician RH Tawney, that you may peel an onion a layer at a time, but you cannot skin a tiger claw by claw.  Atkinson seeks to do the latter without a social strong force enough to counter the power of the capitalist tiger.  We need to work on developing our claws and teeth to fight that tiger and overcome it.  Only then will the battle for equality be won.



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