In 1990, during Margaret Thatcher’s final address to the House of Commons, she was attacked over her record on financial inequality. “How” she was asked, “can she justify many people…being relatively poorer, much less well-housed, and much less well-provided for?” Thatcher was on the button: “all levels of income are better off than they were in 1979” she rallied, “this man would rather have the poor poorer, provided the rich were less rich!”. To give the tabloids their ‘Left Shark’ moment she proceeded to demonstrate the difference: “here” she said, with fingers far apart, “or here”, with fingers closer together, but lower down.
Tory cheers shook the House, but putting aside political rhetoric there remains an important question: are we better off with equality or prosperity? In an article entitled ‘Be happy, pay more to the taxman’, Professor Richard Layard argues that it is the income gap, rather than total wealth that is most pertinent to people’s happiness. Studies show, writes Layard, that we are no happier than we were 50 years ago despite “unparalleled economic growth”. Though richer individuals are generally happier than poorer ones, richer societies are not. Whatever this may say about the petty jealousies of man, it would appear that we define our wealth by the people around us, and our happiness alters accordingly.
There are many real-life examples; researching a trip to Central America last Summer, I glanced through statistics for Costa Rica, Panama, and Nicaragua. Noticeably Nicaragua, which due to its communist past has had almost no US investment, is financially poorer but safer and happier than its more illustrious, crime-ridden, and unequal neighbours.
So, is redistribution of wealth the answer? Sadly it isn’t that simple. According to Layard one of the greatest contributing factors to public happiness is perceived personal freedom (note it’s the ‘perception’ that matters). In other words, forcing equality on people (high taxes, controlled industries etc.) to too great an extent can be just as bad as not having it in the first place.
The best-case scenario for national well-being seems to be a form of benevolent capitalism which structurally ensures that the gap between rich and poor never gets too wide, without too much intervention. So yes, Thatcher was probably wrong, but so is rigid socialism. Political centrism anyone?