Tuesday 25 August 2009

A Rawlsian defence of top pay?

Don Paskini notes strong public support for a top pay commission, suggesting that the support of 63% of Conservative voters, 66% of Labour voters and 70% of LibDems challenges Tom Harris' claim that the proposal had "securing our core vote written all over it", and would make it difficult for Labour "to continue to win the support, not just of our core vote, but of those Thatcher and Major supporters who switched to us in 1997 and who stuck with us for another one-and-a-half elections".

Harris is not backing down, responding in the comments at Liberal Conspiracy that he does not think it would survive scrutiny but that his objection is to the principle rather than the politics of scrutiny of pay at the top.

Even if it turned out this policy was well thought through, enduringly popular, saved the Labour Party from defeat at the general election and was actually set up by the Labour government after the next election… I would still believe that it’s the wrong thing to do.

Harris' argument has been primarily about political strategy - about the 'framing' and 'signals' sent - and he continues to believe the policy would be politically mistaken, despite the polls.

His principled opposition seems slightly harder to pin down - though I think David Coats is right to note that the unlikely idea of a maximum wage has polarised debate about scrutiny of high pay. Few supporters of a top pay commission would think that sensible or workable, and flying the flag for it has skewed this debate.

Indeed, as Harris has acknowledged that anger at excessive bonuses is fully justified, his position appears to entail sacrificing some legitimate scrutiny of rewards which do not reflect economic success or which cause economic instability because of a 'slippery slope' fear about where this may lead in the 'court of public opinion':

This proposal has “securing our core vote” written all over it. Except it wouldn’t, because once you’ve addressed the understandable anger at certain individuals’ exorbitant salaries, pensions and bonuses, you’re left with the principle that a Labour government is setting a ceiling on individuals’ wealth. And that’s not what governments should be doing, because once you’ve established that principle, once you’ve raised a few cheers by ostentatiously depriving some bankers of their bonuses, where do you go next?

The answer to this must surely be to establish a principle about 'unfair rewards' or 'unearned rewards', rather than one of 'setting a ceiling'. (The means would surely be regulation and taxation, rather than pay ceilings).

Or does Harris believe that Labour's challenge to the "unearned rewards" of "fat cats" like Cedric Browne of British Gas was incompatible with the message of aspiration before 1997?

There is evidence from the detailed Fabian study on public attitudes to inequality for the Joseph Rowntree Foundation that a broad coalition for addressing inequality at the top can be constructed more easily than one for tackling poverty and inequality at the bottom, somewhat against the conventional wisdom of the last 15 years.

That doesn't settle the argument about what it is right to do - though it does suggest that the issue of fairness - 'how did you get it?' as much as 'how much?' is powerful in the public and political debate.

Meanwhile, Luke Akehurst, ventures into egalitarian political philosophy to dismiss the Compass campaign, but appears to advance a Rawlsian argument for something close to the current pattern of inequalities of income or wealth.

Have Compass never read John Rawls' "Theory of Justice" which makes the logically impeccable case that social and economic inequalities should be arranged so that "they are to be of the greatest benefit to the least-advantaged members of society" i.e. an unequal distribution of wealth or other resources can be just when it maximizes the benefit to those who have the lowest allocation of resources - the Maximin theory?

Rawls' argument is one of the most debated in recent political philosophy. If Akehurst believes Rawls' argument is "logically impeccable, he will by the same token believe that all inequalities which are not beneficial to the worst-off can not be justified.

There is very strong evidence that the historically unprecedented explosion in bank renumeration over the last 30 years did not create wealth but simply redistributed it upwards, while creating dangerous systemic risks for the whole economy. That is succintly summarised by Robert Peston.

Luke Akehurst must surely agree that this fails his Rawlsian test. There is a legitimate debate about what reforms would be effective in addressing this very important if sector-specific problem; and also about the most effective strategies for addressing inequality more broadly.

While there was once a fashion for attempting to use Rawls to justify Reaganomics - what became pejoratively called "trickle-down" theory, the thrust of the Rawlsian argument is surely with Richard Wilkinson's evidence that the social consequences of greater equality would benefits across society, not just for the worst-off.

This has convinced some on the right, though this increasingly appears to be something of an embattled minority position. David Willetts writing recently of how the social science evidence on the importance of relative position challenges the Thatcherite view that inequality does not matter, and was simply "the politics of envy".

She was not interested in how people were doing compared with others — she thought this was the politics of envy. I remember doing some calculations for her which showed that the value of unemployment benefit in the 1980s was not much below average male earnings after the war. So what were people complaining about? Now the work of people like Michael Marmot and Richard Wilkinson has persuaded me that inequality matters too. There are of course limits to what governments can do, especially about the petty differences between us and people we know, which are often the inequalities people worry about. Nevertheless in dismissing all this as just the politics of envy we showed we did not understand something which does affect wellbeing.

Whatever the debate about how best to address it, Labour should be able to unite around a commitment to a fairer and more equal society (as Akehurst argues, recently criticising John Denham on this basis).

But there is surely no Rawlsian defence of current levels of inequality at the top in the UK.


Stuart White said...

Sunder: being away on hols I have only just read this post. A few thoughts:

(1) First, as you say, Luke's effort to defend top pay on Rawlsian grounds almost certainly falls at the empirical stage - the relevant pay differentials simply aren't necessary to maximize the position of the worst-off.

(2) Luke is on shaky ground to claim that Rawls's defence of inequality on incentives grounds is 'logically impeccable'. For one major problem with the argument, I refer Next Left readers to my post on Jerry Cohen which describes his extremely effective critique of Rawls on this point.

Rupert said...

The problem is that there is no clarity in Rawls as to what the upper limit is for permissible inequalities. And no clarity (for how could there be?) as to how much 'incentive' the potentially-better-off can require for doing the work that makes the poor better-off. In other words: My argument is that Rawls's difference principle is actually not substantively action-guiding. It is compatible with a vast range of policies, including the kind of stuff that Akehurst talks about.
INSTEAD we need a genuinely egalitarian alternative. As recommended by Cohen, Wilkinson - BUT NOT Rawls.