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A passport to privilege
Tim Harford, Undercover Economist, November 7, 2014
Class matters far less than it used to in the 19th century. Citizenship matters far more
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I’ve been a lucky boy. I could start with the “boy” fact. We men enjoy all sorts of privileges, many of them quite subtle these days, but well worth having. I’m white. I’m an Oxford graduate and I am the son of Oxbridge graduates. All those are things that I have in common with my fellow columnist Simon Kuper, who recently admitted that he didn’t feel he’d earned his vantage point “on the lower slopes of the establishment”.
I don’t feel able to comment objectively on that, although we could ask another colleague, Gillian Tett. She’s female and – in a particularly cruel twist – she wasn’t educated at Oxford but at Cambridge. That’s real diversity right there.
All these accidents of birth are important. But there’s a more important one: citizenship. Gillian, Simon and I are all British citizens. Financially speaking, this is a greater privilege than all the others combined.
Imagine lining up everyone in the world from the poorest to the richest. The world is a very unequal place: those in the top 1% have vastly more than those in the bottom 1% – you need about $35,000 after taxes to make that cut-off to be one of the 70 million richest people in the world. If that seems low, it’s $140,000 after taxes for a family of four – and it is also about 100 times more than the world’s poorest people have.
What determines who is at the richer end of that curve is, mostly, living in a rich country. Branko Milanovic, a visiting presidential professor at City University New York and author of The Haves and the Have-Nots, calculates that about 80% of global inequality is the result of inequality between rich nations and poor nations. Only 20% is the result of inequality between rich and poor within nations. The Oxford thing matters, of course. But what matters much more is that I was born in England rather than Bangladesh or Uganda.
That might seem obvious but it’s often ignored in the conversations we have about inequality. And things used to be very different. In 1820, the UK had about three times the per capita income of countries such as China and India, and perhaps four times that of the poorest countries. The gap between rich countries and the rest has since grown. Today the US has about five times the per capita income of China, 10 times that of India and 50 times that of the poorest countries. Being a citizen of the US, the EU or Japan is an extraordinary economic privilege, one of a dramatically different scale than in the 19th century.
Privilege back then used to be far more about class than nationality. Consider the early 19th century world of Jane Austen’s Pride and Prejudice. Elizabeth Bennet’s financial future depends totally on her social position and, therefore, if and whom she marries. Elizabeth’s family’s income is £430 per capita. She can increase that more than tenfold by marrying Mr Darcy and snagging half of his £10,000 a year (this income, by the way, put Mr Darcy in the top 0.1% of earners). But if her father dies before she marries, Elizabeth may end up with £40 a year (interest on her mother’s fortune), still twice the average income in England.
Milanovic shows that when we swap in data from 2004, all the gaps shrink dramatically. Mr Darcy’s income as one of the 0.1% is £400,000 today; Elizabeth Bennet’s equivalent is £23,000 a year. Marriage in the early 19th century would have increased her income more than 100 times; in the early 21st century, the ratio has shrunk to 17 times.
This is a curious state of affairs. Class matters far less than it used to in the 19th century. Citizenship matters far more. Yet when we worry about inequality, it’s not citizenship that obsesses us. Thomas Piketty’s famous book, Capital in the 21st Century, consciously echoes Karl Marx. Click over to the “Top Incomes Database”, a wonderful resource produced by Piketty, Tony Atkinson and others, and you’ll need to specify which country you’d like to analyse. The entire project accepts the nation state as the unit of analysis.
Meanwhile, many people want to limit migration – the single easiest way for poor people to improve their life chances – and view growth in India and China not as dramatic progress in reducing both poverty and global inequality, but as a sinister development.
It would be unfair to say that Simon Kuper and Thomas Piketty have missed the point. Domestic inequality does matter. It matters because we have political institutions capable of addressing it. It matters because it’s obvious from day to day. And it matters because over the past few decades domestic inequality has started to grow again, just as global inequality has started to shrink.
But as I check off my list of privileges, I won’t forget the biggest of them all: my passport.
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