The state & inequality
To what extent can state intervention reduce inequality? The lesson of the New Labour government is that it can’t much; since 1997 inequality has either barely changed, or risen a little depending upon whether you take ONS or IFS data.However, a new paper by Ian Gazeley and Andrew Newell shows that there was a period when poverty and inequality declined markedly. They estimate that between 1904 and 1937 the proportion of working households living in absolute poverty fell from 21.7% to under 3.6%, and wage inequality fell markedly.Of course, poverty due to unemployment or old age remained acute. But the fact is that working poverty was pretty much eliminated before the establishment of the post-war welfare state and Keynesian full employment policies. Gazeley and Newell attribute this to two causes. Households had fewer children, and real wages rose a lot, especially for the poor; the real wages of the bottom quintile rose 48% whilst mean wages rose 30% during this time, thanks in part to increased unionization and higher productivity.Does this mean that significant reductions in inequality and poverty can occur without big government intervention?Not necessarily. Higher wages and smaller families were both, in part, the result of the Great War. The distribution of condoms to soldiers to help stop VD had the effect of popularizing the use of contraception. And the fact that almost a million British and Irish died in the war created a shortage of labour that helped drive up wages.History, then, suggests that state can be a force for equality, by massacring its subjects.