Bill Emmott - International Author & Adviser

Article

It´s not fair but voters can be terribly unfair
The Times - January 9th 2012

Hands up all those against fairness? No, I thought not, and plainly David Cameron thinks not too, or he wouldn´t have launched the new year by emphasising that attractive word, in a bid to wrestle it out of the grip of Ed Miliband. Yet as both parties´ choice of executive pay as a main arena for the fairness agenda will show, it is a much easier word to say than to put into practice. Which is why it also exposes politicians to one of the biggest dangers of all: being seen as insincere and hypocritical.

            This is not to say that Mr Cameron is wrong. Inequality has long been widely predicted to be about to retake centre political stage on both sides of the Atlantic after its long period waiting in the wings (or, to extend the theatrical metaphor more aptly, waiting at tables), but so far has not managed to do so. There may be many local reasons in particular countries, but the common one is this: that the real issue that resonates with people is not inequality as such but rather unfairness or injustice.

            America illustrates this. As long ago as the 2000 presidential election, Al Gore threw away the race by deciding to make inequality his main issue. Whatever you think of the actual, court-determined outcome, hanging chads and all, Vice-President Gore´s crucial mistake in letting the vote get to a draw was that he ran against the economic record of his own Clinton administration, and on an issue about which Americans did not care very much. There was widening inequality, for sure, but at the time the system did not seem egregiously unfair.

            Now, as Barack Obama contemplates a race for re-election in November in which current polls suggest that his Republican opponent will be a wealthy former businessman, Mitt Romney, he too will be tempted to make inequality his mantra. Certainly, inequality of both income and wealth have continued to widen, to record post-war levels, in America as they have in Britain. And who, listening to the popular slogan of the "Occupy Wall Street" campaigners and their global emulators, would not want to be on the side of "the 99%" and against "the 1%"?

             Yet before choosing his line, President Obama should reflect more deeply about his own first term in office, and about the real meaning of that slogan. His flagship domestic-policy achievement, so far, has been one that he had in 2008 placed at the heart of the inequality agenda: making health-care coverage universal. But it has not won him popularity, even among his natural supporters.

In part, that is because the fragile economy and high (if now falling) unemployment overshadows everything. Also, however, the health plan increased state interference and loaded extra burdens on people, neither of which made them happy, even in the cause of equality. The price of that equality was too high, it seems, and it is being paid by the majority, not by some ultra-rich minority.

            Moreover, the most successful new political movement in America these troubled times has not, so far, been Occupy Wall Street but rather the right-wing Tea Party. We can dismiss this, if we wish, as just another example of middle-American crankiness. But it would be better to look beyond that, and the cultural conservatism that comes with it, and focus on the Tea Party´s basic message: that the state, in the form of high taxes, incompetent bureaucrats and corrupt politicians, is the problem rather than the solution.

            This column is not the place to argue that toss. Yet that view fits also with the failure, so far during this economic slump, of the traditional left to find a real, coherent voice. Most European democracies have moved to the right, and in America the Democrats have lost ground. Enter the 99% slogan. What does it mean? At many points in the 20th century it would have meant support for socialism, for a swing to the left, for an extension of the democratic franchise to give a voice to the dispossessed, for a bigger state. Now, what it most convincingly means is that the system, both of capitalism and democracy, is rigged, unfair, unjust, not because of its outcome, as such, but because of the way it works and the hopes it frustrates.

            That means different things in different places: a Wall Street and Big Oil oligarchy in America, bankers´ bonuses and fat-cat executive pay in Britain, a highly-paid political caste in Italy, the sense, in a lot of Europe, that the young are being given a raw deal, in pay, labour rights, pension entitlements, even education compared with the old. That sense of injustice, rather than inequality as such, surely also explains the recent outbreaks of protest in Russia against the Putin regime.

            The question is, how to respond to this politically. This year, I expect this column to have to return to this topic repeatedly, looking at different countries. In a time of vast public debts, using taxes and spending to redistribute money is hard to do, though in Britain the 50% tax rate is, for this reason, bound to stay. So, just as in the 1970s British governments resorted to incomes policies to try to control inflation and preserve fairness in troubled times without spending public money, now a favoured target is executive pay.

            It is a just target, in that top pay really has reached eye-wateringly anomalous levels, and is proving more immune to hard times than other pay, especially public-sector wages and pensions. But how to handle this effectively and fairly? The government says shareholders should be "empowered" by making votes on pay binding on companies; Labour says more "transparency" is needed.

            Both are desirable, but both risk missing the point. There is already plenty of transparency, which is why we are able to get hot and bothered about particular bosses´ pay. The first question is what to do with the information. The second is who should care about it and do it. Shareholders generally don´t care, at least not much, unless high pay hurts profits and dividends, and most pension funds and insurance companies—which are the bulk of big-company "owners"—prefer to keep their distance from individual companies. Unless the law changes to force them to act like owners, they will stay that way.

            The likely outcome is pretty obvious. Efforts to control most people´s pay, through wage freezes, pension changes and tax rises, will be real and painfully effective. Efforts to control executive pay will be abstract and ineffective. Result: having drawn attention to fairness, Mr Cameron will be associated with an unfair outcome, and look insincere. Well, who said politics was fair?


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