Limited redistribution from the rich to the poor can eliminate offensive inequalities that creates walls within nations.
Redistribution is a dirty word for free market fundamentalists. They dislike any interference with the market economy and they are not concerned by inequalities of wealth. Buccaneer capitalists might concede that the state should ensure a basic social safety-net for vulnerable people but the state has no role in reducing inequality.
Adam Smith and the changing ‘necessaries’ of life
One nation conservatives should support redistribution, however, and like Adam Smith – the intellectual father of capitalism – they should worry about gross inequalities.
In The Wealth of Nations, Smith said that a society’s idea of ‘life necessaries’ changed over time. Two centuries ago he wrote:
"By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them.”
Today’s laissez-faire fundamentalists object to the idea of relative poverty. Society’s only moral responsibility, they say, is to fight the absolute poverty of hunger, illness and homelessness. Society’s responsibilities are at an end once people have a roof over their heads, medical treatment and food in their stomachs. Adam Smith wouldn’t have agreed. Today he would probably see a television, a freezer and an annual holiday as among the things that would be equivalent to the leather shoes of his time. He would agree that all Britons should have some share in Britain’s increasing prosperity.
Progressive taxation
Britain’s progressive income tax system ensures that higher paid workers pay a larger proportion of their income in tax than the lower paid. Conservatives support this system. Unlike New Labour (with Gordon Brown’s regressive stealth taxes), however, and mindful of Boetcker’s ‘Ten Cannots’ they understand that progressive taxation should never become too steep. In the 1970s, Labour - aiming to make the ‘pips squeak’ – raised top rates of tax so much that they became counterproductive. It was no longer worthwhile for entrepreneurs to work in Britain and ‘brains drained’ to the USA or to non-economic pursuits. The rich ended up paying a smaller share of tax receipts. After Tory cuts in top rate tax the rich are shouldering a bigger share of the government’s revenue needs.
Redistribution from productive taxpayers to the civil service bureaucracy
Left-liberals unfairly moan about what they’ve dubbed trickle-down economics. They allege that economic growth reaches the poorest workers as crumbs from rich men’s tables. The rich get beautiful yachts and the poor get low-paid jobs, serving them cocktails in harbour-side restaurants. But the trickle-down problem is more real in the state system. Most Britons hope that their taxes reach pensioners and needy families. In reality, much fattens an ineffective civil service bureaucracy. A large proportion of revenues pay for bureaucrats to administer overly-complicated benefit systems and for projects that don’t work. The ideas of compassionate conservatism represent a superior form of redistributive justice.
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