Muddy waters: why Vinnies are wrong on inequality

A recent St Vincent de Paul Society report claims income inequality in Australia is dramatically widening and warns of severe social disruption unless it is reduced. I responded to this report arguing it was grossly exaggerated and that some of its claims had no basis at all in fact. The Vinnies’ authors have since sought to discredit my critique, but they have ignored key points and have ended up muddying the waters.

There are five key claims in the Vinnies’ report that are clearly untrue, and nothing they have said since has justified them (my full paper (pdf file 303KB) outlines these points in more detail).

We are on a “headlong dash into the chasm of inequality”

UNTRUE: This was the key claim in the Vinnies’ report, and it is false. No matter which measure we take, not much has changed in the distribution of incomes over the last ten years. It is therefore impossible to justify the claim that Australia is on a “headlong dash into the chasm of inequality”. In an attempt to justify their claim, Vinnies cite unreliable data on private incomes to suggest the lowest earners have gained very little, but they are referring to the wages of people who work no more than four hours per week. They have also hopelessly confused private income data with data on disposable incomes to claim the real increase in living standards enjoyed by people on the lowest incomes is much lower than it really is.

We are in danger of a “return to the dismal social injustices that characterised the dawn of the industrialised era, when people were kicked when down, while governments idly stood by”

UNTRUE: This warning is absurd. The federal government spends $87 billion on income support, and total welfare state spending amounts to $8,700 for every person in the country. Vinnies have denied my statement that our tax and welfare system redistributes more money to those on low incomes than virtually any other OECD country, but my claim is correct. They compare total welfare spending in Australia with that elsewhere, but this confuses the question of how much is spent with the more important question of how much is redistributed.

Vinnies deny economic growth raises everyone’s prosperity, dismissing this as a “glossy dream”

UNTRUE: Vinnies say we delude ourselves when we think economic growth will increase “prosperity for all”. But average real disposable incomes rose by 15 per cent between 1995 and 2003, and even the least advantaged - who rely entirely on welfare transfers from other people - have increased their spending power by one-eighth. This is a staggering vindication of the “trickle-down” theory of growth that Vinnies dismiss as a “glossy dream”.

Vinnies say we are facing “severe dislocation” and “increased crime” as a result of the failure to reduce current levels of inequality

UNTRUE: Claims like this are repeatedly made by socialist intellectuals, but there is no evidence to support them, and in Australia the evidence runs the other way. As incomes became more equal before 1981, crime rose rapidly. More recently crime rates have fallen significantly yet inequality has remained more or less constant.

Four and a half million people are living in households with an income under $400 per week

UNTRUE: The data they cite are from a 2002-03 ABS survey that estimated 1.8 million households had a weekly income under $400. The Vinnies translate this into 4.5 million individuals. Analysis indicates the realistic maximum figure to be no higher than 2.5 million - they have almost doubled the realistic maximum estimate.

Why did Vinnies put out a report like this?

If their concern is to help the poor why are they so concerned with what is happening to the affluent? Despite protesting in the media that they are not trying to drag down those on high incomes, this is exactly what they want to achieve. They are on record as demanding higher taxes to reduce the incomes of high earners irrespective of whether this achieves anything by way of redistribution to the poor. So why this preoccupation with reducing inequality if the focus is supposed to be on eliminating poverty?

In my original critique I suggested this commitment to egalitarianism is part of a broader political agenda that has been developed by researchers at the Vinnies over recent years. This agenda, I said, was strongly influenced by a Marxist perspective.

This claim provoked a furious response from the Vinnies’ authors. John Falzon’s article here in On Line Opinion  denied he and his colleagues were “communists”, but I never said they were. On a different tack, a Vinnies’ media release described my comments as “vindictive name-calling” and on ABC radio John Wicks dismissed my claim as “abusive”. But describing social analysis as “Marxist” is neither vindictive nor abusive. Marxism may or may not be an appropriate framework for a Roman Catholic charity to embrace, but it is an established and well-recognised method of analysis in the social sciences.

Although I gave extensive footnoted references to back up my claim that their work is strongly influenced by a Marxist perspective, Vinnies insist my claim is “unsubstantiated”. It is therefore worth spelling out more explicitly seven close contiguities between what the Vinnies’ researchers have been saying and core elements of a Marxist approach to social analysis.

Class analysis

Marx believed that modern capitalist society is a “class society”. The capitalist class owns land, finance and businesses while the working class owns nothing but its labour power, which it sells in return for a wage. These two classes are locked in conflict over the distribution of profit (“surplus value”).

Vinnies agree. Criticising “third way” reformists in a 2002 St Vincent de Paul paper, John Falzon began:

Long live Australia: the classless society! This is the fairy tale world of those who occupy the intellectual space of the third way. A beautiful fairy tale, but a fairy tale nonetheless. Class is not dead … [There is a] solid class structure that constitutes the contemporary socio-economic formation.

Wealth and exploitation

Marx believed that capitalists accumulate wealth by exploiting the labour of others. This means that one class only gets richer if another gets poorer - the so-called “immiseration thesis”. As Marx put it “accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole”.

This is an absurd, zero-sum conception of wealth generation which assumes one person can only get rich at another’s expense. But the Vinnies’ researchers agree with it. We have already noted their insistence that poorer people do not benefit from economic growth, but Falzon goes further when he states “as wealth has been generated so has poverty been created”. And although Wicks rather awkwardly distanced himself from this position when directly challenged on radio, the Vinnies’ web site clearly resonates with Marx’s own comments by claiming “the accumulation of wealth on the one hand is connected with the accumulation of poverty on the other”.

Class conflict

Marx believed the widening economic gap between the classes would gradually raise the level of tension and conflict between them, as workers came to see how much wealth was in the hands of the capitalists. Class conflict would take various forms including strikes, absenteeism and criminal behaviour, but eventually it would coalesce into a revolutionary political movement.

The Vinnies baulk at violent revolution, but they agree with Marx’s assumption that class envy will generate social unrest. As we have seen, their recent paper assumes, with no empirical justification, that increasing inequality will generate “sharpening divisions, discord, increased crime”. And asked on Radio National why he believed inequality “is not good for society” Wicks replied “well, because the people at the very bottom see all the things that are available in society … A young Australian … he’s never going to get all the things they show on TV, all the nice goods and services, and all the rest of it. And so what’s he going to do if he can’t have those?”

The Bible’s answer to Wicks’s question (what is a poor young Australian to do when confronted with material goods he cannot afford?) is clear: “Thou shalt not covet thy neighbour's house, thou shalt not covet thy neighbour's wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbour's.” Nor, we might add, anything thou seeist on TV. Vinnies’ answer, however, seems rather more equivocal.

The ruling class

Marx believed that class conflict involves the State operating to defend the long-term interests of the capitalist class. This means that legislation tends to reflect the interests of capital rather than those of labour.

Vinnies agree. Falzon thinks recent public policies have been “dismantling the public sphere in the interests of capital and decollectivisation of labour”. Echoing contemporary Marxist theorists like David Harvey, he sees privatisation as the “result of the need to create new fields for investment of surplus capital around the globe”. Similarly, he attacks “the legislative attempt to wreck the collective bargaining rights of labour”. He sees the 1998 waterfront dispute as “a frontal assault on a well-organised section of the working people” and bemoans the way the State promotes ideologies of personal aspiration to “drive a wedge” between different “members of the working class”. All of this is straight, undiluted Marxist analysis.

The welfare state

The welfare state did not exist in Marx’s day, but an extensive Marxist literature developed from the 1960s onwards explaining how the welfare state “incorporates” the working class, pacifying them, preparing them for their role as wage labourers, and legitimating capitalist rule by blunting its worst effects. Their argument is that “bourgeois” institutions like the welfare state can only ever ameliorate the suffering of the working class and that when workers participate in such institutions they are in effect reproducing the very system which is dominating them.

Vinnies agree. Falzon is scathing about attempts to help the poor that stop short of transforming the whole society:

The third way is, at best, an excuse for not doing anything to substantially assist the poor. It makes no attempt to alter a socio-economic infrastructure that not only puts people into poverty but keeps them there. It proposes that people can escape the chains of poverty by their participation in the very structures that produce their poverty.

He also argues that what he calls the “liberal democratic model of governance” is implicated in, and helps disguise, the “systematic dispossess[ion] materially, socially and politically” of the poor.

State planning in place of the capitalist market system

Marx believed that the working class will never receive the true value of its labour until the wealth of the capitalist class is appropriated. This in turn will require the abolition of private property and the replacement of the capitalist market system with a system of socialised ownership and state planning.

Vinnies broadly agree. Falzon again:

The market exists as a structure for the generation of profit. It rewards those who have capital. It does not exist to serve the needs of those it exploits…The market is part of the problem, not the solution.

In place of the market, he advocates state planning:

Real political security for the people of Australia means a concrete commitment to strategic economic development that does not rely on the market but engages all levels of government in a plan.

Structures of domination

Marx emphasized that he was writing, not about individual capitalists and workers, but about the “structural relation” between them. Workers and capitalists are not the agents of their own fate but are the “bearers” of objective structural realities. Individuals can do little to improve their fates - what is needed is structural transformation (i.e. revolution).

Vinnies agree that individuals lack agency. Falzon’s paper attacks the "specious form of blaming the structurally exploited and excluded for their poverty, inferring that they, rather than the movements and machinations of capital, can make both the ultimate and intimate difference to their own living conditions. This position would be laughable were it not so insulting."

In plain English - there is nothing the poor can do to improve their situation unless the capitalist system itself is overturned.

The Vinnies’ researchers deny their work is Marxist-inspired. John Wicks even tells us that Marxism and Christianity are fundamentally opposed doctrines. But if they want to distance themselves from Marxism they should stop using Marxist theories, concepts and arguments. If it walks like a duck and quacks like a duck, then it’s a duck.