The Fiction of Gatsby

John Rentoul

gatsby2 300x200 The Fiction of Gatsby“In Britain and America, inequality is now back to Gatsby-esque levels.” So wrote Aditya Chakrabortty, Guardian economics leader-writer, yesterday. It is just not true. I don’t know as much about America, but it certainly isn’t true about Britain.

It is a popular myth of anti-Labour propaganda: that the gap between rich and poor expanded greatly under Tony Blair or New Labour, who were no different from their Tory predecessors. “Then came Thatcher and Blair and soaraway inequality,” as Chakrabortty put it.

As I have repeatedly said, New Labour’s record on equality was heroic: the degree of inequality of income (and probably of wealth, although the evidence is more limited) stayed roughly the same from 1997 to 2010, despite the British economy’s being unusually open to global differential pressures. In addition, Labour rescued the great public services of health and education, to the advantage of the less well-off.

This is in contrast with the record of the Thatcher government, when inequality increased by an unprecedented degree. Look at the red line (all households) in this graph, from The Effects of Taxes and Benefitson Household Income, 2010/2011, Office for National Statistics, p17. The higher the line, the more unequal the distribution.

ginietb The Fiction of Gatsby

ifsgini1 The Fiction of GatsbyThe Institute for Fiscal Studies uses different data, which show a slightly different pattern – see second graph, from Living standards, poverty and inequality in the UK: 2012, Jonathan Cribb and others, IFS and Joseph Rowntree Foundation, p36.

These are the figures preferred by those who want to show the Blair government as the Continuity Thatcherites and source of all neoliberal evil, because they show a slight increase in inequality between 1997 and 2007, although the picture is broadly the same as the ONS data.

In other words: inequality increased hugely in the 1980s and has not changed much since.

The next recourse of those determined to present New Labour as either a sellout or a failure is to focus on the earnings of the highest-paid 1 per cent. This tends to involve selectively quoting statistics from another IFS publication, the title of which is one of my Questions To Which The Answer Is NoRacing Away? by Mike Brewer and others, IFS, 2008. This is subtitled, Income inequality and the evolution of high incomes, and it does not show anything racing away; nor does it show yawning chasms or vastly widening gaps or other metaphors loved by Guardian writers. It does show the steadily growing share of after-tax but especially pre-tax income taken by the top 1 per cent and even more so of the top 0.1 per cent. And Brewer and his co-authors comment that this increase since 1997 has offset the more equal distribution of income among the 99 per cent, thus explaining Labour’s broadly neutral record.

One of the most striking graphs of the anti-left literature is this one below, from Danny Dorling, The case for austerity among the rich, IPPR, 2012 (p7). This is something that ought to trouble egalitarians, although it probably does not record so much a widening gap among the existing population, but the taxable presence here of new cohorts of the mobile global rich.

top1 The Fiction of GatsbyDo not fall for the “Gatsby” myth.

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  • Pacificweather

    Myth, old sport?

    If you take a look, old sport, at the ONS document “Social Trends 40: 2010 edition, Chapter 5: Income and wealth, Figure 5.3 Distribution of real household disposable income” you will see the increase between the median and the 90th percentile increased by over £100 per week between 1997 and 2007.

    You have to accept your limitations, old sport, arithmetic is not your area of expertise and you are not so good at web site searches either.

  • newfriendofed

    Granted that the stats are correct, still seems it a stretch to call it ‘heroic’ to not have managed to reduce a ludicrous wealth gap in three terms in office just because there are ‘global differential pressures.’

  • David_Boothroyd

    The most important factor to remember when assessing Government performance on inequality is that inequality doesn’t stay in the same place of its own accord – it increases. In other words, if the Government does nothing, inequality increases. The Government has to take clear action just to stop inequality increasing, and even more drastic action to reduce inequality.

  • newfriendofed

    Trying hard to reconcile the image of Blair ‘heroically’ battling to withstand the pressures to increase wealth differentials while on holiday in Berlusconi’s Villa.

  • Pingback: Did rising prosperity end for most people in 2003? | John Rentoul | Independent Eagle Eye Blogs

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