There is an irony in the fact that one of things the left most misunderstands is itself. Ever since Marx predicted that socialist revolution would follow the immiseration of the proletariat, the left has believed that its time will come when things are really bad. This helps explain why left-wing columnists and politicians expend so much energy telling people how terrible their lives are.

In fact, as the economist and historian Peter Lindert pointed out some time ago, the state is far more likely to become an active promoter of economic equality when other forces - such as changes in the labour market - have already been shrinking the gap between haves and have-nots. He notes, for example, that the much lauded 1945–1951 Labour Government only enhanced equality in an economy that had already spent four decades making the rich poorer and the poor richer.

The converse is also true. As inequality has risen since the 1970s, so we have seen a dramatic policy shift away from the redistributive state starting with the governments of Thatcher and Reagan in the 1980s.

Why this perplexing phenomenon - which Lindert called the Robin Hood Paradox - should exist at all is a matter for some debate. I suspect that it is best explained by the widely-observed psychological fact of loss aversion; namely that people’s negative response to losing something they have in the present is much stronger than their positive response to the possibility they may gain something in the future.

When wages are squeezed, voters are understandably highly loss averse becoming more concerned about the immediate taxation promised by a left wing party than the future possibility of better welfare payments and public services. In periods of greater equality, when the mass of the public feel better off, that loss aversion weakens leaving voters more open to the possibility that higher taxation may bring them some longer-term benefit.

Getting Older = Getting Leftier?

Whatever its cause the fact that the Robin Hood Paradox does exist means a recent widely discussed paper by three economists for the bank Morgan Stanley should give the left some considerable hope for the future. The paper is ably summarised by the BBC journalist, Duncan Weldon, here.

Put briefly, it argues that the rise in inequality witnessed since the 1970s can be explained by the fact that the number of people of working age, as a proportion of the whole population, grew significantly. This was partly the result of post-war baby boomers entering the labour market but also Russian and Chinese workers coming into the global economy as communist barriers to world trade were dismantled. In essence, there was a labour glut and when you get a glut, prices, which in this case are wages, fall. The result is less money flowing to the ordinary worker in the form of income and more flowing to the business owners and managers in the form of profit.

The important point of the paper is the claim that this era is now over. The proportion of working age people is beginning to decline as baby boomers retire and as the number of people entering the labour market falls due to lower global fertility rates since the 1990s. The result will be rising wages and, hence, declining inequality.

This raises the prospect that a new era of active redistribution by the state could be upon us as the Robin Hood Paradox kicks in.

However, before the supporters of the traditional left start celebrating a return to the high tax and spend principles of the good old days, a big problem needs to be addressed.

The factor promoting the new equality is the very same factor putting public spending under enormous pressure: the great proportional increase in the number of older, retired people. States now spend far more on pensions, health and social care than was the case back in 1940s when life expectancy in the UK was around 70 as opposed to today where it stands at 82. Only adding to the pressure is the fact, of course, that there are fewer working people to tax.

The leeway that the state will have to enhance the shift towards greater equality through high tax and spending will be much lower than it was in the post-war era. This poses a fundamental challenge to the left: how to capitalise on a more equal economy by developing policies for greater equality without reliance on conventional methods of wealth distribution.

The answer, I believe, can be found in taking inspiration from the ideas of the eighteenth and nineteenth century Radical movement which sought equality in an era when a tiny, reactionary state seemed to offer no help in that quest. That is a subject for another post. In the meantime, a careful revision of all the obituaries currently being written for the left may be in order.

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These and other themes are explored in my book Small is Powerful: why we must escape the era of big government, big business and big culture. It is due for publication in June 2016 and can be pre-ordered here.