Bill Jamieson: Stats little comfort in age of inequality

Despite their relative poverty, Indians are far more hopeful about what the future holds. Picture: AFP/Getty Images

Despite their relative poverty, Indians are far more hopeful about what the future holds. Picture: AFP/Getty Images

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ARE we incapable of optimism? Or are we permanently locked in a state of doubt and despair about our prospects?

For the past two years official figures have pointed to record employment, more women and young people in work, real growth in earnings and higher living standards.

One possible reason is that prosperity generates a fear that things could get worse

The statistics are unambiguous. Our generation is better off, safer and destined to live longer than our parents’ generation – and probably than any preceding generation. Crime has fallen to its lowest level in more than 30 years. Absolute poverty levels have fallen to their lowest level since the 1930s. And UK average earnings have been growing at the fastest rate since 2009.

Yet none of this appears to have cut through a persistent doubt and pessimism about our life chances and prospects.

Might it be that long-held assumptions about prosperity and happiness are flawed? That it is other folks’ prosperity, not our own, that determines whether we are optimistic or pessimistic?

A recent wide-ranging survey by the Legatum Institute think-tank by the pollsters YouGov exploring attitudes across seven countries yielded a striking response to the question: “Do you agree or disagree that ‘the next generation will probably be richer, safer and healthier than the last?’”

The results found that the most optimistic of the seven countries was India, while the most pessimistic was the United States. What was especially striking was that there seemed to be a strong correlation between prosperity and pessimism.

India is by far the poorest country in the list (per capita income, in terms of purchasing power parity, is $6,000 a year), while the US is the richest ($55,000 a year).

The gulf in optimism between the three gloomiest countries (Britain, Germany and the US) matches the gulf in income. Britain is the poorest of the rich three with purchasing power parity income per head of $40,000, while the income per head of the four other countries is $16,000 a year or less.

What is wrong with us? Why might this be? YouGov’s Peter Kellner speculates that one possible reason is that prosperity generates a fear that things could get worse, while people in poorer countries really do think that, in the words of the song adopted by Labour in the Blair years, “things can only get better”.

What may also be giving levels of optimism in poorer countries a boost is their recent economic and lifestyle experience. In general, India, Thailand and Indonesia have all become significantly richer – or at least less poor – in the past 20 years or so. “It is therefore more likely,” he adds, “that their relative optimism flows less from their poverty than from a perception that things are broadly getting better and will continue to do so.”

Now there is much in this. But I would argue that we do not need to pore over international experience too long to arrive at an understanding of why we have a sense that things today are not going that well.

Just a few years ago we were struck by a financial crisis and banking collapse on a scale that we thought confined to the history books about the late 1920s. Modern western economies had surely moved on 
from this shock. Instead we were acutely reminded not only of our vulnerability but also the danger of over-optimism that prevailed in the period leading up to the 2007-9 crisis – the belief that we really had abolished the cycle of boom and bust.

Now we are left with a huge legacy of borrowing, and we are still struggling, seven years on, to slow the rise in government debt. Business confidence, fearful that higher taxes and more government cutbacks may be in store, has taken a long time to recover from the traumas of the sudden downturn and drying up of bank finance. And the failure of business investment to take off with the economic recovery reflects both a more cautious, rule-driven culture and a pervasive caution about our ability to keep up with ever-changing technology in the digital era: even innovation can quickly be overtaken.

At the household level there is still a huge personal debt overhang, with little sign of this being brought down any time soon. There is also an evident unease at the levels of wealth inequality – the gap in the life experience of those in the iceberg homes and subterranean mansions of Belgravia and those in the rest of the country where home ownership now seems more remote than it was in the immediate post war years.

This sense of the gap between the continuing generous bonus culture of those at senior levels of the banks and financial institutions and the low income, zero hours contracts reality of many at the lower end of the scale prompts searching questions as to how stable and enduring our current statistical wellbeing really is. Even in the public sector there is a yawning gap between the generous salary awards for those at the top of local authority, health service and welfare administration and those at the lower end. What comfort or reassurance can we draw from the reality that life for many really hasn’t got that much better at all?

Little wonder that across the neoliberal think-tanks there is much soul searching as to how the benefits of a market economy can be more widely shared without resort to the Keynesian orthodoxies of higher taxes and ever more borrowing.

Chancellor George Osborne may talk of an economy “motoring ahead” and how our economic performance favourably compares with the G7. Isn’t that after all what the figures show? But building a solid base for “optimism” requires something more than abstract statistical chest-beating. «

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