Social status and money

Tim Worstall has interesting things to say about the difference between social status and economic inequality, pointing out that the two things only occasionally map onto each other, a fact which does rather undermine the egalitarian argument that reducing economic inequality will reduce differences in status. A good point indeed: in the former Soviet Union and in heavily statist countries today, for example, there was and is a gulf between the citizenry and the cliques that run the show. This exists to a lesser extent, however, in the mixed economies of much of the rest of the world, where ‘new class’ of people – bureaucrats, politicians, media folk, academics, quangocrats, etc, hold considerable power and influence, even though they may earn less than say, a Goldman Sachs bond dealer. The gap was arguably far harder to bridge than is the case in the more fluid situation one finds in a pure market order where the process of ‘creative destruction’, to quote the Austrian economist Joseph Schumpeter, destroys once-dominant businesses and dynasties and creates new ones in a never-ending cycle. Tim also makes the good point that having high status is often little to do with money at all. Fame, or having a prestigious job, or being an influential commentator, or whatever, often counts for far more than how much money one has in the bank. Ask yourself this: who has more status in British society – the editor of the Times or a hedge fund investor?

Another way of thinking about the difference between being rich and status is this: in some cultures, where acquiring wealth is sneered at or even suppressed, what counts is the accident of birth, or the ability to pull the levers of political power, or manipulate opinion in some way. As you will, gentle reader, no doubt guess, I think that one of the great things about the pursuit of wealth is that it is, in one of the deepest senses, profoundly egalitarian. Think about all those media commenters who sneer at ‘ghastly chavs’ messing up the view in the South of France or taking cheap flights to Malaga: what this point of view admits, in a way, that capitalism makes it possible for the masses to get on the same ladder as those dealt a good hand by accident of birth. I still think that part of the motivation for the Green movement or strict controls on immigration and population growth is a desire to cut off the ladder of opportunity for the masses (yes, I know this is a bit of ad hominem argument but I think it carries some validity).

For a great book on the subject of envy, which of course lurks beneath a lot of complaints about status and inequality, I recommend this classic study.

Anyway, as Tim rightly points out, people who think that ironing out economic inequality through such methods as steeply progressive income taxes will narrow gaps in status are liable to be disappointed. Humans are by nature a competitive species, and ranking folk according to some metric or other is ineradicable. Also, as the US writer George Gilder wrote in his masterful early 1980s defence of supply-side tax cuts and entrepreneurship, the folly of progressive taxes and other methods is that they do not eradicate inequality. Rather, they fossilise existing patterns of unequal wealth distribution and encourage the most ambitious people in a society to channel that aggression into less benign forms. Not an original insight, of course – Samuel Johnson, the 18th Century writer, made the same point – but one that needs to be rammed home from time to time.