Thatcher Fallacy (10)


“Thatcherism produced a widening wealth gap”

The implication here is that an increasing wealth gap is a bad thing. However, a) It is not a bad thing, b) it is part of the economic cycle, and c) it is therefore inevitable.

If the wealth gap offends your sense of social justice it really shouldn’t. Income does not have a social conscience, but is determined by the level of demand for a product or service. A large company might be prepared to pay a chief executive a million pounds a year plus bonuses. This is because he is one of only few people who have a proven track record in turning round large companies. His wages reflect his value. A bar man, on the other hand, might work the same number of hours but he is easily replaced. This, not social justice, determines income and resultant income inequality.

And what is the alternative? What if that company decided not to lure a capable executive with an attractive contract? What do we suppose might happen to the company and to the jobs it provides? Inherent to this fallacy is the misunderstanding that the rich are somehow separate to the poor. In fact they are related through the economy.

Put in economic context, the increasing wealth gap can be seen as part of the economic cycle, tending to widen during periods of growth and narrow during periods of recession. During the 1980’s boom income disparities increased, while in the 1970’s and early 1990’s income disparities decreased. The same pattern is mirrored internationally. The last 25 years of relatively high international growth has seen the wealth gap widen, with the United States experiencing the most severe disparities. Ultimately it might be a recession that curbs the most extreme wages.

Far from a bad thing, an increasing wage gap is a symptom of healthy growth.


One thought on “Thatcher Fallacy (10)

  1. Gaz Hughes: “My contribution to this debate will be mostly philosophical, rather than historical.”

    And where is it?

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