Galvin - Economic Inequality and Energy Consumption in Developed Countries

How Extremes of Wealth and Poverty in High Income Countries Affect CO2 Emissions and Access to Energy

Ray Galvin

• Editorial: Academic Press
• Año: 2019
• ISBN:
  9780128176757
• Categoría: Economía
• Categoría: Teoría económica

Inequality and Energy: How Extremes of Wealth and Poverty in High Income Countries Affect CO2 Emissions and Access to Energy challenges energy consumption researchers in developed countries to reorient their research frameworks to include the effects of economic inequality within the scope of their investigations, and calls for a new set of paradigms for energy consumption research. The book explores concrete examples of energy deprivation due to inequality, and provides conceptual tools to explore this in relation to other issues regarding energy consumption. It thereby urges that energy consumption approaches be updated for a world of increasing inequality.

Extreme economic inequality has increased within developed countries over the past three decades. The effects of inequality are now seen increasingly in health, housing affordability, crime and social cohesion. There are signs it may even threaten democracy. Researchers are also exploring its effects on energy consumption. One of their key findings is that less privileged groups have lost consistent access to basic energy services like warm homes and affordable transport, leading to huge disparities of climate damaging emissions between rich and poor.

• Provides overwhelming evidence of the persistent and increasing income inequality and wealth inequality in developed countries over the past three decades
• Showcases recent empirical work that explores correlates of this inequality with energy consumption behavior and some of the key problems of access to adequate energy services
• Shows the connections between these findings and the existing ways of researching energy consumption behavior and policy

Part 1

Theory and concepts: Bringing economic inequality into energy research

Chapter 1

Recent increases in inequality in developed countries

Ray Galvin University of Cambridge, Cambridge, United Kingdom
RWTH Aachen University, Aachen, Germany

Abstract

The social science frameworks commonly used in energy consumption studies in developed countries today were formed in the late 20th century in strongly egalitarian societies with high economic growth. Yet the societies they are used in today are characterized by extremes of inequality in both wealth and income, and lower economic growth, almost all of which accrues to the benefit of the rich. In this chapter I discuss these economic changes of the past 30–40 years, beginning by explaining how income and wealth inequality interplay and the different ways these are measured. Drawing on large datasets from academic, government and think-tank sources I then show the dimensions of economic change in these countries, from being the most egalitarian high-income societies in history, to having high and persistently increasing extremes of wealth and poverty. I then explore the reasons for both the late 20th century's unprecedented egalitarianism and the more recent shift to inequality. These include a series of major, globally disruptive events, together with changes in the degree of dominance of two opposing economic ideologies: the Keynesianism that prevailed in the egalitarian period, and the classical free-market (neo-) liberalism that prevails today. I also argue there are no fixed laws of nature governing how societies develop economically, but that people are ultimately in charge and have the potential to change things for the common good.

Keywords

Economic inequality; Gini coefficient; Neoliberalism; Contingency; Poverty; Developed countries

Chapter outline

• 1 Introduction
• 2 Economic inequality: Some preliminary issues
  • 2.1 Wealth inequality compared with income inequality
  • 2.2 Measuring inequality
• 3 Recent changes in wealth and income distribution
  • 3.1 Estimating economic inequality
  • 3.2 What about the bottom 10%?
  • 3.3 Tax havens
• 4 How inequality has changed in the developed countries
  • 4.1 Is extreme inequality the norm in human history?
  • 4.2 Why were we so egalitarian in 1950–80?
  • 4.3 The shift to neoliberalism
  • 4.4 Being poor in a society of extreme inequality
• 5 Conclusions
• References
• Further reading

1 Introduction

Over the past 30–40 years the distribution of wealth and income in almost all the developed countries has shifted dramatically. In the 30-year period immediately following the Second World War these countries were unique in recorded history. They enjoyed strong, persistent economic growth leading to historically high real incomes per person, while at the same time they were remarkably egalitarian, with very low rates of poverty and historically small differences in incomes and wealth across the rich-poor spectrum. Over the past 3–4 decades, however, economic growth has slowed in these countries while in most of them economic inequality has persistently increased. Large and increasing proportions of these countries' populations are poor; their middle-income earners are in many cases worse off than previously; the richest 10% are astonishingly wealthy; while the wealth and income of the richest 1% beggars the imagination (Piketty, 2014; Dorling, 2018; Alvaredo et al., 2017).

This has important implications for energy consumption, because energy costs money. In this book we will present evidence of how this plays out at household level, and also at the levels of infrastructure, energy supply, and macro-level decision making. We will also argue that these enormous changes in income and wealth distribution lead to certain individuals having far more say than others as to who gets to enjoy what energy services, how our future energy infrastructure will develop, and how this can affect CO₂ emission levels.

It also has important implications for social science. While engineers study and develop the technical aspects of energy technology and infrastructure, social scientists conduct vitally important research on the people and groups involved in energy provision and consumption. This involves in-depth research on households, suppliers, relevant social networks, and decision makers at all levels, including national and supra-national policymakers. Strangely, however, the social science typically used in energy research has not yet caught up with the huge changes in wealth and income distribution in developed countries over the past 3–4 decades. This has led to the peculiar situation that much of current social science research on energy consumption in these countries ignores one of its most important determinants. Research often proceeds as if these huge discrepancies in wealth and income were not there.

In Chapters 3 and 4 I will look at some of the great advances certain niches in sociology have made over the past few decades, in understanding why these discrepancies have occurred and in critiquing the economic theories that appear to have fostered them. Unfortunately, these branches of sociology have not yet been taken up in earnest by the social science approaches commonly used in energy consumption research. Instead, this research often proceeds as if money functions and is distributed much the same today as it was in the 1950s–80s. It might not be a coincidence that the social science frameworks used in this research were formed, or at least have their roots, in the social and cultural milieu of that golden age of egalitarian plenty.

For many sociologists whose views were formed by the world of those times, relative equality and plenty seemed the normal state of the developed world. For example, the prominent sociologist Margaret Archer (2000), argued that Bourdieu's (1958, 1976) insights on poverty, drawn from his empirical work in France and Algeria in the 1950s, were irrelevant to the social science of 2000 because by that year poverty had been all but eliminated in developed countries. What she did not account for (along with others) was that by the end of the 20th century the egalitarian achievements of the post-War years were already being seriously eroded.

I will argue below that the 25–30 years following the end of the Second World War were certainly not the norm for wealthy societies but a very happy aberration. For most of recorded history, societies throughout the world have been characterized by extreme levels of income and wealth inequality (Winters, 2011, 2017; Piketty, 2014; Graeber, 2011). At the top end, a very small elite of outlandishly rich “oligarchs,” to use Winters' terminology, have comprised around one-hundredth of 1% of the population. These people have not only had more wealth than most of us can imagine, but have simultaneously either ruled their societies directly as dictators, monarchs or potentates, or used their wealth to decisively influence the direction of government, especially on economic matters (Winters, 2011; Stiglitz, 2013). The 1–10% of people just below this group have been fabulously rich compared to most of the population but their political power has usually been subject to the whim of the oligarchs. Most of the population has lived in varying degrees of poverty, from utterly destitute to just surviving, and in some societies there has been a middle class, usually of just a few percent but sometimes larger, who live fairly comfortably.

In recent centuries in English speaking and European countries this type of economic inequality reached a peak just prior to the First World War. It then reduced more or less steadily until around 1980. Since then economic inequality has increased again and in some developed countries it is approaching the levels seen just prior to the First World War (Piketty, 2014).

To begin to get an idea of how the distribution of income has changed in recent decades, Fig. 1 shows what I call the “10–50 index” for the US and for Germany. This gives the ratio between the share of national income received by the top 10% of earners, and the share received by the bottom 50%. The raw data for these graphs comes from the World Inequality Database (WID, 2018), which is maintained and continually updated by Thomas Piketty's research team at the Paris School of Economics. I will frequently use data from this source in this book, supplemented with data from international bodies such as the OECD and Eurostat. I deliberately chose the US and Germany for the first graph of the book because the US is known to be a highly unequal society, while Germany is often popularly thought of as strongly egalitarian.

Fig. 1 Ratio between shares of national income of top 10% and bottom 50% of earners, USA and Germany, 1961–2014. Author's calculations from WID, 2018. World Inequality Database. Available from: https://www.wid.world/.

Fig. 1 shows that in the US in the 1960s and 1970s, and until about 1982, the highest earning 10% received about 1.7 times as much of total national income as the bottom 50%. The value 1.7 can be misleading because it actually means that the average earnings of those in the top 10% were 8.5 times those of the bottom 50%. This may sound high, but in historic terms it is remarkably low (Winters, 2011). However, after 1982 this ratio increased steadily, to reach 3.7 by 2014. This means the top earning 10% were now receiving, on average, 18.5 times the average income of the bottom 50%. This be...