Tapu Misa: We all need to be given a fighting chance

Life is not fair, wrote libertarian laissez-faire economist Milton Friedman. "It is tempting to believe that government can rectify what nature has spawned."

Tempting, he implies, but ultimately futile. Who'd want the kind of mediocre society where everyone finishes the race at the same time? It's an argument I hear every time I mention inequality. Life isn't fair, inequality is a fact of life, so get over it.

The American philosopher John Rawls saw it differently: "The natural distribution is neither just nor unjust; nor is it unjust that persons are born into society at some particular position. These are simply natural facts. What is just and unjust is the way that institutions deal with these facts."

Still, the release of a report on inequality in Britain would seem to confirm the hopelessness of even trying to right societal imbalances. In a nation acutely aware of the impact of social class, and the social and economic cost of widening inequality (it has its own Equalities Minister) the lack of progress is disappointing.

The report, An Anatomy of Economic Inequality in Britain, says the gap between rich and poor is greater than at any time since World War II, despite 13 years of Labour rule and the billions which Labour has poured into initiatives to try to close the chasm.

By some measures it's harder for a child born into poverty today to rise up the social ladder than at any time since the 1950s.

The fact that the inequalities opened up in the 1980s under Friedmanite Margaret Thatcher, and were held back, if not significantly narrowed, by Labour policies, is little consolation.

Exploiting the report's findings, the Conservative party promises more action to fix a "broken" Britain, even though some of its policies - dismantling tax credits, a tax break for married couples and raising the threshold for inheritance tax to £2 million ($4.5 million) - are likely to widen the gap still further.

The parallels with New Zealand are striking. But while in Britain there's official acceptance of the costs of inequality, we're still not sure if inequality is really all that bad here in Godzone.

Which may be why the Tax Working Group was content with its objective of "aligning tax rates which aimed at improving efficiency while not making equity (the transfer of taxes to the needy and the poor) any worse".

As equity goals go, "not making equity any worse" was pretty weak-kneed.

"The question not asked," wrote University of Auckland professor of economics Susan St John in a Herald opinion piece, "was 'is the current level of inequality and poverty acceptable?"'

As far as she's concerned, the answer is "no": "New Zealand's after-tax distribution is one of the most unequal in the OECD, and child poverty rates are a national disgrace."

It's hard see the equity in promoting a rise in GST, which no one disputes will hit the less well off, while recommending a drop in the top tax rate that will give John Key an extra $26,000 in his pocket.

The group, consisting, as someone else has pointed out, of males earning more than $100,000, has steered clear of politically untenable - and perhaps personally costly - recommendations which might give us a fairer tax system, chiefly a comprehensive capital gains tax.

There's no tax-free income bracket, either (as in Australia, where the first $6000 earned is tax-free).

And although the proposed changes will still disadvantage those on lower incomes, much of the focus has been on the fact we're apparently overtaxing our rich. That's difficult to avoid when the top earners earn so much more than those at the bottom of the income ladder.

How do we decide what's fair and just?

In his 1971 book A Theory of Justice, Rawls argued the most reasonable principles of justice are those everyone would accept and agree to from behind a hypothetical "veil of ignorance".

If we got the chance to set some ground rules for how society would be governed from a starting position where we were all equal, and where we didn't know beforehand what our place in society would be, whether we'd be born into a poor family with a history of drug and alcohol abuse, or a nurturing one in which we were encouraged to thrive, whether we'd be endowed with the kinds of talents that would be highly prized and rewarded in our society, or whether we'd be slowed down by disabilities, we'd want to make sure society gave us a fighting chance.

Which would mean guaranteeing everyone equal right to basic liberties, such as freedom of speech and assembly, and making sure everyone had real equality of opportunity - not just that we'd be given a shot at any office or position on the basis of merit but that we should have a reasonable opportunity to acquire the skills on which merit was assessed. Such as good schools, for example, and safe neighbourhoods.

Rawls argued morally arbitrary factors shouldn't determine our life chances or opportunities.

Those of us who win the life lottery through an accident of birth and gain advantages for which we can claim no credit (such as the kind of family we're born into, our inborn talents, even our so-called individual efforts assisted by a combination of fortuitous circumstances), should be prepared to share some of our good luck with the less fortunate. Through higher taxes, for example.

Rawls's theory didn't preclude inequalities in society; under his "difference principle", social and economic inequalities could be tolerated so long as they were "of the greatest benefit to the least-advantaged members of society".

Libertarians disagree, of course, but it's tempting to wonder if we'd be arguing about a liveable minimum wage, or the need for a progressive tax system if we framed public policy from behind Rawls' veil of ignorance.