The UK just isn't as unequal as people seem to think

We've often said around here that the national inequality figures overstate the actual amount of inequality that there is in the UK. Yes, there's very definitely regional inequality in incomes. But there's also significant regional inequality in the cost of living. Not all that surprisingly (with the exception of parts of the SW) the higher living costs (most especially housing) are also where the higher incomes are. The UK is very much more unequal in such regional terms than most other countries simply as a consequence of London's domination of the economy. What that in turn means is that consumption inequality, the only form of inequality that we could possibly really worry about, is a lot smaller than the income inequality that we all normally measure.

And from the Taxpayers' Alliance recent report, this little snippet:

The analysis showed a geographical divide in taxpayers and benefits recipients. Households in the East Midlands and London, as well as the south east, east and south west of England paid more in taxes than they received in benefits. All the other regions received more in benefits than they paid in taxes.

Households in the North East of England received an average of £3,175 more in benefits and benefits in kind than they paid in taxes, whereas in London households paid £4,119 more in taxes than they received.

The tax and benefit system also reduces that regional inequality even further.

We're really not as unequal as everyone likes to say that we are.

Of course poverty traps exist: but they're possible to escape

Over at The Economist some musing on whether there really is a poverty trap that developing economies can get stuck in. and the answer is yes, of course there is: but also that it's potentially possible to escape such traps.

DO POVERTY traps exist? Academics seem to think so. According to Google Scholar, so far this year academics have used the phrase “poverty trap” 1,210 times. (Paul Samuelson, possibly the greatest economist of the 20th century, was mentioned a mere 766 times). Some of the most innovative work in development economics focuses on how individuals' lowly economic position may be perpetuated (geographical and psychological factors may be important).

But, says a new paper by two World Bank economists, the idea of poverty traps may be overblown. They focus on national economies and present some striking statistics. In the graph below, a country that manages to get to the left side of the line has seen real per-capita income improvement from 1960 to 2010.

So that's the empirical evidence. But there's also a basic logical point that we can make.

Three hundred years ago all countries were poor. Now some countries are not poor and some countries still are. It's thus logically certain that it is possible to escape whatever poverty traps there are. For some places have done it. It's also equally true that there must be things that prevent that economic growth from happening for some places haven't had that economic growth. Thus we can assert, without possibility of contradiction, that sure, there are poverty traps but there's nothing inevitable about them at all. It is possible to escape for some have done so.