Scarcely able to think straight

Scarcity - poverty - is an assault on the brain. And almost three in ten children in Britain live in poverty. It's hard to think of a more flagrant example of unfairness.

Depiction of the siege of Lisbon, 1147, by by Roque Gameiro (Wikipedia)

I had the privilege of sharing a stage on Friday with three brilliant speakers at a conference called Scarcity and Fairness, organised by the Legal Action Group and the Advice Services Alliance: Sir Ernest Ryder, former Lord Justice and Senior President of Tribunals; I. Stephanie Boyce, former President of the Law Society; and Eldar Shafir, Professor in Behavioural Science and Public Policy at Princeton University.

The event was focused on the criminal justice sector, and the first two speakers spoke powerfully about the increasingly parlous state in which the justice system finds itself - underfunded, dysfunctional, no longer able to provide anything remotely resembling access to justice - “in need of CPR”. The consequence of scarcity in this sector is that we are rationing people’s access to justice; and yet equal access to justice is one of the foundation stones of a fair society, and when it is absent, poverty and inequality are the inevitable result. Scarcity of justice directly undermines the rule of law.

One of the points made by both speakers was that conversations about inequality in the UK too rarely include a justice system perspective, focused as they often are on wealth, tax, social security, education, health, housing, work and the rest.

I am going to confirm the validity of this observation by moving swiftly onto the topic explored by the other speaker, Eldar Shafir.

Eldar’s research is on how people make everyday decisions, and on the impact of poverty (the psychology of scarcity - of not having enough) on decision-making.

His findings strongly contradict the notion that people in poverty make bad choices because of their attitudes or values, that being poor is somehow a failure of character. Instead, he argues that being short of money, and worrying about it, has a huge impact on cognitive performance:

• Focusing on the constant struggle of getting by with too little, and the trade-offs that come with it, uses up a huge amount of mental bandwidth, and leaves very little capacity for thinking about other things - in the same way that packing for a trip takes much longer when your suitcase is too small to fit everything you need. Pick whatever metaphor you like. Scarcity colonises, controls, besieges the mind.

• One of his experiments showed that simply asking poorer respondents to think about a scenario that exceeded their budget (such as getting their car repaired) preoccupied them with concerns about scarcity to such a degree that it dramatically reduced their performance on cognitive tests, an effect that was bigger than the impact of going a whole night without sleep, and similar to losing 13 IQ points, enough to take someone from a ‘superior’ IQ score to ‘average’ or from average to ‘borderline deficient’.

Simply raising monetary concerns for the poor degrades cognitive performance even more than being seriously sleep deprived; and people who are very capable if they have enough resources are much less capable if they do not.

The inescapable conclusion of this research is that interventions ‘inside the classroom gates’ will only ever address educational inequalities up to a point. Parents and children who are preoccupied by poverty and scarcity will never have an equal opportunity to shine, even if the education system is perfect.

A literature review published by the Education Policy Institute in 2018 on key drivers of the disadvantage gap covers a shocking range of social determinants of education, from conception to adulthood. Deprived children are often literally sleep-deprived, on top of all the other barriers to their cognitive development and performance.

My home-made animation below captures some of the ways, explored in the report, in which socio-economic inequality leads to educational disadvantage (if you’re reading this in an email and can’t see the animation, you’ll need to open the post in a browser).

Last week the Joseph Rowntree Foundation revealed in its annual poverty report that more than one in five people in the UK were in poverty in 2021/22, including nearly three in ten children and around two in ten working-age adults. And today the Prince’s Trust has published a report that echoes Eldar’s research. It finds that more than four in ten young people say that worrying about money has made them unable to concentrate at school. One in three people aged 16 to 25 could not afford to get the qualifications they needed for the job they wanted, while one in ten have had to turn down a job because of costs and a similar proportion from poorer backgrounds have missed school or work in the last year because they could not afford transport.

What can we do about all of this? There is a place for ‘nudge’ interventions to make it easier for people to make ‘good’ decisions. But, as Eldar put it in a striking image from his talk, society is responsible for removing landmines from the streets - we can’t expect the people who live on those streets to do this themselves. An active state needs to actively regulate. The policy example that he gave to illustrate this was capping exorbitant interest rates on payday loans. Another example is curbing the worst aspects of insecure work so that people can at least plan ahead when it comes to their work commitments and their monthly income.

As Eldar points out, scarcity is not only about money - people are also affected by scarcity of health, wellbeing, support, esteem and respect (the latter two products of our meritocratic mindset). But money is central to it, and giving poor people money works. There’s plenty of evidence that cash transfers work well - the recipients spend the money wisely on housing, education and healthcare, not on cigarettes and alcohol. Proof that when you alleviate scarcity, people’s mental bandwidth expands.

But to truly tackle the root causes of the problem, we need to look up as well as down, and take action to reduce levels of wealth inequality. Poverty and wealth inequality are as intertwined as bread and butter:

• Inequality makes it harder to be poor because people suffer from low social status as well as obvious material disadvantage (and the consequences are bad for everyone, as the authors of The Spirit Level have argued).

• But inequality also makes it harder to escape poverty. The ‘Great Gatsby curve’ shows a strong inverse link between income inequality and social mobility; wider gaps between rich and poor lead to more rigid societies.

• And even more fundamentally, inequality is a root cause of poverty.

Last week we and the Policy Institute co-hosted the launch of the new book by Liam Byrne MP, The Inequality of Wealth: Why it Matters and How to Fix it, with Professor Bobby Duffy, Carys Roberts of IPPR, and Anoush Chakelian of the New Statesman. You can watch the recording here.

Liam argued that Britain today has regressed to Roman levels of wealth inequality:

The average wealth of a Roman aristocrat was about one and a half million times that of the average income of the Roman citizen. But in the last Sunday Times rich list, the wealth of the Hinduja brothers was about 1.2m times the average earnings in our country.

His diagnosis is that wealth inequality is making Britain poor, corrupt and stagnant, and that it’s about to get a lot worse, as £5.5 trillion flows from the baby boomers to younger generations in the next few decades in the form of (undertaxed) inheritances. The IFS estimates that, while inheritances will remain small for those with the least wealthy fifth of parents, for those with the wealthiest fifth of parents they are set to rise from averaging 17% of lifetime income for those born in the 1960s, to 30% of lifetime income for those born in the 1980s.

The discussion that followed hinged around the need to build coalitions for change, which must involve those who have personally benefited from the status quo - such as older homeowners and those in the top 10% by income - by harnessing their concern for the prospects of their children and grandchildren. We need to present the moral arguments for a fairer society in terms that hark back to the new settlement that followed the Second World War, as a big switch of direction that common sense dictates is necessary now in order to restore the social contract. A new settlement for freedom is needed to build a real democracy of opportunity.

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