I spoke tonight at the Sydney Institute on the topic of inequality. The embedded video is a short version, and the long-play version of my speech is below.

(See also reports in the SMH and Canberra Times, and an op-ed version in the National Times.)

Why Inequality Matters, and What We Should Do About It*

Andrew Leigh MP
Federal Member for Fraser
www.andrewleigh.com

Sydney Institute
May Day 2012

Introduction

Imagine a ladder, in which each rung represents a million dollars of wealth.[1] Imagine the Australian population spread out along this ladder, with their distance from the ground reflecting their household wealth.

On this ladder, half of all households are closer to the ground than they are to the first rung.

The typical Australian household is halfway to the first rung.

Someone in the top 10 percent is at least 1½ rungs up.

A household in the top 1 percent is at least 5 rungs up.

Gina Rinehart is 5½ kilometres off the ground.

‘The rich are different from you and me’, wrote an awestruck F. Scott Fitzgerald.[2]

‘Yes’, wrote the laconic Hemingway. ‘they have more money.’

But why should we care about the gap between rich and poor? Shouldn’t we focus on raising the bottom, rather than how much wealthier the top are than the rest? Aren’t discussions of inequality merely – shudder - ‘the politics of envy’?

Certainly, there are eminent economists who have taken this position. The University of Chicago’s Robert Lucas has argued that ‘of all the tendencies that are harmful to sound economics, the most seductive, and in my opinion, the most poisonous, is to focus on questions of distribution’. Harvard’s Martin Feldstein says ‘there is nothing wrong with an increase in well-being of the wealthy or with an increase in inequality that results [solely] from a rise in high incomes’.[3]

Contrary to Lucas and Feldstein, I want to persuade you that inequality matters, that the gap between rich and poor really is an important public policy issue, even apart from the question of poverty. Inequality has costs and benefits, and policymakers need to think hard about the right level of inequality. This is an issue that Wayne Swan has put squarely on the national agenda, and I commend his article in The Monthly to you.[4]

To begin, let me take a moment to review what we know about inequality in Australia. There are many measures of inequality, but I’m going to focus on top income inequality, because it allows me to look at a much longer period, and because it’s very clear that when we’re talking about top incomes, the topic is inequality rather than poverty.[5]

I gave a speech to a group of Sydney University students this morning on ‘Five Science Breakthroughs That Could Change Politics’. The text is below.

‘Five Science Breakthroughs That Could Change Politics’*

Andrew Leigh MP
Federal Member for Fraser
www.andrewleigh.com

Talented Students Program Breakfast
Sydney University
18 April 2012

Introduction

In 1910, Alexander Graham Bell, inventor of the telephone, was visiting Australia. In Melbourne, he gave evidence to a parliamentary committee on communications.[1] He told them his ‘dream’ was that ‘a man will be able to talk with any other in any part of the United States’. Bell criticised our use of single-wire telephones, and encouraged Australia to install two-wire circuits to avoid ‘cross talk’. And he praised the quality of Australian electrical engineers. But even the great Bell didn’t get everything right. Asked about mobile telephones, he said that wireless telephony was unlikely to compete, due to the difficulty of securing privacy.

Reading Bell’s evidence a century on, I am struck by the sense of optimism and possibility, and my predecessors’ deep interest in one of the scientific breakthroughs that would shape the modern age.

There are three reasons I wanted to speak with you about science breakthroughs. First, I don’t think it’s a topic that politicians spend enough time on. For example, a survey published in 2010 of federal politicians’ reading habits found only one respondent reading a book about science.[2] And as the climate change debate showed, even findings that are broadly accepted by scientists can be described by certain politicians as ‘absolute crap’.

Second, talking about science is good for us because it engenders a sense of awe. As Monty Python once pointed out, our galaxy, one of millions in the universe, is a hundred thousand light years side to side.[3] As the late Christopher Hitchens observed, when our sun finally gives out, the people watching it will be a higher evolutionary form of humans than us.[4] Bryan Gaensler describes ‘Oh-my-God’ particles, which have been recorded moving through the universe at 99.9999999999999999999996% of the speed of light.[5] Like the great arts, science can be beautiful and thrilling.

Third, I’m immensely proud of what science has achieved. The stump-jump plough transformed nineteenth century agriculture. The winged keel allowed us to end the US’s 132-year hold over the America’s Cup. Spray-on skin helped burns victims. My own electorate contains CSIRO, who invented wi-fi and ultrasound; and ANU, the workplace of Brian Schmidt, who shared the 2011 Physics Nobel Prize for his work showing that the universe is expanding at an accelerating rate.

Book Launch of Jemma Purdey, From Vienna to Yogyakarta: The Life of Herb Feith
Andrew Leigh MP
Parliament House
6 July 2011

I begin by acknowledging the traditional owners of the lands on which we meet today, and thanking those who have worked hard to organise today, particularly Louise Crossman and Nik Feith Tan.

Jemmy Purdey, family and friends of Herb, internationalists all – thank you for coming today to celebrate Herb’s life and Jemma’s fine book.

I spoke at the Lowy Institute today, suggesting a few ideas for improving Australia's aid program.

Fragile States and Agile Aid: Some Ideas for the Future of Australia’s Development Assistance Program

Andrew Leigh
Federal Member for Fraser

Lowy Institute

18 May 2011

I acknowledge the traditional Indigenous owners of the lands on which we meet today.

Aid Works

Dai Manju lived in a small village in central China. Because her parents were ill and couldn’t afford the cost of sending her to school, she dropped out. When journalist Nicholas Kristof visited in 1990, she was hanging around the school hoping to pick up bits of knowledge.[1]

After publishing a front page article about Dai in the New York Times, Kristof was chuffed to receive a donation of $10,000 from a reader. He promptly sent it on the school, which spent it on improving facilities, and provided Dai with a scholarship to stay in education so long as she passed exams. After a good amount of the money had been sent, Kristof phoned the donor to thank him for the generous gift. It was only then he realised that the man had in fact only sent $100, and the slip of a bank teller’s fingers had multiplied it one-hundredfold. Informed of their error, the bank agreed to provide the difference as a donation.

After graduating as an accountant, Dai now runs her own business employing many others, and is able to send money back to improve the lives of her parents. Because many of the other girls in her class also received ‘bank error in your favour’ scholarships, the village now has a road.

Spent wisely, foreign aid can transform lives for the better. This year, Australia’s foreign aid program will build 2000 schools in Indonesia, fund a Women’s Crisis Centre in Fiji, prevent 8000 cases of blindness in East Asia, and provide clean water to 1.2 million people in Southern Africa. World Vision CEO Tim Costello claims that this year’s aid budget will save 200,000 lives.

Yet too often, aid debates become removed from the people that they are intended to help. When aid advocates ask the public for donations, they typically ask for help to solve an immediate and practical problem – feeding a child, building a well, providing schoolbooks. To the best of my knowledge, no aid campaigner ever knocked on a door and said to the resident: ‘we’d like you to consider increasing your aid contribution to 0.5 percent of your income in 2015-16, with the ambition of going to 0.7 percent in the future’.

Don’t get me wrong: the quantum of aid is important. I recognise that Australia’s aid contribution as a share of national income still places us in the bottom third of donor countries. Scaling up our aid to half a cent in the dollar will put us at the developed-country average.[2] This is eminently sensible given that 18 of our 20 nearest neighbours are developing nations, and we sell over $90 billion worth of goods to developing countries each year. Few developed nations have as much self-interest in running a good aid program as Australia. But we should never forget that the purpose of foreign aid is to alleviate disadvantage. More aid creates the potential for reducing poverty – but it will not happen automatically.

Although the input-wallahs would occasionally have us believe otherwise, the most interesting debates in foreign aid are not about the quantum of assistance.[3] So today, I want to suggest a few ideas about how to increase the effectiveness of the Australian aid program. This is particularly important in the context of the scaling up of Australia’s aid program. Over the next four years, the Australian aid budget will almost double in nominal terms. This represents a unique opportunity to ensure that our aid is spent in a way that does as much good as possible.

For an economist like me, that means identifying Australia’s comparative advantages in foreign aid, and rigorously evaluating our aid programs. Let me deal with each in turn.

Here's the speech that I gave last night to kick off my community meeting in Gungahlin.

Revenge of the Nerds: Improving Australia’s Education System
Gungahlin Lakes Club, 16 March 2011

In a book titled Outliers: The Story of Success, writer Malcolm Gladwell discusses the way that extraordinarily successful people came to get where they are. Gladwell’s aim is to dig deeper than the legend of brilliance, and discover what lies underneath. His most interesting story concerns Bill Gates. Now, you probably think you know the story of Gates: smart geek drops out of Harvard, starts his own computer company, and becomes a squillionaire. But how many of you know about Gates’ high school experience?

Bill Gates attended high school in Lakeside, a school in Seattle. Each year, the mothers’ club ran a rummage sale, and in 1968, they decided to spend $3000 on a computer terminal. Now $3000 was a lot of money in those days, and the mothers’ club didn’t buy any old computer. They bought one that allowed real-time programming, directly linked to a mainframe.

To get an idea of how extraordinary this was, my father was at the time doing his PhD at Cornell University. The computer he got access to used punch cards, and he had to wait overnight to get his results. Yet as a schoolkid, Bill Gates was using a far better computer than a student at an Ivy League university.

The result was that Gates and his friends got the chance to do more computer programming than almost anyone else in the world. Thanks to a few more lucky breaks, he got access to the computer lab at the University of Washington. And before he left school, he had gotten a part-time job writing code. By the time Gates dropped out of Harvard in his second year, he had been programming virtually non-stop for seven years. He estimates that there were probably no more than 50 young people in the world with that sort of experience.

Yes, Bill Gates is a smart guy. But the moral of the story is that what made him what he is today were the opportunities he was given. If we want more Bill Gateses in Australia, the answer isn’t to dig inside our DNA and sequence the genius gene. It’s to expand opportunities for every child, so every young Australian has the chance to fulfil their potential.

It is hard to imagine a greater honour than to represent your friends and neighbours in our national parliament. Each of us brings to this place the hopes and dreams of the people who chose us. I am keenly aware of both the incredible opportunity the people of Fraser have bestowed on me and the very great responsibility to them which that opportunity entails.

Let me begin by telling you about my electorate of Fraser and the city of Canberra in which it lies. Fraser rests on the right bank of the Molonglo River, stretching north from the office blocks of Civic to the young suburbs of Bonner and Forde in the ACT’s northernmost tip. Because the leaders at the time decided that a capital city must have its own port, the electorate of Fraser also includes the Jervis Bay territory, which is home to a diverse community and a school where kangaroos graze on an oval overlooking the Pacific Ocean.