The Different Sides to Inequality

Perhaps it has always been often-discussed, but I feel the inequality debate is as active as ever. Basic question, is inequality rising, and if so, does it matter?

The prosperity gap at a global level between nations is in fact shrinking. The financial crisis did damage to developed countries while middle and low-income countries grew. The global middle class has doubled since 200 to about 600 million people. Problem is, in developed countries with low or no growth, the widening gap between have’s and have-not’s creates real social tensions as the rich can survive on savings, something the poor cannot typically tap into.

I personally think inequality needs to be debated rigorously as there are many facets to the definition itself. Here are some reasons why we should care about inequality:

1) People’s well-being may depend on it. The have-not’s might view society as being unfair with the have’s occupying a higher status than the not’s. Psychologically this is debilitating and can create all-out chaos if not adeptly managed.

2) The equality of opportunity can be harder to achieve in an unequal society. Those with greater wealth pass this on to their children who in turn prosper making it difficult to trickle down.

3) Inequality impacts politics. Campaign contributions most notably operate in this fashion. However, it is also interesting to note that the rich today are very different from the rich say several decades ago. Whereas in the past the rich often counted on a large portion of their largesse from their parent’s estate, today’s rich earn most of their money in salaries, with the highest earners being in the financial sectors. Some would argue this is part of the political process in that the deregulation of the financial sector has enabled these individuals to increase their salaries exponentially and no doubt a great deal of lobbying from that very same sector played a role in this.

However, taking a swipe at this group could create more harm than good as innovative sectors such as software, telecommunications and biotech are intimately involved which would slow the economy for sure.

Globalization

Some might argue that the rise in inequality is due to the fact that a relatively small business can go global and increase its rents much faster than before when the customer base was geographically confined, physically speaking. Moving forward, as technology continues to develop one could theoretically see many billionaires in the world’s future as anybody anywhere can find the cheapest labor pool and sell on-line to a customer base of 6 billion people. Is this a bad thing, hard to say, but it does contribute to inequality I suppose.

I have found some fascinating arguments for and against worrying about inequality and I would love to hear more. Most important, keeping the discussion moving I think is the only way to engender smart policy.