The threshold of inequality
The subject of inequality is both interesting and important for a multitude of reasons. From a purely positive perspective, income inequality is a phenomenon which is inseparably linked to economic growth and economic development. Despite such a close association, it is often found that income inequality is either completely ignored, or not given sufficient attention, in the mainstream macroeconomic debates of economists and policymakers.
If we put on our normative glasses, then we shall see that the topic of inequality is intimately related to ideas of fairness and social justice. Since economics is a "social" science, economists cannot always afford to take refuge in their ivory tower abstract models and hide behind the thick curtains of technical jargon. Even if economists are accused of being renegades or revolutionaries, it is their moral obligation to raise their voice on issues that are of great concern to society as a whole. Inequality is undoubtedly such an issue.
In today's world, one does not need to be an economist or a researcher in order to see inequality. Inequality is everywhere. Bengali filmmaker Satyajit Ray understood inequality. His 1980 film, Hirak Rajar Deshe (The Kingdom of Diamond King) showed a fictional land of diamonds where the incredibly rich king maintained a stranglehold on the poor citizens through the use of force, physical torture and brainwashing. In more recent times, American author Suzanne Collins has brought inequality into the limelight through her novels in "The Hunger Games" trilogy. Collins shows us a world where certain classes of people live a life of unimaginable luxury, whilst the rest are compelled to struggle for basic survival. Despite being works of fiction, these stories provide us with a reflection of the state of affairs in the world today. Nowadays, the gulf between the rich and the poor is continuously widening. Some wonder whether these changes will lead to some kind of socioeconomic shock, just like the shifting plates of the earth often lead to an earthquake or tsunami.
If we look at the data, we can easily observe that the level of inequality today is unbelievably high. The incomes of the poorest 10 percent of people increased by less than USD 3 a year between 1988 and 2011, while the incomes of the richest 1 percent increased by 182 times as much. In the US, recent research by economist Thomas Piketty shows that over the last 30 years the growth in the incomes of the bottom 50 percent has been zero, whereas incomes of the top 1 percent have grown by 300 percent. In Vietnam, the country's richest man earns more in a day than the poorest person earns in 10 years. A FTSE-100 CEO earns as much in a year as 10,000 people working in garment factories in Bangladesh.
In the fourth century BC, Aristotle talked about inequality in his work "Politics". Like most other Greek philosophers, Aristotle condemned acquisitive behaviour in the strongest terms. He believed in the pursuit of knowledge and justice, rather than the quest for material possessions. Ironically, Aristotle supported the ownership of private property, which is in itself the result of acquisitive behaviour. Under the existence of private property, some level of accumulation of wealth is inevitable and, subsequently, some inequality is unavoidable. Aristotle was aware of this issue.
Aristotle recognised that equality was a prerequisite for social justice, whilst inequality was a precursor for social unrest. He warned that "inequality is a cause of revolution" and that "the greatest crimes are caused by excess". However, Aristotle identified three major problems of economic equality. First, he mentioned that economic equality was difficult to achieve in practice and any attempts to equalise the economic power of individuals would be imperfect. Merely equalising incomes would be insufficient since wealth was also owned in terms of land, slaves and other assets. Secondly, he observed that economic equality would be unstable since human wants were unlimited. Even if economic equality were to be achieved by some means, it would not last for too long since "the avarice of mankind is insatiable" and "men always want more and more without end". Finally, Aristotle argued that economic equality would in essence be unfair. Redistributing income and wealth invariably involves a transfer from the rich to the poor. Aristotle believed that such redistribution would be unfair and may even incite social tension. Thus Aristotle nullified the notion of economic equality on the grounds that it is imperfect, unstable and unfair. He advocated that the government should not aim to equalise income or wealth, but rather should aim for moderation in the distribution of income and wealth.
The 18th century Swiss philosopher Jean Jacques Rousseau believed that nature had ordained equality among men and it was man himself who created inequality. In his "Discourse on Inequality", Rousseau argues that the genesis of income inequality is in the ownership of private property.
Rousseau was not a communist. He did not believe that property should be collectivised. Rousseau recognised that the market economy improved people's standard of living. However, he also pointed out that it led to income inequality amongst people. Rousseau was not very comfortable with this reality and was very unwilling to trade off income inequality in favour of standard of living. Rousseau advocated that the most durable cause of income inequality was human ego centrism and vanity. According to Rousseau, private property, and the inequality that it creates, is responsible for a multitude of social problems. Thus in this regard, Rousseau's words echo the voice of Aristotle, who also believed that inequality was one of the reasons behind the problems of society.
Studies have suggested that income inequality is not natural, and that it is not in our nature to accept income inequality. The distribution of income is an issue which is too important to be studied simply by economists; it is of interest to everyone in every field. Throughout history, inequality has either been renounced as a vice or revered as a virtue. The endless debate on income inequality has often been fought from these ideological perspectives. However, as the discourse has progressed it has become more and more obvious that the fundamental stumbling block is the degree of inequality, rather than inequality itself. Thus the real question in the inequality debate is how much income inequality is the best for society.
The writer is Economics and English Language Teacher, Mastermind School.