Inequality has emerged as one of the most contentious topics over the last one decade. It has not only found centre stage in bitter political debates and academic discourses, the extreme inequality that currently prevails in advanced industrial societies has raised many question regarding the degree of real influence average citizens have in shaping laws and policies. After all, if mature democracies are designed to ensure that the interests of the few do not undermine the wellbeing of the many, then how did we allow economic and political institutions to concentrate wealth to such an extent?
In terms of magnitude, just to offer a glimpse, the recently published Federal Reserve Report notes that the top 1 percent in the US now controls 38.6 percent of the country’s wealth in 2017, much larger than the wealth share of its bottom 90 percent. In India, the difference is even starker as the richest 1% in the country now own 58.4 percent of the country’s wealth, according to Credit Suisse Group AG. Even at the global level, an Oxfam’s report notes that the richest 1 percent of the population has owned more than the bottom 99 percent since 2015. Thus, upon reflecting on such unpleasant developments, it is only natural for a curious and concerned mind to question how such a degree of extreme inequality endures in the modern era. More importantly, is such inequality harmful for the global economic and social progress?
The short answer to the latter questions is: yes. As wealth become increasingly concentrated in few hands, it is only natural that the aggregate demand within nations weaken as the marginal propensity of consumption of the extreme rich has historically been low. This also motivates the rich to invest their income and wealth not in producing actual goods and services by establishing factories or hotels, which average people consumes, but rather in volatile assets where speculation dictates if one enjoys a boom or bust. Thus, Wall Street, the London Stock Exchange and many of its contemporary avenues across industrialised countries become the natural parking spot of such wealth, creating and widening the fault-lines of a more vulnerable and fractured global economic plane. As a result, the global financial crisis of 2008 is not a one-off incident. Rather, if the present degree of inequality endures, then the future global economic outlook is bound to encounter few more such crashes before we harness a genuine interest to address one of its core structural determinants: inequality.
Of course, this rather depressing concern takes me to the first question: why are we failing to address such extreme inequality in the first place? I believe the answer to this question deserves an examination of not only the nature of the economic and political institutions that dominate how policy decisions are made within nations, but also a need to scrutinise how humans, as an animal, think. Being precise, there is a genuine concern across a large pool of public thinkers that modern democratic institutions within advanced industrialised societies are facing major issues.
In other words, at least after the Second World War, the representative political order – i.e. a system of governance in which elections are used to decide who governs – that gained prominence across almost all industrialised states was no longer overthrown by coup d’états or political forces who challenged its legitimacy. Yet, what happened was a slow dilution of policy preference of the masses because economic elites learned the art of using their wealth to build inroads within the decision-making process of such political arenas. Plainly speaking, the budget for pro-people issues such a health care, education or affordable housing soon noticed stagnation while paychecks to finance wars never ran out. The rich have also theoretically convinced a large segment of policymakers that reducing their tax burden will significantly aid prosperity for all – a position that almost has no empirical validation.
But the capture of policy space within mature democracies is only a part of the story. We must also reflect on another question: do we as a human being have such tolerance for inequality because at the subconscious level we have developed a tolerance for it? This is possible given human beings as a biological entity have literally learned to live within social settings that breed and sustain inequality since the Agricultural Revolution – i.e. for roughly 12000 years. This tolerance is also reflected in everyday political rhetoric where it is popularly championed that, ‘the American dream is if you work hard and give your best, then one day you can rise to the top’. Yet, what is rarely questioned in such societies is whether what separates the ‘top’ from the ‘bottom’ are glass ceilings that are created and sustained by the elites to ensure that whoever reaches the top (or born in it) stays at the top, even if they don’t play by the socially admired rules of hard-work and honesty.
This also brings me to the final set of questions: if the pillars that sustain extreme inequality within countries are so strong and have endured for thousands of years, then is there a pragmatic solution for the problem? Can our generation have any real scope to address its adverse impact on the society? The answer is yes, but we have to accept that while the problem we witness has taken this extreme form after evolving for thousands of years, undoing it will also take a while. And there is nothing wrong in it.
After all, the societies we presently experience were formed when each new set of progressive ideas added on to the previous ones over generations.
Hence, brick by brick we have to advocate social reforms that not only compels the rich to pay their fair share in the national exchequers across countries, the informed citizenry across the world has to advocate institutional reform that prohibits policy capture by groups with whom economic wealth is concentrated. Moreover, for having a real shot in mitigating the problem of inequality, a critical mass of informed citizenry must find the necessary devotion to fight institutional attributes within polities that breeds inequality. History is unanimous that exploitative institutions – be it slavery or women’s lack of right to vote – only crumble when a critical mass of people rejected its legitimacy. Thus, the fight against exploitative inequality needs such resolve. However, whether the current generation of liberals across political space will find it a worthy cause is a different enquiry altogether.