nomoba
3rd November 2014, 13:54
Many feel that some economic inequality is acceptable as long as those who study and work hard are able to succeed and become richer. This idea is deeply entrenched in popular narratives and reinforced through dozens of Hollywood films, whose rags-to-riches stories continue to feed the myth of the American Dream around the world.
Experimental research has shown just how important fairness is to most individuals, contrary to the prevailing assumption that people have an inherent tendency to pursue self-interest.*
Many believe that inequality is somehow inevitable, or is a necessary consequence of globalization and technological progress. But the experiences of different countries throughout history have shown that, in fact, deliberate political and economic choices can lead to greater inequality. There are two powerful economic and political drivers of inequality, which go a long way to explaining the extremes seen today: market fundamentalism and the capture of power by economic elites.**
... as economist Thomas Piketty demonstrated in Capital in the Twenty-First Century, without government intervention, the market economy tends to concentrate wealth in the hands of a small minority, causing inequality to rise. Despite this, in recent years economic thinking has been dominated by a ‘market fundamentalist’ approach, that insists that sustained economic growth only comes from reducing government interventions and leaving markets to their own devices. However, this undermines the regulation and taxation that are needed to keep inequality in check.
In the 1980s and 1990s, debt crises saw countries in Latin America, Africa, Asia and the former Eastern bloc subjected to a cold shower of deregulation, rapid reductions in public spending, privatization, financial and trade liberalization, generous tax cuts for corporations and the wealthy, and a ‘race to the bottom’ to weaken labour rights. Inequality rose as a result. By 2000, inequality in Latin America had reached an all-time high, with most countries in the region registering an increase in income inequality over the previous two decades. It is estimated that half of the increase in poverty over this period was due to redistribution of wealth in favour of the richest. In Russia, income inequality almost doubled in the 20 years from 1991, after economic reforms focused on liberalization and deregulation.***
Despite the fact that market fundamentalism played a strong role in causing the recent global economic crisis, it remains the dominant ideological world view and continues to drive inequality. It has been central to the conditions imposed on indebted European countries, forcing them to deregulate, privatize and cut their welfare provision for the poorest, while reducing taxes on the rich. There will be no cure for inequality while countries are forced to swallow this medicine.
Despite the evidence that it increases inequality, rich-country governments and donor agencies, such as the UK, the USA and the World Bank, are pushing for greater private sector involvement in service delivery.
Experimental research has shown just how important fairness is to most individuals, contrary to the prevailing assumption that people have an inherent tendency to pursue self-interest.*
Many believe that inequality is somehow inevitable, or is a necessary consequence of globalization and technological progress. But the experiences of different countries throughout history have shown that, in fact, deliberate political and economic choices can lead to greater inequality. There are two powerful economic and political drivers of inequality, which go a long way to explaining the extremes seen today: market fundamentalism and the capture of power by economic elites.**
... as economist Thomas Piketty demonstrated in Capital in the Twenty-First Century, without government intervention, the market economy tends to concentrate wealth in the hands of a small minority, causing inequality to rise. Despite this, in recent years economic thinking has been dominated by a ‘market fundamentalist’ approach, that insists that sustained economic growth only comes from reducing government interventions and leaving markets to their own devices. However, this undermines the regulation and taxation that are needed to keep inequality in check.
In the 1980s and 1990s, debt crises saw countries in Latin America, Africa, Asia and the former Eastern bloc subjected to a cold shower of deregulation, rapid reductions in public spending, privatization, financial and trade liberalization, generous tax cuts for corporations and the wealthy, and a ‘race to the bottom’ to weaken labour rights. Inequality rose as a result. By 2000, inequality in Latin America had reached an all-time high, with most countries in the region registering an increase in income inequality over the previous two decades. It is estimated that half of the increase in poverty over this period was due to redistribution of wealth in favour of the richest. In Russia, income inequality almost doubled in the 20 years from 1991, after economic reforms focused on liberalization and deregulation.***
Despite the fact that market fundamentalism played a strong role in causing the recent global economic crisis, it remains the dominant ideological world view and continues to drive inequality. It has been central to the conditions imposed on indebted European countries, forcing them to deregulate, privatize and cut their welfare provision for the poorest, while reducing taxes on the rich. There will be no cure for inequality while countries are forced to swallow this medicine.
Despite the evidence that it increases inequality, rich-country governments and donor agencies, such as the UK, the USA and the World Bank, are pushing for greater private sector involvement in service delivery.