Inequality is a political problem, not an economic one


The Drum
By: Tim Dunlop
November 28, 2013

Inequality can be social, economic and democratic, but at its heart it is about the exercise of power, who has it and who doesn't, writes Tim Dunlop.
The six heirs to the Wal-Mart retail fortune in the United States have a net worth greater than the bottom 40 per cent of the population.

Let that sink in for a second. And while it does, consider this further Walmart-related fact: one of their stores recently ran a charity drive asking customers to donate food in order to help ... their store's employees. Yes, they were begging their customers for food for their staff.

You can pretty easily see what the Pope is getting at with his recent exhortation that we do something about "the new tyranny" that is "unfettered capitalism".

Clearly, when big, successful businesses are paying such low wages that they find it necessary to ask for donations of food from customers in order to help out their employees, we have crossed the line between good economic management and social pathology.

A society that allows a situation like this to exist is plain and simple sick, and showing the advanced signs of democratic decay.

Such decay doesn't just happen in a vacuum: this sort of growing inequality - and it is a worldwide phenomenon in developed countries, including Australia - happens because politicians make choices. And the choices they make are what they are because those making them are more influenced by the rich and powerful than they are by the rank and file.

This in turn happens because the institutions that allow all of us to have a say in policy - everything from political parties to sections of the media - are no longer representative of the broader public but have become captives of powerful special interests.

It is not just a case of direct economic policies lowering taxes on the wealthy and redistributing national wealth upwards - though that happens in spades.

Something more insidious is at work. The very tools we use to assert ourselves as citizens against these special interests are themselves attacked and undermined. In the US, not only does corporate money corrupt the legislative process, but there are concerted efforts to rig the game before anyone actually gets to Congress. This is done by gerrymandering congressional districts and by enforcing voter identification laws aimed at discouraging disadvantaged groups from voting at all.

And let's not get too smug. Increasingly, Australian governments are looking to the United States as a source of inspiration.

Tony Abbott has stacked his commission of audit with representatives of big business, while Queensland is in the process of legislating its own voter identification laws, to name just two examples. You could throw in Labor's capitulation on the mining tax too.

If you want to isolate a single factor that helps make all these shifts and changes possible, I'd suggest it is the demonization of government itself. From this, much else flows.

At least since the time that Ronald Reagan declared that government was the problem not the solution, we have been suckered into accepting that governments should operate more like businesses. And we have been told that the best way for that to happen is to outsource what they do directly or indirectly to private firms.

While this may make some sense with a government airline or a bank, there is no logical reason it should also apply unproblematically to healthcare, education, prisons, and other areas that are essential to the operation of a civilized society.

The big lie we have been sold is that business is efficient, dynamic and adventurous while government is - by definition - inefficient, moribund and risk-averse.

As economist Mariana Mazzucato argues in her recent book The Entrepreneurial State: Debunking Public vs Private Myths in Risk and Innovation, this is anything but the case:

Most of the radical, revolutionary innovations that have fuelled the dynamics of capitalism - from railroads to the Internet, to modern-day nanotechnology and pharmaceuticals - trace the most courageous, early and capital intensive 'entrepreneurial' investments back to the State. [A]ll of the technologies that make Jobs' iPhone so 'smart' were government funded (Internet, GPS, touch-screen display and the recent SIRI voice activated personal assistant).

Such radical investments - which embedded extreme uncertainty - did not come about due to the presence of venture capitalists, nor of 'garage tinkerers'. It was the visible hand of the State which made these innovations happen.

If you are scoffing at such claims, chances are you part of the problem.

So we demonize government, we laud private enterprise unconditionally, we privatise everything in sight, we cut services because we have undermined our tax base with handouts and reduced rates to our richest citizens - corporate and otherwise - and we wonder why we are not happy with the outcomes, why inequality rises and why we increasingly feel powerless.

It isn't rocket science (another area, incidentally, where the state has done all the heavy entrepreneurial lifting). When the state retreats and its functions are replaced by private firms, political control shifts from elected officials responsible to the whole community to unelected managers responsible to their boards or shareholders.

Inequality - social, economic and democratic - is part of our more general disenfranchisement from the political process.

It is about the exercise of power, who has it and who doesn't.

It is always and everywhere predicated on a demonization of government, an unending process conducted by think tanks who take their funding from big business, or even media outlets who devote column after column to demonizing government investment in everything from the ABC to the NBN.

I'm neither anti-business nor naively pro-government (how could anyone be when you look at the growing involvement of states in citizen surveillance?) but we are currently getting the worst of both worlds: a private sector so powerful that it is essentially unaccountable, and a public sector drained of meaning and confidence.

More than a balanced budget, that is the scale we have to fix.

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This page contains a single entry by CFED published on December 2, 2013 3:44 PM.

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This Is Why Poor People's Bad Decisions Make Perfect Sense is the next entry in this blog.

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