What to do with Economic Inequalities

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Studying economic inequalities seems to be the new “fashion” in the last couple of years among academics and researchers. It is undoubtedly that “Occupy Wall Street movement” and its European counterpart “le mouvements des Indignés” have something to do with it. Those social movements, to their credit, brought to the public space, new concepts like the “90%” versus the “10%” or even the “99%” versus the “1%”. They became the slogan of these movements.

Unfortunately, rare are of those studies or books that would call for a total rethinking and reshaping of the capitalist and neoliberal system. Instead, these studies on the inequalities would most of the time justify them and portray them as “inevitable” or even defend the “1%” by claiming that they are the one pushing the economy forward.

Of course, “The Capital in the Twenty First Century” by Thomas Picketty, in an unprecedented and thorough study about the rise of the economic inequalities in Western Europe and the US, rightly pointed to the cause of these inequalities: the accumulation of wealth with a tiny proportion within the society and hence he proposed a special tax on wealth, to better distribute the incomes.The principal message of Picketty is that the wealth in western countries reached high level that surpassed the growth rate of their economies and that cannot be justified by real productivity or growth (thus, the danger of financial crises). Despite this, the critics of Picketty quickly dismissed his crucial message and instead jumped to accuse him of being a “modern Karl Marx” in reference of the “Capital” book by Karl Marx. Some of these virulent critics went even to consider the work of Picketty as ideologically motivated and not at all based on economic assumptions.

Angus Deaton, a prominent economist from Princeton who received the Nobel Prize of Economics in 2015, published a book in 2013, named “The Great Escape: Health, Wealth and the Origins of Inequalities.”

Contrary to Picketty, Deaton’s intentions are not to identify the inequalities as one of the “main culprits” behind the poverty and lack of development of some countries. Rather, he blames the spread of diseases and health issues as the main reasons behind people economic fallout. He believes that the world populations were able to achieve some level of development because of the improvement of their medical accessibility: hospitals, medications, research…He refers to this as the “Great Escape”, the escape from diseases, from poverty, and thus from inequalities. Another factor that Deaton believes has improved people’s lives around the world is “globalization”.

For this, he gives the examples of countries like Hong Kong, Malaysia, Singapore, South Korea, Taiwan and Thailand and Botswana, who had an economic growth rate higher than 4% per year in the period between 1960 and 2010.

However this economic growth didn’t translate automatically into economic equalities between the countries and inside the same country.

Hence, in China a country with a high growth rate, and with an economy that would soon surpass the American’s, the average income in China remains 20% of the American’s.

Despite those flagrant inequalities, Deaton, thinks that it is the ingenuity and intelligence of people that would make them advance and lead them to win over poverty. Even if this progress will be met with increasing inequalities at some point.

Contrary to the book of Picketty, Deaton’s was well received by the neoliberal reviews. Even when Deaton exposed the financial debacles of Wall Street and how the government bailed out the financial institutions using the usual refrain of “Too big to fail”, he didn’t go anywhere further to put in question, the “accepted” and “justified” institutionalized greed underlying today’s neoliberalism.

Deaton continues to believe in globalization as an engine of development and explains the inequalities between countries and within countries as “mismanaged globalization”. But he doesn’t tell us how these inequalities can be kept in control without falling in social unrest. He doesn’t provide us with any concrete actions on how the health conditions of poor countries can break out of the circle of poverty specially knowing that inside those same countries government, corruption and lack of democratic institutions are all linked together.

Picketty book’s introduced a classical tool to defy inequalities: taxes. But, this was immediately, considered as a socialist measure. Deaton candidly admits in his book that “Equality policy required by democracy is still threatened by economic inequality”. Nevertheless, he remains mum on how to achieve and implement that much need “equality policy”.




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