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Addressing income inequality
Posted: Tuesday, August 14, 2018

By Raffique Shah
August 14, 2018

Last week, when I wrote about the plight of the "working poor" in this country and the need for all interest-groups to address what is clearly a huge socio-economic problem, I was unaware that the issue had attracted international attention and there is actually an organisation based in Paris, France, that, since 2011, has focussed on what they have designated "income inequality".

An ardent reader of my column who belongs to the "one percent" (he may take offence to being so categorised) forwarded to me an article in the Los Angeles Times published on the same day as my column, headlined "The truth about income inequality". I should add that since I got to know the sender, I've determined that while he is wealthy, he has a spirited social conscience much like America's Warren Buffet, who, over the past 30 years, has ranked in the top five among the world's wealthiest, but who has consistently and tangibly shown concern for the inequities of the world economic order.

According to the Pulitzer prize-winning journalist Michael Hiltzig article in the LA Times, the Paris-based World Inequality Database report of 2018 "…(shows) the history of inequality and its possible future — or futures, dependent as they are on government policy choices…Economic inequality is widespread and to some extent inevitable, but the scale of inequality as it has evolved in many countries is not inevitable...

"If rising inequality is not properly monitored and addressed, it can lead to various sorts of political, economic, and social catastrophes."

In other words, much the way people make choices in life that determine their future, so too countries have choices of policies and programmes they could adopt that would determine whether their rich-poor gap narrows or widens.. The consensus of authors of the report, which is supported by empirical data, is that the West European models have delivered a more equitable distribution of incomes than the US model.

The report noted, "…The one percent commanded about 10 percent of national income in Europe in 1980, about the same as its share in the US. But its share rose only to about 12 percent in 2016, compared with 20 percent in the US…Consequently, the bottom 50 percent in Western Europe still possess a larger share of national income than the top one percent, the reverse of the situation in the US…"

Putting it in a global context, the report says, "Income growth has been sluggish or even zero for individuals with incomes between the global bottom 50 percent and top one percent groups."

It then issues this dire warning: "At existing rates, the wealth share of the top 0.1 percent will match the share of the entire global middle class by 2050."

But it places options that can avert such a volatile socio-economic setting: "Countries have a choice - whether to continue their current trends, which would mean increasing inequality, follow the US model, which would increase inequality even more, or follow the European Union trend line, which would narrow the gap between the top one percent and the bottom 50 percent...

"...Among the keys to reducing economic inequality are progressive tax systems, inheritance taxes and public investment in education, health and the environment..."

Whew! It doesn't get any starker than that. I thank my friend for drawing this article to my attention, and journalist Hiltzig for researching and writing it.

What is disconcerting from our perspective in Trinidad and Tobago is this: all of us—journalists, politicians, trade unionists, economists, analysts, hell, the entire panoply of critics and commentators—engage in non-orgasmic masturbation over the state of our economy, sterile arguments over its ever-elusive diversification, but we ignore the most fundamental socio-economic question: where are we as a people going?

Let's face it: if, by some miracle or misfortune—war, for example, or even the intensification of the global trade war triggered by that oaf in the Oval Office, Donald Trump—the price of oil and gas were to triple or quadruple, and foreign dollars pour into our financial system, hence eliminating the number one problem we think we face, a dire shortage of foreign exchange, we shall revert to wallowing in what we think is wealth, engage in an orgy of conspicuous consumption of foreign goods and now technological services that have become our digital oxygen, and forget about widening income inequality and the pauperisation of large numbers of people, a ticking time bomb that will one day explode and make today's crime infestation seem like a garden of Eden by comparison.

That is one of the tragedies of our time.

Sure we need to fix the economy, to reduce our dependence on hydrocarbons, to improve productivity, to eliminate corruption and waste, and so on.

But what good would all these achievements serve us if there are permanent pockets of poverty littering the landscape, if the working and middle classes live their working lives serving hard labour, then retire into infirmity?

There must be alternative systems that allow for a more equitable distribution of the nation's wealth, that require each to produce according to his ability and compensated accordingly. There must be systems that discourage laziness and punish parasites, be they among the oligarchs or the paupers.

I dream on.

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