Tony French

parliament house 2_opt
‘Parliament House Canberra’ Tony Ilic flickr cc

Yet again, it’s official; the rich really are galloping away from the rest of the field in the well-to-do financial stakes. To those of us with eyes, this has been evident enough, and Andrew Leigh, former professor of economics at ANU turned politician, has now put figures on the increasing pace at which the wealthy are pulling away from the rest of the pack (Battlers and Millionaires: Australian Egalitarianism Under Threat).

Since 1975, he says, real wages for the top ten percent have risen by 59%, but only by 15% for the bottom tenth. “If cleaners and checkout operators had enjoyed the same rate of wages growth as the well paid, low-paid workers would be earning an extra $14,000 a year.” Increased earnings mean accumulating too. The richest 50 people in Australia have more wealth than the bottom 2 million.

Australia prides itself on qualities of mateship and egalitarianism, but Leigh’s research shows these qualities becoming myths when we are confronted with his figures on the accelerating financial inequality in this country. The rich are getting richer, but the poor, while not actually getting poorer, are “not enjoying the same gains from growth that the top are”, says Leigh.

The factors giving rise to this growing inequality include globalisation, skill-based technological changes, the decline in trade unionism, weak financial services regulation, and a generous tax system for investors.

Comment about Leigh’s results has predictably been negative, summed up simply as a leftie plot to slug the rich by increasing their taxes. “Redistributing wealth by taxing the rich won’t help”, screamed the Australian newspaper headline (19 April) for an article by Maurice Newman, chairman of the PM’s Business Advisory Council, perhaps in a wild reaction to any troublesome talk of raising the top tax rate to 80c in the dollar, as suggested by that currently popular neo-Marxian, Thomas Piketty.

The reality is that the top income earners do pay the most tax, the top 25% of them paying more than two-thirds and the top 10% pay forty-five percent. Simply by having them pay more would not end inequality (but it would help), the funds swelling government coffers but at the risk of proliferating tax minimisation schemes and offshoring. Ending the pace at which inequality is growing is less about mugging the rich and more about providing opportunities to overcome disadvantage, in short, work to generate a reasonable standard of living and if fortune smiles, wealth. Wealth from toil as our National Anthem proudly proclaims.

Debate on inequality stalls when it becomes obsessed on equality of outcome, or worse becomes a dialogue on envy, class division using emotive language of the uber rich and struggling poor. But those pictures too are a reality of the growing inequality.

The focus might usefully instead be more upon equality of opportunity, in other words how to achieve low unemployment and rising wages for everyone. We can all agree on that.

Equality of opportunity has been seized upon by libertarians as the cornerstone of individual freedom, individual responsibility, economic security and independence for all. Fine words and code for ‘if you don’t make it then it’s your own fault’. Your faults might just include, as Judith Sloan reminds her Australian newspaper readers (May 3), marrying badly (“non-assortive mating”, as she calls it), bad pairing-up which often results in single parent families (and you do need two household income earners per household these days), incomplete schooling with the likely outcome of unemployment and consequent social disadvantage.

These results too are a reality. Leigh acknowledges them: effective “assortive mating” he says leads not only to higher incomes (with two professionals and increased participation by women in the workplace) but also alarmingly to entrenched generational privilege. Don’t believe him? Next time you visit your GP ask him if his father was also a doctor. Of course divorce is a well recognised route to that destination called poverty.

Libertarian promotion of personal responsibility, that it’s your own fault if you fail to succeed, has become a driver for less government involvement in promoting economic security. Surely you have heard that the ‘age of entitlement’ is over. It’s the market, mate!

The reality is that the notion of equality of opportunity, like the notion egalitarianism, is becoming equally mythical. If families are the bedrock of society, then not all families begin equal, and if schools are the great levellers then not all schools are equal either, meaning that not all employment opportunities are equal. And jobs, well, they, or their absence, are the basis for on-going inequality. If you start off poor then the likelihood is that you will stay poor. One need only look to the ‘land of the free’, the USA, to see the consequences of gross inequality.

In the interest of social harmony there is a role for government to ensure good educational opportunities, minimum wages, affordable medical care, home ownership potential, and protection from ‘economic fears of old age, sickness, accident and unemployment’, as President Roosevelt long ago said.

The reality is that these “rights” as he called them are becoming less achievable, not just in the USA, but here. Witness the latest Commonwealth Budget that targets the young, unemployed and single parents. Programs to assist the disadvantaged young into employment have been cut and families are now responsible for their children until the age of 30. If education and employment are but two rungs on the ladder to reduce inequality then the current Budget entrenches inequality.

The Government has looked after its mates, property owners, trusts and self-managed super fund members but fanged its little mates the pensioners, the sick, the unemployed and the marginalised, raising the awkward question, does economic power purchase political power?

Listen mates, its time we were reminded about egalitarianism just in case we thought it was dying or was in fact dead.



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