Cometh the hour, cometh the third murderer. So now inequality is in the spotlight and is being booed off the stage. It is blamed for the rise of populist politics, and more fundamentally for economic stagnation. The economic neo-liberal orthodoxy that so implausibly claimed that economic competition, unfettered by government regulation, would benefit all of the citizens has produced the gross inequality that hinders economic growth.
The bastard child is strangling its father. Denial of inequality of wealth and the defence of the economic framework that spawned it—once conventional wisdom—now seems as desperate as the denial of global warming. Addressing inequality is also becoming a political necessity. This is to be welcomed, as are political proposals to address it. But they need to be harnessed to a vision of society that the economy will serve. Otherwise, they will simply serve the competitive individual economic ideology that has bred inequality.
This failure is patent in the Labor Party’s presentation of the commendable proposal to reform the use of family trusts as a means of addressing inequality. Trusts have been used as an engine for the concentration of wealth.
The move to reform their use, however, has been portrayed by its proponents, as well as its opponents, as part of a competition between rich and poor, in which the protagonists see each other as inspired by greed and envy. This reinforces the view of economics as based on competition between individuals. This lies at the root of inequality
The goal of the exercise, too, is defined in purely economic terms: to repay the heavy levels of debt that Australia has incurred. That may be no bad thing, but it leaves out of the account the broader social goals that repaying debt will serve. They are subordinated to the management of the economy, instead of controlling it.
The same dynamic was evident in the conflict between Cricket Australia and the cricketers’ union. The dispute was about two interlocking matters: the distribution of money and the part of the cricketers in the government of the game.
In the treatment of the dispute, the larger issue of common responsibility for a common goal receded from view and it was viewed as the competitive economic struggle between greedy players and a self-interested Board. The final settlement was seen simply as the victory of the players. That cricket is primarily a cooperative, in which players and Board are partners with shared responsibility for shaping the game, was forgotten.
Lacking in the discussion, both of inequality and of the relationship between the cricket Board and players, was a larger vision of what gives importance to equality, justifies cutting benefits to pay off debts, and makes the game of cricket worth playing, watching and administering. This larger vision is usually described as the common good.
"Inequality is not measured by the difference between the very wealthy and ordinary workers, but by the difference between the wealthy and the vulnerable trying to live off social security."
It describes a world in which everyone, especially the most disadvantaged, have a seat and are fed, and in which everyone shares responsibility for ensuring that the table is more richly supplied for the benefit of present and future diners. Economic settings should also promote cooperation, so that competition is tempered by shared responsibility for securing the common good.
From this perspective, individual wealth has a social bond attached—it is accompanied by responsibility to contribute to the common good. The role of governments is to ensure that the economic settings of taxation and regulation implement this responsibility.
In modern societies they must provide the funding to enable all people to live decently, and to build resources for the benefit of future generations. This means ensuring that the physical infrastructure is built, that the environment is protected, that education and personal support will enable young people to develop humanly and contribute to society, and that people have access to reliable health care, especially through preventative medicine. These form the engine for growth in a humane and productive society.
In Australia, all these things are inadequately resourced and valued, so that vast private wealth coexists with public neglect. The social bond attached to wealth should be drawn upon, both by the rectifying of socially irresponsible settings such as the tax structure of family trusts and of negative gearing, and by wealth and inheritance taxes.
These are simply an expression of the responsibility of all people, and so of governments, for the common good; of the use of wealth so that everyone has a share at the table. Inequality is not measured by the difference between the very wealthy and ordinary workers, but by the difference between the wealthy and the vulnerable trying to live off social security.
The economic system must enable the lowest to live decently and with respect. It must provide the conditions under which people can flourish and contribute to society. It should ensure that our grandchildren inherit a living and healthy environment. The making and keeping of money should be shaped to those large goals.
That means shaping an economic and social order that privileges partnership over competition, inclusion over exclusion, community over individual gain, and people over efficiency and profit. It means seeing cricketers and other craftsmen and workers as responsible to the other people who make the game enjoyable and profitable, and sharing in the responsibility for the decisions that shape it.
The model that best embodies this ideal is the cooperative, in which people share ownership of the organisation where they make their living and share responsibility for their common wellbeing, and that of those to whom it is related. One of the most interesting forms of this was Mondragon.
Inequality is currently the flavour of the month, as it ought be. It is the codeword for the uncovering of the defects of liberal economic theory. Gross inequality is the predictable result.
Andrew Hamilton is consulting editor of Eureka Street.