The Most Urgent Challenge is Inequality

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The Most Urgent Challenge is Inequality

Comments: Late Capitalism reveals itself to be like Late Feudalism

The Most Urgent Challenge is Inequality

By Luigino Bruni

Published in Avvenire on 16/09/2012

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Growth is a challenge, inequality even more so.  The increase of inequality in capitalist economies is becoming the first real obstacle to socio-economic development.  Because of the great inequality of opportunities, rights and freedoms, the drugged wealth we have created is not fertile, generating authentic development.  How could it be any different, after all?  Only work generates jobs.  If we were to take another look at the journey from the Industrial revolution to today, we would become aware of how preoccupying the index of inequality is in a market economy.  After a substantial decrease in western economies of the nineteenth century, caused by the passage from feudal social and economic structures, to a more dynamic market economy, in the last decades triumphant capitalism is causing inequalities to increase once again, bringing them to almost initial levels. 

In the USA, the first fortune 500 managers earn on average 10 million dollars yearly, and the 20 wealthiest hedge funds managers (the most speculative investments) gain totally, more than the sum of the incomes of those same 500 managers.  There’s more: today, the inequality present inside the United States is very similar to that in countries which are only now leaving feudal social structures.  Well then, our late capitalism is looking more like late feudalism, as if two centuries of economic development and rights earned, have served for nothing, or too little, in terms of inequality.  Too much market is producing the same uncivil fruits as the absence of markets.  This is an urgent and grave message, also because it contradicts the reformist utopia profoundly associated with the birth of modern political economy, when the development of markets was seen by the illuminati as the main instrument to overcome feudal ways and go towards a democratic society of free and equal people, not foreseen, yet agonized by them.      

In fact, while development of markets also meant development of work and of rights, the economy was overall faithful to its original vocation; but, late generation capitalism, founded upon financial incomes and debt, is bringing the world back towards a rigid polarization between classes which had been believed surpassed.  Why?  First of all the 4/5 of so called absolute poor (approx. two billion people who live with less than 2 dollars a day) are no longer found in what we call ‘Poor Countries’ but in countries with medium to high incomes.  This shows us a new epoch-making fact: the line of demarcation between rich and poor is always less tied to a geographical (North-South) but is shifting more to the interior of every country: globalization has in fact deeply changed poverty morphology.

For this reason, today, the relationship between the GDP of countries and the various indicators of wellbeing and malaise is becoming less significant and useful.  If we take the GDP of countries with medium-high per-capita income (e.g. Ocse Countries) and we crossed them with fundamental indexes for people’s lives such as life expectancy, children’s welfare, mental illness, obesity, crime, youth school grades, and social mobility, we discover that nothing significant comes to the fore, because data is very similar between itself.  Things change dramatically though if, instead of the GDP index we take inequality indicators (among which the famous ‘Gini Index’), because we’ll discover great differences in those fundamental indexes within these same countries.  

In other words, in terms of life expectancy, of health, of human capital, of capabilities, as Amartya Sen would say, there is a much bigger difference between an English office worker and an English woman of Caribbean origins with a casual job and lower education, who lives in London’s poorest quarters and is perhaps a single-mother, than between an English office worker and a Peruvian office worker; a difference which becomes even smaller when we compare an English top manager with one from South America.  Inequality is a grave public malady, of which the entire population of a country suffers, including even the upper class - as much recent data shows- because inequality increases social envy, status mentality, insecurity and the unhappiness of all.

Therefore, coming back to the today of Italy and Europe, those who truly love the common good and work towards true economic recovery, must worry a little less about the GDP and do more about reducing inequality.  If we continue to tax work, gasoline, first houses, raising income taxation (VAT…), and not taxing big stocks and estates, financial incomes, as well as all other kinds (including those of status positions within many protected feudal categories), we will keep looking at the wrong indicators, to confuse effects with causes, to measure things which distract us from the great challenges of the crucial moment we are living in.

Hope resides mainly in young people who have less tolerance for inequalities:  from their indignant non-resignation can begin a new social and economic season, where l’égualité, not only formal but of substance, can once again be one of the greatest values of our civilization.

All of Luigino Bruni's comments on Avvenire can be found under Avvenire Editorial.

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