I recently wrote about income inequality in Malta. Two documents published recently provide further eye-openers about income inequality globally and its possible effects. These effects could also impact our country.
In a letter to the United Nations and the World Bank, 200 leading economists asked these institutions to take action to reduce global inequality. They claimed that the recent increase in inequality has been the sharpest since World War II. This has been due to the fact that the coronavirus pandemic did not affect all countries in the same way and neither did it affect different population segments in the same way.
As with most global crises, the result is that the rich get richer and the poor get poorer. Admittedly in some poor countries, income has risen steadily, but the income of the super-rich has risen faster. Extreme poverty and extreme wealth have risen sharply.
This needs to be seen in the context of a commitment made eight years ago by the international community, as part of the UN sustainable development goals, that inequality would be reduced by 2030. It is claimed that because of the pandemic and the measures which governments had to take to mitigate its economic impact, progress in reducing poverty has slowed down considerably.
The letter by these leading economists stated that, “the richest 10 per cent of the global population currently takes 52 per cent of global income, whereas the poorest half of the population earns 8.5 per cent of it. Billions of people face the terrible hardship of high and rising food prices and hunger, while the number of billionaires has doubled in the last decade.”
The gap between the haves and the have-nots is increasing, and the have-nots are effectively being denied their right to pursue their own good
If we do not take action to start reducing income inequality earnestly, there is the risk that poverty becomes entrenched and the risk of climate breakdown increases.
A pertinent question to ask is where are we coming from, to understand better where we need to get to and how to get there. For the last four or five decades, the mantra has been that liberal economics is the answer to our economic ills. Let the market thrive and the market will look after itself.
Let the rich make more money and wealth will eventually trickle down to the rest of the economy.
Facts have shown this is just a myth. Trickle economics does not work as those who promote liberal economics claim. And the free market does not look after itself. Since we have allowed the free market to look after itself, there is today a market for drugs, human persons, human organs, armaments and for whatever harmful things one wishes to mention and one wishes to buy.
Liberal economics was meant to reduce inequality but it actually did the opposite. When we think of liberalism, we dream of a system which promotes human rights, civil liberties and freedom from dogmas. However, economic liberalism has brought about a system which is none of these but, instead, is abusive of the weak.
Think of those who would like to buy their own home but cannot because prices have been kept high by the speculators. Think of those who would like to have a second child but cannot afford it. Think of young children who have been forced to work instead of going to school to support their family. Think of young people who would like to further their studies but cannot because their family does not afford it. All these are the consequences of liberal policies, which have turned out to be illiberal. And they are causing further inequality.
Paraphrasing John Stuart Mill (an English philosopher and economist), we need to pursue our own good but we should not inhibit others from pursuing their own good.
The way things are going at the moment is that the gap between the haves and the have-nots is increasing, and the have-nots are effectively being denied their right to pursue their own good.