In my last column, I asked why we were blind to inequality. The more important question is what we can do about it. Fifty years ago,
Martin Luther King Jnr argued for the “the shift from a thing-oriented society to a person-oriented society”.
Inequality has risen because of four fundamental forces – geography, demography,
technology and governance. Geography matters because the best
jobs and wealth are created in advanced cities in the growing
economies. You become poorer if you live in a ghetto, isolated rural area or failed state. Demographics matter because, if many young people all come into the labour market at the same time, wages will be low and jobs scarce –
this sparked the Arab spring. Technology can help raise income and wealth, but it is a double-edged sword – wonderful for consumer surplus, creating new goods and services at cheaper prices, but
creating job deficits by reducing demand for low-skilled, mechanical-type jobs. Lastly, if inequality and injustice are to be avoided, the quality of governance makes the most difference. We have never lacked the technical tools for social engineering. The real issue is whether we have the political will.
Solving inequality is much harder than diagnosing inequality. That no single country has succeeded impressively is a measure of how hard this is to achieve. There are eight possible measures to reduce inequality:
●Providing basic services, such as
education,
health care and reskilling to improve talent and ability to grasp opportunities;
●Providing good jobs, with appropriate pay and adequate pensions, giving the lower and middle classes the income to generate both consumption and savings;
●A mix of progressive taxes, fiscal transfers and incentives to enable fiscal sustainability while providing social protection to the underprivileged;
