Home | Business News | Browse by Publication | A | Arena Magazine

Driving inequality: Frank Stilwell asks should we accept the prevailing political-economic arrangements that generate inequality.

Article Excerpt
'A rising tide lifts all boats' is an expression commonly used by economists and politicians to justify prioritising economic growth and neglecting the distribution of income and wealth. It has had particular resonance in the last decade. As Australia has become wealthier, material living standards have generally increased. But the benefits of economic growth have been unevenly dispersed. To adapt the nautical metaphor, big waves have distorted the rising tide, causing some boats to ride high in the water while others are in danger of capsizing.

The latest figures from the Australian Bureau of Statistics (ABS) give some indication of the disparities. In the two years from 2003-4 to 2005-6, average incomes of the top 20 per cent of households rose by $139 per week, while low-income households (defined by the ABS as the second and third deciles) had an average increase of just $24 per week. The top 20 per cent of households now hold 61 per cent of the nation's total household wealth, while the poorest 20 per cent have only 1 per cent.

What causes such inequalities in the distribution of income and wealth? There is no single explanation, rather a range of causal clusters. Structural factors include the capital-labour relationship, the economic power of corporate capital, and the effects of globalisation. Political influences include the effects of neo-liberalism on public policy. The effects of industrial relations policy changes on labour market conditions are also significant. So too are the distributive effects of land and housing markets in the cities and the inheritance of wealth. Because these influences on economic inequality are interconnected we need a layered explanation and a correspondingly multidimensional strategic policy response.

Structural Economic Drivers

To begin at the beginning: the normal functioning of a capitalist economy drives economic inequality. Capital makes capital and poverty generates poverty. As liberal US economist Lester Thurow says, 'Capitalistic economies are essentially like Alice in Wonderland, where one must run very fast to stand still--just stopping inequality from growing requires constant effort'.

Indeed, what really needs to be explained is why capitalist societies like Australia are not even more unequal than they are. A partial answer is that, historically, trade unions and reformist governments have been ameliorative influences. Trade unions...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!