The days of loosely-defined ideologies of the right and the left of the political spectrum are now long gone. Fairness seems to be no longer a priority for political leaders throughout the world. What matters is winning elections and possibly guaranteeing a comfortable future when retirement beckons.
In the late 20th century, political leaders struggled to promote economic growth after the devastation of World War II. It was the era of industrialisation as factories sprung up to produce the commodities that the growing western world demanded.
We experienced this economic boom over five decades when first the military shipyards, then the beginning of industrialisation and the birth of modern tourism gave tens of thousands of Maltese the opportunity to aspire for a quality of life that previous generations never experienced.
The majority of families in western societies experienced the democratisation of living standards. Most owned or rented their homes thanks even to social housing projects that saw limited public finances supporting home ownership schemes and social housing projects.
Disparities in wealth have always existed but, in most people’s lives, this was not very visible as many families could afford daily luxuries like televisions, air conditioners and cars.
The emergence of the middle class was an achievement of late 20th century politics. But things are changing fast. In the last three decades, globalisation, automation and the abandoning of social democratic values by many political parties saw a reversal of the pattern of converging living standards. Tax reductions for the better educated middle classes became the holy grail of political thinking.
Asset bubbles and cheap credit eased life for most people. Those working in the top posts of the financial services industry grew fabulously rich while many others could borrow ever more against the value of their home. When the economy crashed in 2007 many were questioning the wisdom of politicians using taxpayers’ money to save banks that mismanaged themselves while thousands of ordinary people lost their houses and jobs.
As we fast approach the third decade of the 21st century, western societies are becoming more aware of the increasing inequality that often sees people at the bottom and in the middle of the income distribution falling behind not just in relative but also in absolute terms.
Better distribution of public wealth is only a partial solution to growing inequality
Despite the effort of some enlightened social activists like the Occupy Wall Street campaign leaders, traditional political parties are at a loss on what they need to do to reverse the rising inequality trend. France former president François Hollande was determined to raise income tax to 75 per cent to stem this rise in social inequality. We all know about the humiliating exit from the political scene of this European leader.
Other shrewder politicians rode the wave of widespread discontent and promoted populist policies. Greek Prime Minister Alexis Tsipras and US President Donald Trump embarked on a populist political manifesto that promised the return of inclusive growth. So far, both of these political leaders have failed to reverse the inequality trend in any significant way.
Widening income disparities have social and economic side effects. They can boost growth as the rich continue to become richer thanks to their increased savings and investments. But large income gaps also promote inefficiencies as talented poor people fail to make the grade in educational achievement and the have-nots nurture resentment by supporting growth-destroying populist policies.
Better distribution of public wealth is only a partial solution to growing inequality.
Robert Lucas, a Nobel prize-winning economist, argues that: “Of the tendencies that are harmful to sound economics, the most seductive and poisonous is to focus on questions of distribution.”
Better distribution is undoubtedly needed to support those who cannot help themselves including those with special needs, mental ailments or living in absolute social deprivation.
While there will always be poor people, those political leaders who still listen to their social conscience should never let this reality lead to inertia in promoting social programmes.
European societies tend to concentrate more on egalitarian values believing that in a fair society income gaps should be limited. The US and China emphasise the importance of equality in opportunity.
Achievement through education remains the most efficient path to social mobility and a fairer society. We need to ask ourselves whether we are doing enough to give the more disadvantaged in our community a better chance to succeed in the future.
Admittedly, educational achievement is a complex issue. But improving our educational system is a good starting point to address widening income inequality.
johncassarwhite@yahoo.com