A Comment on Inequality Revisited – Richard Giles
June Carbone (ERA Review, Mar-Apr 2014) points to some notable effects of social inequality: the large power that the ‘rich and powerful’ have in setting the ideology and the agenda of governments; the shifting of taxation onto regressive taxation; the reduction in ‘welfare’ (under the mantra of ‘the end of the era of entitlements’); and the fragmentation of society into classes.
Moreover, she points to a statistic that is crucial to understanding this increasing social inequality, that those running away with the wealth of society are the top one-tenth of one percent of wealth- holders. Such a staggering statistic must make one doubt, first, the socialist view that the origin of modern inequality lies in wages withheld from workers (‘surplus value’) and, second, the neo-classical economic view that everything will work better once it is privatised.
Unfortunately, the same statistic must make one doubt her view that the trouble begins with the behaviour of greedy company executives in laying off workers and refusing to invest in worker training, and the increasing control of wealthy lobbyists over government programs. Clearly, these are but the effects of the exercise of enormous wealth in the pursuit of its interests. There are reasons here to explain the exacerbation of inequality but nothing like any basic reason for its existence.
Perhaps the basic reason could be this. There are two bases of wealth, labour (in which we include capital as ‘stored up labour’) and location. Thus, there are two streams of income, one to the owners of labour and one to the owners of locations (whether those
locations be valuable rural or city properties, mines and quarries, radio frequencies, or ocean sea-beds). The unfortunate fact is that the owners of labour pay most of the taxes. And even more unfortunately, the stream of income from locations is allowed to fall into private pockets.
If we call the stream of revenue from location economic rent, it is the build-up of this rent with the development of society that is placing immense wealth in the hands of those who own or control the most valuable land. From this basis, as Ms Carbone shows, every possible means at hand is used to consolidate and enlarge this wealth.
Richard Giles is an ERA member living in Victoria
Editorial comment: We support these comments of the author, however ERA has always held the view that it is necessary to consider the implications of economic rent acquired by the private sector in its broadest context – not only economic rent which is associated with land locations.