Inequality matters

20 August 2014

Inequality matters. Inequality is dangerous. And inequality is at a near all-time high. At its core, the Government’s recent budget not only engenders but actively exults in the creation and maintenance of inequality, a phenomenon rapidly expanding not just in Australia, but around the world. Generations of economists have promised that free markets and competition would bring an end to disparity in society. But the statistics are out. And the statistics don’t lie.

French economist Thomas Piketty’s 'Capital in the 21st Century' presents a comprehensive history of inequality and capitalism. Lamenting the never-ending arguments between economists regarding the effect of capitalism on inequality, where each side of the political spectrum merely asserted their views and pointed to the other side's lack of evidence as proof of their own views, Piketty presents a comprehensive, impartial and statistical view of income and wealth inequality over the last 150 years. His statistics demonstrate conclusively that the free, uninterrupted and unfettered operation of capitalism inevitably leads to widening inequality, as is occurring around the world and in Australia, even without the help of Hockey’s inequality budget.

Piketty’s history shows inequality climaxed in 1913, at the end of a period of uninterrupted capitalism, before rapidly diminishing as the First World War, Great Depression, Second World War, and finally the Cold War effectively disrupted and prevented the free operation of capitalism. Post WWII, economists heralded the return to peaceful capitalism and a drop in inequality. But Piketty's stats show the exact opposite. Since 1960, global income and wealth inequality has steadily and consistently increased, climaxing in the present day at near 1913 levels. Capitalism and inequality, Piketty shows, perpetuates inequality, which under the hegemonic operation of free market economics, has grown to unconscionable proportions.

However Piketty, as a mere statistician, stops short of attributing the series of global crises beginning in 1913, the highpoint of global inequality, to inequality. That bold link is made by Hannah Arendt, who in examining the origins of totalitarianism and the dark 20th century, cites explicitly the heightened inequality of income. Capitalism leads to inequality (that much is clear from the stats, that don't lie), which in turn inevitably leads to the problem of over-saving in the rich and superfluous capital. Yet superfluous capital cannot remain idle – due to the very rules of capital itself – and hence becomes a major destabilising force, as money pursues more money pursues more money. It was

MARGARET DOOLEY AWARD

Inequality matters

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