Tag Archives: inequality

Weekly salon 20/1

1. Trump’s trade deal will make us collateral damage

Kevin Rudd’s AFR article Trade deal will not stop US and China drifting apart gives us the lowdown. From the URL his heading was probably Trade war truce a symbol of the US unhinged. Seems Trump banged on for an hour about incoherent nonsense at the announcement while the head Chinese trade negotiator stood patiently by.

Rudd says intellectual property theft will be criminalised in China for the first time. Good in principle, but you will need to make your case in Chinese courts. Continue reading Weekly salon 20/1

Saturday salon 21/4

1. The inequality paradox

A New Scientist article by cognitive scientist Mark Sheskin of Yale University (pay-walled) says we should aspire to ‘fair inequality’ rather than ‘equality’ or ‘unfair inequality’, and most people would be happy with that.


He’s saying if you force people to choose between complete equality and high levels of inequality, most choose the latter. Given an open choice, however, people will choose moderate inequality. Continue reading Saturday salon 21/4

Saturday salon 26/8

1. Finished with sex, it’s time for reason

There are articles at the SMH, at the ABC, but the best was in the AFR (pay-walled).

The Australian Sex Party is being closed down to make way for the new Reason Party, in good time for the next federal election. Continue reading Saturday salon 26/8

Saturday salon 22/7

1. Turnbull’s Kim Jong-un moment

One of two big stories this week, from the SMH, Peter Dutton to head merged ASIO, AFP and Border Force super security department. However, Paula Matthewson at The New Daily captured the spirit of the thing by focussing on the optics in Hilarious and menacing at the same time: Turnbull’s Kim Jong-un moment. When Abbott made a national security announcement, this is what we got:

Continue reading Saturday salon 22/7

Power cripples your brain

The old saying that power corrupts has been verified by science. Not only that, it does your head in, as it were, cripples your brain and cuts you off from reality. Jerry Useem tells the story in Power Causes Brain Damage.

Dacher Keltner, a psychology professor at UC Berkeley, conducted years of lab and field experiments.

    Subjects under the influence of power, he found in studies spanning two decades, acted as if they had suffered a traumatic brain injury—becoming more impulsive, less risk-aware, and, crucially, less adept at seeing things from other people’s point of view.

Continue reading Power cripples your brain

Saturday salon 21/1

1. The rich have become gods

According to the latest Oxfam report, the top 1% now own more than the rest of us. In fact, just 62 people own as much wealth as the poorer half of the world’s population. The rich have become like gods. Marx said:

    Money is the supreme good, therefore its possessor is good.

Continue reading Saturday salon 21/1

Saturday salon 26/11

1. Australia trails only Switzerland in wealth table (pay-walled)

    AUSTRALIA’S lofty status as the world’s second richest nation remains intact, new figures reveal, despite household wealth stalling this year.

    In the seventh annual Global Wealth Report from Swiss bank Credit Suisse, the “lucky country” posted an average wealth of $US375,600 ($508,900) for every Australian, second only to banking hotbed Switzerland, with an average net worth of $US562,000.

Continue reading Saturday salon 26/11

The oligarchs are here and active in our midst!

Rob Oakeshott tells us he “poked power in the eye and got an almighty punch on the nose in return.” He laments the influence of the monied class in politics, which he sees as subverting democracy.

Swan is very clear about how a small but growing number of very rich people penetrate the political system in a reflective chapter of his book, The Good Fight. There is a negative review in Newscorp and an amazingly positive one in Fairfax. Who would have thought! I’m not sure they read the same book! I’ll not attempt a review here. Rather, I’m focussing mainly on his chapter Enemies worth having and his paper The 0.01 per cent: the rising influence of vested interests in Australia originally published in The Monthly, now included in an appendix.

Swan accepts the market economy and the value of entrepreneurship, and accepts that many business leaders are concerned about the national interest as well as the welfare of their corporations. Unfortunately a growing number, he says, suffer from ‘the blindness of affluence’ based on materialism and selfish individualism, and are aggressive and ruthless in pursuing their ends. He says:

Many of the winners from our prosperity just don’t see poverty and injustice any more, let alone the persuasive case that a fairer society produces an even more prosperous economy. The logic and the economics put forward by Joseph Stiglitz and Thomas Piketty, and in Australia by people such as Andrew Leigh, are ignored. And in their world, higher quality universal education and health services are a drain on the budget, not a platform for a fairer and more prosperous economy. (Emphasis added)

Such selfish corporates preach competitiveness and productivity for the economy as a whole, but in practice are only interested in the short-term benefits to their own corporations. What they are seeking is wealth transfer to them from consumers and taxpayers.

This small but growing group throw their weight around quite directly. The classic case was the public campaign over the mining super tax, where they sought to destroy a government rather than offer up one cent. They blatantly lied about consultations that had been held with them and mounted a $20 million media blitz against the Government.

In this case their bluff was called by Gillard when she attained power. She told the miners that the tax would be implemented in spite of them. They had a choice of entering discussions to have an input, but only on condition that they withdrew their campaign. This worked and the discussions were amicable.

I’ll leave it to others to judge whether the miners nevertheless got much of what they wanted. I’ll just note that it is a super profits tax and that the industry pays considerable normal royalties and taxation. Nevertheless the point in question is that the minerals are owned by the people, not the companies, and the people should get a fair reward.

This example encouraged the club industry, where the independents, Oakeshott and Windsor, were certainly spooked by their campaigning against the proposed pokies legislation. The extent to which the Labor Government was similarly spooked is not clear.

The tobacco industry is one case where the Labor Government stared the industry down.

A case where the industry won hands down was the superannuation industry. The fees accruing to the funds management industry are in the range of $20 to $40 billion each year. The industry can thank Labor for creating the industry and Labor had just approved a graduated increase from 9 to 12%, thus increasing the size of the industry by a third through that decision alone. Swan details how he planned to close the super tax loophole for the very wealthy, looking for funds to pay for the NDIS (National Disability Insurance Scheme).

John Brogden, head of the Financial Services Council, requested a meeting, which was arranged with Swan, Shorten and advisors. Brogden advised that his industry had a media campaign against the Government ready to go, and if they altered super in any way at all they would launch it.

Swan told Brogden he didn’t play that way and terminated the meeting, but in fact in the end he soaked the universities instead.

In looking at the Henry tax review a Business Tax Working Group was formed. When considering reducing the corporate tax rate, Swan wanted to pay for it by rescinding a raft of business tax concessions. The BTWG insisted that it be paid for by consumers with an increased GST. The BWTG subverted the consultations by backgrounding the media, producing negative press commentary. In the end nothing happened.

Business too lined up against carbon pricing and the greenhouse mafia appear alive and well in the current consideration of the Renewable Energy Target.

Swan sees the conservative political parties as tools of business with sections of the media playing their part.

Swan says you enter politics to make a difference and if you forget the little people you sacrifice part of your nation’s soul. Strange he doesn’t mention what happened to unmarried mothers under his watch, but he does regret that fiscal discipline is a brutal game and often brings into play what he would call Labor values.

In the end he gives himself a tick. A bit over a month after he resigned as Treasurer the ABS Household Income and Income Distribution data was published showing that inequality had fallen again between 2009-10 and 2011-12.

According to Swan, Obama described income inequality as the defining issue of our time. I wonder whether he too would get a koala stamp!

Stiglitz on inequality

Joe Stiglitz certainly knows how to make a point, as he did to Fairfax Media in calling our budget changes to health and education “absurd” and a “crime”. He did this on the basis of the relative performance of our system as against the USA. In health, for example, America spends twice what we do as a percentage of GDP for three years shorter life expectancy.

In his Fairfax article he claims:

Two big lessons of economic research over the past 10 years are that inequality is not the result of inexorable laws of economics but rather of policy; and that countries that adopt policies that lead to high inequality pay a high price – inequality not only leads to a divided society and undermines democracy, but it weakens economic performance.

In this he explicitly diverges from Piketty, as he said in conversation with The Conversation:

I think he [Piketty] is absolutely right to emphasise the increase in inequality that has occurred. I think he is absolutely right in his key idea that the period from World War II to 1980 was unusual in the history of capitalism, capitalism has typically been associated with high levels of inequality.

What I differ with is I don’t think it is the inexorable result of economic laws, of economic forces. It is a result of policies and politics, it is the result of rent-seeking behaviour, which the laws and regulations help create or don’t do enough to counter. There is almost a tone in his book that this is just the way of capitalism, and my view is that the kind of inequality that we’ve seen is really a result of the fact that we don’t have a well-functioning market economy.

So to Stiglitz markets are a human artefact and need regulation, and the nature of laws and regulations governing markets matters. As do state provisions and interventions.

Joe Hockey defended his budget saying you can’t expect equality of outcomes, only opportunities. Stiglitz has a more nuanced and interactive view:

While there are many dimensions to growing inequality, perhaps the most invidious is inequality of opportunity. Western democracies pride themselves in providing a level playing field, in which all who would work hard can prosper. But it’s a myth, and nowhere more so than in the US, in spite of the rhetoric about the American dream. The life prospects of a young American are more dependent on the income and education of his parents than is the case in other advanced countries. And there is a vicious circle: inequality of outcomes leads to inequality of opportunity which leads to further inequalities of outcome. The prospect for America’s future is thus still more inequality of outcomes and opportunity.

Stiglitz says that only about 8% of those in the bottom half of the income scale get a college education. He says our Australia’s HECS system works and is the envy of the rest of the world.

But Australia is neither the best nor the worst in terms of equality. In his article in The Guardian he compares our Gini coefficient unfavourably with that of Norway, a resource-rich country that has done a particularly good job of managing its wealth for the benefit of all citizens. He links to the OECDiLibrary. I can make more sense of the CIA Factbook which places Norway on 25 and Australia on 30.3, close to the European Union average of 30.6. The USA looks third world at 45.

On the one hand we are the best in the Anglosphere, with Canada on 32.1, the UK on 32.3 and New Zealand on 36.2. On the other, we are worse than half of Europe.

A third area where we do better is in “basic welfare support and systems of social protection.” In America with

almost one out of four children living in poverty, and with deficient public support, the prospects for their future are not rosy – and this will inevitably translate into weaker overall economic performance for the country.

In Stiglitz’s ideal world one’s opportunities are not constrained by the circumstances of birth. Society should help individuals to become whatever they can be, which is in turn better for society and the economy. In Hockey’s world society gets you to a mythical starting line from which reward is dependent on individual effort. Social support is not universal. The social safety net has holes in it through which fall the unworthy.

I sense that for Stiglitz freedom and equality are integrated through a sense of justice, as for John Rawls. Full individuality is attained in a cooperative and mutually supportive social context. This contrasts with the individualistic competitiveness which seems a leading feature of Hockey’s world.

One day listening to Radio National I did hear about research which purported to show that societies with a Gini coefficient of 33 or more tended to become socially dysfunctional and corrosive. Unfortunately I did not get a name or a link. It seems to me, however, that the sense of outrage felt towards Hockey’s budget stems from the sense that it is taking us as a society into territory where we feel that the social contract between the people and the state has been breached.

Stiglitz on the budget changes to health and education

“A crime”, “absurd”. That’s what he said.

Asked by Fairfax Media to nominate the two biggest mistakes the government could make that would take it down the American path of widening inequality and economic stagnation, Professor Stiglitz chose the budget changes to university fees and Medicare. Each would make Australia more like the US.


“Countries that imitate the American model are kidding themselves,” he said. “It seems that some people here would like to emulate the American model. I don’t fully understand the logic.”

In the lead-up to the budget Education Minister Christopher Pyne said Australia had much to learn about universities from overseas, “not least … from our friends in the United States”.

Professor Stiglitz said Australia had “a system that is really a model for the rest of the world”, and deregulating fees would move the entire system in the wrong direction.

“Trying to pretend that universities are like private markets is absurd. The worst-functioning part of the US educational market at the tertiary level is the private for-profit system,” he said. ”It is a disaster. It excels in one area, exploiting poor children.

“If you’re rich your parents can pay the fees, but if you are poor you are going to worry about how much debt you’re undertaking.

“It is a way of closing off opportunity and that’s why the US doesn’t have educational opportunity.

“While we in the US are trying to re-regulate universities, you are talking about deregulating them. It really is a crime.”

Similarly with the health system. We have one of the best systems in the world for access and outcomes. Yet we are trying to take it in the direction of the USA which sits at the bottom of the pile.

He said the typical inflation-adjusted income of a US household was lower than it was 25 years ago. The typical inflation-adjusted income of a male full-time worker was its lowest in 40 years.

“You have to say that the American market model has failed. It’s a very strong statement for someone who believes in a market economy. But at the bottom it’s even worse. The minimum wage is about where it was almost a half century ago.”

Asked what Australia had done right that the US had not, he said: “unions”.

“You have been able to maintain stronger trade unions than the United States. The absence of any protection for workers, any bargaining power, has had adverse effects in the United States.

“You have a minimum wage of around $15 an hour. We have a minimum wage of $8 an hour. That pulls down our entire wage structure.”