Whether Growing Economic Inequality is a Political Problem

Tim Dunlop famously wrote, “inequality can be social, economic and democratic, but at its heart is about the exercise of power, who has it and who doesn’t”. As power and politics are inextricably linked to each other, in this light, growing economic inequality is clearly a political problem. In this essay, economic inequality refers to unequal access to wealth and income. The essay will argue that growing economic inequality is indeed a problem of political nature as its origin is rooted in the political sphere, and as in order to curb it, a political solution is required. The essay nevertheless includes the other perspective as well, acknowledging critics that argue that growing economic inequality, just like its name, is critically an economic rather than a political problem, given its significant economic consequences.

Growing economic inequality is a political problem as it is politically motivated, and stems from political causes. An alarming projection produced by the House of Commons library suggests that if trends seen since the 2008 financial crash were to continue, then the world’s richest 1% are on course to control as much as two-thirds of the world’s wealth by 2030. Such an alarming trajectory does not simply occur without external influence, and in this case, the influence comes from the high command, primarily the government and the wealthy. Growing economic inequality is now a worldwide phenomenon in developed countries as a result of the choices made by politicians who are more influenced by the rich and powerful than they are by the rank and file. Some politicians even admit to this. In his 2016 presidential campaign, Bernie Sanders brazenly claimed that “it is not just that the one-tenth of 1% owns more wealth than the bottom 90%. They use that wealth to perpetrate, perpetuate their power. And they do that politically.' Running political campaigns require a huge sum of money, and politicians depend on donations from individuals and wealthy corporations. Far from being altruistic, more often than not, these wealthy businesses and businessmen pour money into political campaigns in order to buy political access and influence over public policy and legislation. As a result, the policy preferences of the very wealthy consistently prevail over the preferences of middle-class and poor voters. Such policies include corporate tax cuts, driving income concentration at the highest level of the income spectrum. Tax cuts lead to higher reported capital income and a decrease in wage and salary income. These effects are concentrated among top earners, and a study finds no effects for those reporting less than $200,000 in income. Hence, actions within the political sphere such as political spending have propagated a systemic problem of class interests, where the rich gain advantages in accordance to their vested interests in the expense of the broader public, standing in the way of an economy that works for the middle class, resulting in growing economic inequality.

Furthermore, growing economic inequality is a political problem as it requires a political solution to solve. A report by the New Economic Foundation, produced in partnership with Friedrich-Ebert-Stiftung London, came up with a list of policies that the government in the United Kingdom should strongly consider putting into action, such as the creation of a department of labour that would be in charge of raising the minimum wage, and putting pressure on corporations to publish the difference between the highest and lowest salaries they pay out. Such action would effectively tackle polarised pay, shrinking the difference between the amount of money meant for employees and shareholder profits. Oxfam Research has also proposed a Global New Deal to solve the prevalent problem of growing economic inequality. Oxfam urges world leaders to consider “global partnership” measures that foster greater fairness of the international financial system, such as the creation of a fair and accountable international tax system. By doing so, leaders would aid in tackling the problem of economic inequality through the redistribution of economic power. Hence, as growing economic inequality is clearly a politically charged issue that requires strong political resolve, as well as real political actions to tackle it, it is very much so a political problem.

Nevertheless, detractors argue that while economic inequality may have spilled over to the political sphere, it is still at its core, an economic problem. They argue that growing economic inequality cannot be considered anything other than an economic problem due to its heavy economic consequences. Growing economic inequality was the main force behind the 2008 financial crisis. In the face of alarming economic inequality, deregulation of the financial sector in the United Kingdom and the United States of America was carried out to free finance in order to provide the fuel needed to drive the growth of the economy. With this, the assumption that an unbridled quest for wealth would trickle-down from the rich to the poor became largely accepted across the economic and political spheres. Financial markets and companies’ role in areas such as pensions and social insurances to homes and public infrastructure grew significantly. This resulted in the polarisation of wealth and incomes which fed asset bubbles, risky financial activity and necessitated vast levels of household debt – resulting in the 2008 financial crash. It is also worth to take note that the alarming level of economic inequality in the United States of America may have been the reason why the period of Great Recession that followed the crisis was so dragged out, leaving the economy defenceless and exposed to the threat of fresh downturns. Ultimately, with economies being financialised, growing economic inequality is inevitable. It leads to economic instability, preventing economies from growing. In this light, growing economic inequality is, in fact, an economic problem as it poses a huge obstacle in the centre stage of the economic sphere.

To end up with, Author Paul Van Der Mewre famously wrote, “money makes the world go round”. Perhaps, in this case, it is more apt to rephrase this quote as “money makes the world of politics go round”. Money gives wealthy businessmen and corporations the opportunity to buy themselves a seat at the centre of the political arena, thus gaining for themselves leverage to restructure the economy to suit their interests which more often than not, results in economic disadvantages for the broader public which thus perpetuates the problem of growing economic inequality. Under further assessment, the idea of growing economic inequality as a political problem is further cemented as it requires a solution of political nature to solve. Yet, it would be simplistic to dismiss the other side of the argument, as it needs to be understood that economic inequality is generally too large, too unfair, and unnecessary, with marginal differences during each year. Thus, with the ambiguity associated with the issue of economic inequality, the problem of growing economic inequality is more multi-dimensional than initially given credit for, as besides being a political problem, it also can be classified as an economic problem when considering its significant economic consequences.

Bibliography

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