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Inequality and what can be done about it

Published 25 Apr 2016
Adam Csenger

Inequality has been a major topic of discussion for a while, and it’s easy to see why when we look at statistics which show that income distribution in most countries has become much more unequal over the last 30-40 years. There’s plenty of data available that provides a good overview of the current trends, both global and within individual countries.

Looking at the issue globally, inequality between the richest and the poorest countries is far greater than inequality within any single country. Perhaps less obvious is the fact that global inequality (that is, inequality between the richest and the poorest countries) has been on the decline since the 1990s. This is due to the development of the Global South, particularly China and India, and since this trend is likely to continue, inequality between rich and poor countries will keep decreasing. By contrast, however, inequality within individual countries has increased. This is especially the case with big economies like the US, China and India, but also, to a lesser extent, in most European countries (including Scandinavia).

The US has become an example of extreme inequality among developed nations. The richest 1% in America earned less than 10% of all national income from the 1930s to the 1970s, but this number had risen to 24% by 2007. Household wealth distribution reveals an even greater inequality: in 1986, the share of household wealth owned by the top 0.1% was 9%, but today it is 22%. The top 1% of American households controlled 40% of the US’s entire wealth in 2011. In a striking display of the skyrocketing wealth of the elite of the elite, CEO pay at the largest 350 American companies was 20 times as high as that of the average worker in 1965, 58 times as high in 1989, and 273 times as high in 2012.

While the US is an extreme case, almost all countries of the Organisation for Economic Co-operation and Development (OECD) for which data is available have seen income inequality rise from 1980 to 2009.

The economist Thomas Piketty, whose book Capital in the Twenty-First Century has contributed to increased awareness about inequality, sees inequality as an inherent feature of capitalism. In his view, the middle decades of the 20th century, characterised by relatively low inequality, were the exception rather than the rule in capitalism’s history, since they were the outcome of two world wars and the Great Depression. Since the influence of these major shocks has waned, it is now back to the usual state of affairs. The rich use their power and privilege to influence policies that enable the concentration of wealth, while the interests of the middle and lower classes are often ignored.

How does Australia fare when it comes to inequality? The Inequality Report 2015 by the Australian Council of Social Service, released in June 2015, found that income inequality in Australia is higher than the average for the OECD, although it’s not as extreme as in the US or the UK. However, the trend in Australia is moving in the wrong direction: both wealth inequality and income inequality are rising (with wealth inequality being higher than income inequality). Regarding average income, someone in the highest 20% of income groups has around 5 times as much income as someone in the lowest 20%. In terms of average wealth, a member of the highest 20% of wealth groups has about 70 times as much wealth as someone in the lowest 20%. Over the last 20 years, the share of both income and wealth for the highest group has increased, whereas the share of the middle and lowest groups has decreased. Between 1985 and 2010, real wages rose by 72% for those on higher incomes and just by 14% for those on lower incomes.

Egalitarianism is a core Australian value. It is therefore no surprise that the report shows that Australians are concerned about fairness in society and there is a perception that this fairness is declining. Moreover, inequality is harmful in many ways: it impedes participation in social and economic opportunities and erodes social cohesion. It results in reduced economic activity and skewed democracy, since those with money and power have a disproportionate ability to have their interests protected. The list could go on.

Inequality is not an irreversible process, so what can be done to combat it? Firstly, in democratic countries where politicians represent or are supposed to represent the interests of their electorates, people have to be made aware of what inequality is and what is at stake if it isn’t addressed. Only if a large enough number of people believes inequality is unacceptable will there be pressure on a large enough number of their elected representatives so that laws targeting inequality will be adopted.

Governments have a range of policy tools they can implement. With respect to Australia, a 2014 report by Australia21 and The Australia Institute titled Advance Australia Fair? What to do about growing inequality in Australia recommends the following, among other measures: taxation reform (eliminating, for example, tax exemptions for the rich and making sure every individual and organisation pays their fair share of tax); setting up job creation programs; implementing fairer funding reforms for schools; setting benefits and pensions no lower than the poverty line and indexing them to average wages; and establishing cooperatives and employee-owned organisations. More generally, it is also crucial to ensure equal access for all to public services such as education, health and family care.

Australia is not characterised by extreme levels of inequality, but we’re heading in the wrong direction. With a long history of egalitarianism, the country has the knowledge and experience required to stop and reverse growing inequality. The task now is to make it happen. Then, if Australia takes the necessary steps, it can show the rest of the world how to build a society where everyone can have a fair go.


Adam Csenger recently completed a postgraduate Master of International Relations at Macquarie University. Previously he completed an undergraduate degree in International Communications (Diplomacy) at the College of International Management and Business in Budapest, Hungary. He’s interested in the Middle East, Africa, the Cold War and world history.