Inequality out of control?

Is income inequality now beyond limits

A report appearing in this week’s issue of this newspaper’s Profit magazine indicates that there are increasing signs of income inequality. However, while they might indicate the entrenchment of inequality, they do not necessarily mean that inequality has breached the limits of tolerance that might lead to social upheaval. It should be acknowledged that the type of indicators which are visible, are the automatic result of a capitalist economy. One indicator is the arrival of luxury brands in dedicated stores, a development indicating that there is a market for such goods, composed of consumers who have the disposable income to allocate to those goods. Another is the proliferation of cafes, and with them the entry of coffee into the beverage market of the country. Additional signs are the increasing number of luxury vehicles that are becoming available to buyers, and the preponderance of investment rather than need in the housing market.

Are these and other appeals to high-end consumers a sign of an uptick in the economy? If there was indeed an increase in prosperity, this would be probable. However, there are no other strong signs, and the rise in poverty showing up in various surveys indicates that one of the first signs of economic growth, a labour shortage, does not seem to be taking place. On the other hand, not only is the taxation regime skewed in favour of income inequality, but the state has not set up the welfare structure that accompanies a culture of income levelization. In any case, it would not be possible to provide the features of a welfare state without a high level of direct taxation, which is not being done. Indeed, the opposite is being done, with the government reducing tax rates in the budget for the higher income brackets.

Just because income inequality is a necessary concomitant of laissez-faire capitalism does not mean the government can ignore it. True, attempts to achieve equality have generally failed, but the impulse remains even if only because of the potential for social unrest that it carries. This income inequality is said to be a factor in the spread of militancy as well as nationalism in Balochistan. Even capitalist economies have a cure, or at least a way of containing the problem by the prosperity of economic growth, as well as creation of a welfare state. The inequality is there, but the solutions are not.