Peaceful ways to reduce inequality

In my last column, I wrote about The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, a book written by Walter Scheidel.

According to him, economic inequality has been the defining feature of civilization since the dawn of agriculture. When humans began to farm and herd livestock, they were able to pass on their assets to future generation, thus perpetuating wealth inequality.

Throughout history, only violent events have significantly lessened inequality. Scheidel described these events as the “Four Horsemen of Leveling”– mass mobilization warfare, transformative revolution, state collapse and catastrophic plagues.

It seems that from the dawn of civilization, the ruling class has also been dominated by the wealthy elite. The state policies and programs have therefore tended to perpetuate income inequality.

Another force that has generally promoted inequality is globalization. According to Scheidel, “Its waxing and waning has long been associated with swings in inequality… A survey of trends in some 80 countries between 1970 and 2005 finds that freedom of international trade and concurrent deregulation significantly raised inequality.”

Globalization leads to economic growth but it tends to benefit the elites disproportionately in both developed and developing countries.

One reason is that it effectively doubles the number of workers in the global economy even as capital failed to increase at the same rate. This leads to the proportion of skilled labor in the global workforce declining, thus widening inequality. Another effect of globalization is the downward pressure on wages as workforce from poorer economies are able to compete globally. For example, this has been the convenient excuse for any request for increase in minimum wage in the Philippines, as businessmen threaten to move their business to another country.

Are there ways of reducing inequality through peaceful means? It is obvious that Scheidel does not believe this is feasible because he devoted only 13 pages in his 504-page book on recipes for reducing inequality.

Aside from Scheidel, there have been many economists and businessmen trying to find ways and means to reduce inequality. The main problem I see is that the most feasible alternatives are not acceptable to the wealthy elite.

For example, several decades ago, I was in a small discussion group with prominent businessmen discussing this topic. One of the businessmen proposed a novel solution. He proposed that there should be a limit to the ratio between the highest salary and the lowest salary in a business firm.

The discussion bogged down when nobody, even the proponent, would accept even a 50-to-one ratio. An example is that if the lowest paid salary is P20,000/month, the highest paid would be limited to P1 million/month.

The most logical way of lessening income inequality is through taxation. The present tax structure makes taxes on capital such as dividends more favorable than taxes on salaries. This is obviously biased towards the rich. Payroll taxes are strictly enforced whereas taxes on the income of the wealthy, which takes the form of benefits, are not automatically deducted.

Another common way of the very wealthy avoiding taxes is by placing their wealth in overseas tax havens. Ideally, there should be a global wealth register to help prevent offshore tax evasion.  Corporations should also be taxed on their global profits and hidden subsidies. Some economists have even proposed an annual global tax on wealth which will be withheld at the source, like the average payroll tax.

One major source of inequality is the unequal access to quality education. I was once asked in a TV interview what was the best way of improving the quality of public school education. I proposed that all elected and appointed national and local government officials should be required to send their children to public schools. In addition, I said that any person that is in the upper income bracket should be required to send their children to public schools.

Equal access to quality education should be one of the main vehicles for achieving income inequality.  During that interview, I remember that no one in the panel agreed with me.

Another method for equalizing wealth is to have universal health care without any recourse to private health care. In this case, everyone would have the same quality health care.

Another proposal would be banning any one from having more than one residence until such time when the housing crisis is resolved.

Another reform should be the imposition of a living wage as the minimum wage; creating a jobs program that could assure everyone that is willing and fit to work would be guaranteed a job.

For those who think these proposals to reduce inequality are too idealistic, they should present alternative proposals that could lead to drastic reduction in income inequality without resorting to violence.

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