A radical view on income inequality

Heated debates about the righteousness of the positions of liberal and conservative groups have been obvious in the arena of free markets, taxes and government spending. As we have seen in class, the liberal arguments tend to highlight the positive side of the lower right quadrant while conservatives highlight the negative side of it. It would be common sense to find the equilibrium where these arguments are in harmony. Nevertheless, in the real world this is very hard because several issues with conflict of interest among the people in power.
In this paper we argue for the radical side in regards to the ongoing issue of income inequality.
Our main purpose is to point out that neither liberals nor conservatives have addressed the issue appropriately. The argument we make is that income inequality cannot be treated as a disease that can be cured with government spending nor believing in free markets.
After analyzing the liberal and conservative agendas on the issue we decided to comment on something that at first seems to be out of context but that quickly becomes a solid argument for solving the inequality problem. First of all, with the aid of Ken Wilber’s integral model we briefly analyze some empirical evidence on labor evolution and the relative wage. Secondly we provide with some insights made by the greatest radical political analyst of our times, MIT professor Noam Chomsky. Finally we provide a conclusion and the possible results of our radical agenda.
Empirical evidence supports the idea that as there is more technological progress; there will also be higher wage inequality between people with high school education and higher and those without. One can see this theory in light of the four quadrants developed by Ken Wilber. In addition it is also helpful to look at the relationship between wages of those with high school education and those without education (WH/WL) for the time period from 1960 until 2000.
First, Ken Wilber describes the four stages of mankind going from a foraging economy to informational global economy. Moving from one stage to another, all the quadrants must operate efficiently and be in balance for the economy to operate well. Looking the last centuries, the move from an agrarian early state/empire to the industrial nation states can help us to understand this better. As the industrial revolution evolved in the late 18th century, there was also a move from in the in the lower right quadrant from agrarian to an industrial nation state. However, this imbalance will lead to what Ken Wilber refers to as flatland. This is because it was perceived that these new inventions to produce clothing and other goods cheaply were good for the country. Now, this was a state of flatland as the upper left quadrant was in great imbalance; human being’s hopes and desires were not balanced. One can also include the outer needs of the individual which states that one has to have food and clothing as well as the inner needs of the society which needs shared beliefs and goals. London, England is a great example as it was one of the cities where the industrial revolution first emerged and by 1951 half the population of England lived in London. This is in great contrast to the agrarian economy of England, when most of the people made a living by working on farms.
This is also close related to Maslow’s hierarchy of an individual needs which at the bottom of its pyramid has physiological; the next stage is safety. As referred to previously in this paper, the transition to industrial economy brought a lot of hardship for people identified as low skill workers as there was an imbalance in the adoption of new innovations. As the society gradually developed, diffusion allowed industrialization the economy was allowed to operate more efficiently.
One can now compare the move from an agrarian to industrial society with the move from an industrial to an informational society. The economist Kevin Bowman has done some research on the relative wage of high skilled workers to that of low skilled workers. Bowman’s focuses on the context of economical development from 1960 to 2000, and points out the effects of technological slowdowns on fluctuations of the relative wage. This evidence supports the theory that a move from one stage to another will cause an inequality to increase. The research shows that as there is more technological progress such as in the 1990’s; there will be a greater wage inequality. One can also refer to this as skill biased technological change where the high skilled with high school or more education will benefit in times of more invention and innovation. On the other hand, as average labor productivity increases and as there is greater adoption, the low skilled will benefit because there is a little invention and innovation, or little adoption. Thus, as machines takes over more and more jobs; people will have to be able to operate machines and adjust to new work tasks. In order to this; people need education, this is main reason for the large wage inequality. There are more demand for educated workers which then will drive the wages and creating inequality. In terms of the four quadrants one will have to move in all quadrants; in the lower left to become more centauric, in the upper left to apply vision logic and in the upper right to reach the stage of SF3.
As more education and skills is required to obtain a job, there are more layers of knowledge and skills a person has to cut through in order to learn what is required for a job. Another interesting fact is that college tuition tends to follow the wages of the high skilled workers in an economy. As there is more invention and the high skilled workers wages go up relatively more than those of low skilled workers, so will also the cost of education go up. Thus, in this paper we argue for measures which will make the move from one stage to another more balances as it allows the society to operate more efficiently by taking into account all the needs of the society as described in the four quadrants.
Now, we would like to turn our attention to the underlying issue of this paper. According to Professor Noam Chomsky it is very revealing to analyze the nature of the democratic deficit in the US. Polls have revealed an astonishing 95% of the population whose opinion is that the government does not take into account the general public opinion when legislating new policies. Chomsky goes further by providing the example of the disastrous national healthcare system which has been a widely known concern of the general public for several years. The response to this issue by both republicans and democrats has been poor. Neither of them has addressed the public demands, which clearly illustrates that power first serves the interests of people with vast amounts of wealth. In any case the main point we are trying to raise is that the vast majority of the time both liberal and conservative executive decisions are in favor of few people which does not represent the general public in the US. Thus in order to solve any problems, the imbalance in the realms of political decision making cost benefit analysis must be radically changed.
Another great point that Noam Chomsky is famous to stand for is his analysis on the abuse of double standards. Chomsky has a long career in depicting the innumerable cases where politicians have made use of double standards. The clearest example of the abuse of double standards by politicians is the typical conservative who argues for free markets. Just to come back in the future arguing that the government should subsidize certain industry practices in which the politician or its superiors hold stakes. Similar cases could be made for liberals.
Taking into account Chomsky’s arguments, we can move forward to analyze the issue of income inequality. The basic problem that we argue to be the principal driver of income inequality is the insatiable thirst for economic growth of the wealthy. This unsustainable growth requires the global economy to by pass several negative externalities, which in term make the economy more fragile and susceptible to bubble creations. Furthermore, this phenomenon creates a vicious cycle where the wealthy arbitrarily control the labor market by increasing or decreasing the demand for low skill workers. Let us take our current economic environment, because of the aggressive de regulation of financial market derivatives the entire financial system fell apart. The consequences of this collapse can be summarized as follows:
• People on the top of the income distribution took substantial losses
• People in the “middle class” saw their retirement accounts shrink
• People at the bottom of the income distribution may not have seen any loses comparable to the ones above mentioned
However, the loss of the people at the bottom of the income distribution will be a result of an iteration of the collapse –namely many of these people will be or already have lost their job. In retrospect, the wealthy profited from an exploited financial system and propitiated a collapse of which they took the biggest hit, and now they are passing on the consequences to the general public. Of course we know that the problem is more complicated than what we described above, but we think that the fact that the problem was originated by greed is way undermined.
Reflecting on Chomsky’s ideas, what we have learned in class, and personal experience we have arrived to an agenda that would ameliorate the issue of income inequality. As we have portrayed income inequality is not a surface problem that was solely originated by the discrepancy in the relative wage. It is also a result of an uncontrollable desire to get more, because more is better. Moving away from capitalistic practices has been seen as either communism or socialism thus creating a sort of taboo in people’s minds because those ideologies are almost believed to be evil. Political debates are often destroyed by ad hominem attacks as the words socialism and communism carries negative connotations such as sharing and spreading wealth. These attacks do not allow for a debate to be reasonable and the aim is to put the our argument in bad light.
For that reason we want to make clear that we do not stand up for any of those alternatives, because they have already proven to be ineffective. We believe our agenda to be radical because it transcends the ever ongoing debate between liberals and conservatives. It strikes the root of the problem and it provides an honest forecast of the possible evolution of the economy if applied.
As argued by other radicals we believe that it is essential to create an income ceiling. Secondly we stand for a minimum wage that does a better job at trailing the standards of living. Thirdly, we advocate the implementation of more effective welfare programs.
The imposition of an income ceiling will attack the root of the problem which is the bottom-line greed. A positive externality results from this because if people are not tempted to cheat the system to make more and more profits, we will see a more stable business cycle. We do understand that there are implications about coming up with newer stuff and development. Our response to that is that we already have so many advances to digest, that it would bring a greater payoff to have most of the population to catch up with the current stock of knowledge.
The second point in our agenda is to really push for a minimum wage that effectively trails the changes in standards of living. This will allow for people in the lower sections of the income distribution to build up real assets. It is also true that having a higher wage the transitioning away from welfare will be more plausible.
Finally, we turn our attention to the last point of the Ragli-Monterrubio agenda. Our argument is that welfare is necessary to help people move away from poverty. In doing so, it is crucial to avoid creating dependency. It is here were our radicalism differs from others because we believe that a true change can only be achieved if everyone works towards it. In this case people receiving welfare will be progressively being asked to do something in exchange for the monetary aid. Mostly, we would like to pay this people to learn. Maybe in a more detailed plan there could be a pool of needed professions or tasks that are in scarce demand which the government then could offer to this pool of people. The objective is that gradually this people will be able to get positioned in the labor market thus reaching economic freedom from the government.
We now that the points we offered in our agenda to combat income inequality make people uncomfortable and some other just laugh at them. The truth is that, we guarantee that if these were undergoing changes we will experience a tough time while the markets adapt to the new rules. However, after that we are positive that we experience much balanced business cycles.
In summary, the global economy is always undergoing invention, innovation and diffusion which depending of their individual magnitudes will impact the general productivity and more specifically the economic growth. Tools such as the four quadrants developed by Ken Wilber and more recent research by Kevin Bowman are essential not only to analyze these changes in history, but also to give us an idea of how the future will be. In addition, it is also fundamental to add to the integral view of Wilber the need to address the democratic deficit that is devastating the US. That along with truly radical reforms to the economic system could well send this country to be truly the first potency in the world. Not only militaristic, but also in its standards of living and economic equality. It is all about overcoming the chasm between our current state and a more sustainable one.