Saturday, October 20, 2012

Our Struggle to define Inequality – Doug Saunders' Take

Doug Saunders
In today's Globe & Mail Doug Saunders has an interesting article on the difficulty we are having in defining exactly what inequality means:

That’s why inequality has replaced poverty as the great political theme of the moment. Once upon a time, we might have believed the two were related – but it turns out, as leaders from Beijing to Berlin to Bogota are discovering, they’re very different problems...

Yet, as much as we use the word “inequality” to describe this problem, we really don’t understand it. Politicians on both ends of the spectrum abuse the term, and suggest unrealistic solutions...

When those on the left discuss inequality, they too often fall for a “lump-of-money fallacy” – the belief there’s a fixed pile of cash, too much of it in the hands of the rich, that needs to be spread around more evenly.


But wealth doesn’t work that way: What the non-rich lack is not a share of the pot but a productive economic situation in which to generate wealth. The problem isn’t the 1 per cent. It’s the 60 per cent whose world of productivity and security is increasingly denied to the lower 40 per cent.

When politicians on the right discuss it, they too often fall for the “zero-sum fallacy”: the belief that fixing inequality through government action will kill wealth creation and, by extension, make everyone poorer. It’s true that less poverty usually equals more inequality – the policies that get people out of poverty (by creating growth) usually benefit the rich even more. When the rich get richer, the poor usually get poorer. But the converse isn’t true: 

Countries with strong redistributive systems and free economies are usually both wealthy and equal.

Saunders has nailed our imprecision when using the term "inequality". And that contributes to the difficulty in trying to deal with it.

3 comments :

  1. Canada is a multi-cultural and multi-ethnic nation that was built upon the backs of hard working immigrants. Senator Don Oliver has made many attempts to eliminate racism and inequality in Canada but has run into the barriers of racism in doing so.

    What Canada needs to ensure equality is further affirmative action and sticker employment equality laws. These equity laws, as suggested my Senator Oliver, should actually carry clout where an employer will actually be fined or jailed for refusing to hire a person of colour. The same should go for affirmative action where it should be actually legislated that the coloured minority gets preference at employment or whatever.

    The current Employment Equity Act and Section 15 of the Charter is a great start but it clearly needs much improvement as the ethnic face of Canada is changing.

    The only way to right the wrongs and end racism is via government intervention and government monitoring.

    ReplyDelete
    Replies
    1. Anonymous, maybe there was a time when employers could put a sign up saying "No [group of your choice]" need apply, for some intervention, in today's world all this talk of coercion, jail terms for non compliance, affirmative action for all, sends a shiver up my libertarian spine.

      " an employer will actually be fined or jailed for refusing to hire a person of colour"

      And who is to decide for the employer whether this 'person of colour' is competent to do the job?

      Delete
  2. "When politicians on the right discuss it, they too often fall for the “zero-sum fallacy”: the belief that fixing inequality through government action will kill wealth creation and, by extension, make everyone poorer"

    It depends on the extent of the 'wealth re-distribution', when you get to the obama Marxist level just look at the results.

    Isn't the 'zero sum fallacy' the same as the 'lump of money fallacy'?

    ReplyDelete

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