Inequality in the Modern Era: An Unresolved Question

Abstract: In this essay, I will introduce studies about the comprehension and historical concepts about global inequality and how it works. I will start in a historical conception linking the points of how inequality was developed in society. Then, I will talk about globalization and how it works in politics and inequality, showing another perspective about it, and finally, I will talk about the conceptions of these studies and develop an economy and mathematical theory to how to decrease inequality in economy local arranges.

Keywords​: Economy, Mathematics, Inequality, Trust, Politics, Society

INEQUALITY, AN HISTORICAL CONCEPTION

It is observed that developed countries that went through times of chaos​ー​such as wars and great depressions​ー​had strong changes in economic and social thinking. These transformations have been important in reducing inequality in the past centuries, and primarily in the bourgeoisie’s change of opinion on social and economic reforms [1].

Studying this, it is observable that inequality does not come from economic interests alone. In the United States (US), we can still see at this moment in time the hostility of the population to welfare state policies. This is related to a historic racial resentment, where social groups understand that this measures would benefit others, such as Latin and Afro-descendants [2]. It was these divisions that didn’t allow the development of the welfare state in the US as well as in Europe, which underwent this impasse. Also in Brazil, we have the late abolition of slavery and regional differences observed until nowadays. When the Portuguese came to explore the country, they created a materialistic state with Marquês de Pombal [3], dominated by the small bourgeois class from the colony. This attitude continued until the metropolis, a culture that is still reflected in the present in the forms of corporatism and elitist interests in the country, fostering inequality.

GLOBALIZATION TIMES AND ECONOMY POLITICS

A lot of economists accuse globalization of increasing inequality [4]. The problem with this proposition of explanation is that globalization has not only happened in developed countries but also, in regions like Asia and Europe. If globalization can be explained in an only way, the behavior of inequality should be the same everywhere. But it has grown much more in some countries, especially Brazil and the US compared to Europe and Asia. Therefore, we have other explanations that are particular to each case.

According to Simon Kuznets, condensing, as the country’s economic development progresses, there will be gains in education and people will be able to seek more
qualifications, with a natural fall in income inequality [5]. These conclusions need to be strongly analyzed because developed countries don’t always tend to decrease income inequality.

The low inflation in Europe is a good example of this, reporting how globalized technology has increased the concentration of money in the hands of large companies, creating an immeasurable future economic problem with the replacement of manpower by machines and artificial intelligence [6]. Globalization doesn’t explain everything, several important factors influence this aspect, we cannot make objective conclusions on this issue.

HOW INEQUALITY CAN BE REDUCED

Jean Jacques Rousseau talked about two types of inequality [6]. Basically, the first one was about different talents and skills. The other one originated from political interests, favoring certain groups and corporations. The first type of inequality isn’t negative; the second one is.

That being said, the economical means to reduce negative inequality is, basically, through more economic freedom [7​]​. Of course, they are related to education, health, basic sanitation, and infrastructure. In short, guarantees of access to such items are also an economic challenge. Somehow, you can say that such aforementioned items are the responsibility of the state. However, you can question: “how does the state can get resources?” Basically, the state can get resources through taxes levied on households and businesses.

Following a mathematical logic, the greater the prosperity of family and business, greater the power of state fundraising, considering the state the provider of health, education and other services. On the other hand, the guarantee of family and business prosperity is through an environment of constant improvement of production techniques. This happens in a system of wide competition of free market.

Decentralized systems, like the market, are more efficient with regard to solving alocative problems, that is, to create efficient pareto measures. So, the general prosperity is guaranteed with a well developed market [8], while equality should be treated as a specific point, this is, as if it were a necessary point to work with in order to improve the living conditions of groups in extreme vulnerability.

Also, the free market also promotes the reduction of gender inequality because, with the entry of women in the labor market, the country becomes more productive and reaches a higher level of well-being, consequently, converge to your full potential economic and social development.

However, the apex point in these studies who we can’t ignore is about social trust. It’s can brings stability and greater stability generates more trust. Societies with greater relationships of reciprocity and trust developed more. An example, in the north-central of Italy, where trust relationships were historical traditions [9]. As a result, governments had a better performance, the economy, greater development. It is paramount that people trust institutions in order to achieve a healthy business environment.

Mathematically, this phenomenon is interpreted using John Nash’s game theory [10], when analyzing a case, people or institutions, this theory prefers to take competitive game strategies upon cooperative games. However, in the long-term, the cooperative strategies become beneficial to all agents, providing, in an economic interpretation, a development of local economic arrangements can be developed when in social cooperation, they can optimized market allocations and making them efficient pareto allocation.

It is also important to increase the earnings of the lower-income population that maintains the base of the social pyramid. To understand how they can have access to education and qualification. However, deep tax reforms are necessary to deal with income concentration then poverty eradication requires higher GDP growth. Nations that have tax systems with many indirect taxes end up taxing the middle and low-income groups more, and consequently, halts GDP growth and poverty reduction [11]. Nevertheless, we understand that the process to reduce inequality needs a more free society and, consequently, a free market. The freedom attached to included and justices social and economy politics can result in a better society for all the social classes.

REFERENCES

1. Gaikwad, N. (2018, February 9). Identity Politics and Economy Policy. The MIT Press
2. Meira Penna, J.O. 1988. O Dinossauro (1 ed.). Rio de janeiro: T. A. Queiroz Editor.
3. Alvaredo, F; Chancel, L; Piketty, T; Saez, E; Zucman, G. 2018. Tracking the rise of global economic inequality: new evidence from the World Inequality Report 2018. World Inequality Lab
4. Kuznets, S. (1955, March). ECONOMIC GROWTH AND INCOME INEQUALITY. The American Economic Review. Vol 1.
5. Kannan, P.; Bernoff, J. 2019, May 5. The Future of Customer Service Is AI-Human Collaboration. MITSloan Management Review
6. Rosseau, J. 1755. Discourse on the Origin of Inequality (1 ed). Oxford, United Kingdom: Oxford University Press
7. Horwitz, Steven, Inequality, Mobility, and Being Poor in America. January 2, 2014. Forthcoming in Social Philosophy and Policy Spring 2015.
8. Andreu Mas-Colell, Michael D. Whinston, Jerry R. Green (June 15, 1995). Microeconomic theory (1 ed.). USA: Oxford University Press.
9. Putnam, R. 19 Feb 2001. Making Democracy Work : Civic Traditions in Modern Italy (Revised ed.). New Jersey, United States: Princeton University Press
10. Nash, J. January 1, 1997. Essays on Game Theory (1 ed.). USA: Edward Elgar Publications.
11. PRIEWE, J.; HERR, H. 2005. The macroeconomics of development and poverty reduction. Baden-Baden: Nomos.

Este artigo foi elaborado por Filipe Lipster, um brilhante coordenador do SFLB. Contate Filipe pelo e-mail filipekatesta@studentsforliberty.org.

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