THE AGENT OF RISING INEQUALITY

Most scholars would agree that globalization is the primary culprit behind the incredible increase in global economic inequality, but what is “globalization” and what has led to this phenomenon? In this paper globalization is used in an economic context. Essentially, economic globalization is the process by which national economies have been integrated into the wider international economy. International trade, capital flows, migration, foreign investment and the spread of technology have made national economies more interdependent and have created a new global economy.

The rise of globalization is due to new technologies and growing populations. As Robert Reich explains, “…the critical ingredient igniting globalization was a raft of new transportation and communications technologies…that drastically reduced the cost of moving things from one point on the world’s surface to another.” The development of the world-wide web has allowed investors to trade stocks and transfer capital around the world at the click of a button. Cargo ships, cargo planes, overseas cables, steel containers, satellites and computers have all helped to lower transaction costs substantially, enabling companies to mount cost effective endeavors worldwide.

While globalization has been made possible because of new technology, it has been perpetuated by marketization. Capitalism defeated communism and even countries such as China and Russia, who were once icons of communism, are embracing the market. As the world becomes more connected, or interdependent, because of trade and capital markets, firms and countries have struggled to become more competitive.

Fueling globalization, and perpetuating inequality, is a rising level of competition among firms, as consumers around the world are demanding lower prices and investors are seeking higher returns. As Reich suggests, “The real explanation involves the way technologies have empowered consumers and investors to get better and better deals—and how these deals, in turn, have sucked relative equality and stability, as well as other social values, out of the system.” The development of new information and transportation technologies has increased competition among market actors to attract investors and reach more consumers. Perhaps the most profound result of this has been that companies are under extreme pressure to cut costs in order to deliver better deals and show higher profits. For example, as payrolls are about 70% of the average business’s costs, CEO’s must cut wages and reduce benefits in order to please consumers and investors. Furthermore, firms claim that astronomical wages must be paid to CEOs in order to attract the most talented, and sometimes the most ruthless of people, who will be willing to do what is necessary to increase profitability. The result of this new global system is that small groups of people seeing higher and higher wages, while the majority of people’s wages are stagnant.

The new global economy, forged by innovations in information and transportation technologies, may benefit the consumers and investors of the world, but the workers and citizens are losing ground. As Reich put it, “Consumers and investors gain power, citizens lose it.”Globalization has created enormous tension between the market and social groups who attempt to fight it through their respective governments. As Dani Rodrik articulated, “The process that has come to be called “globalization” is exposing a deep fault line between groups who have the skills and mobility to flourish in global markets and those who either don’t have the advantages or perceive the expansion of unregulated markets as inimical to social stability and deeply held norms.” Competition for consumers, investors and even for talent, is leading to vast economic inequalities.

5. HOW COULD ECONOMIC INEQUALITY BE REDUCED?

The trend of economic inequality will not end if nothing is done to stop it. If anything, inequality will likely rise in the coming future without comprehensive intervention. As Rodrik suggests, “Advances in transportation and communications technologies render national borders more porous to foreign competition than they have ever been, and nothing short of drastic government restrictions can alter that.” The problem is that the international market doesn’t have a supreme political authority to regulate it. Therefore, countries must regulate domestically in order to affect economic inequality globally.

In one proposal by U.S. Senator Jeff Bingaman, domestic governments would put strict rules on corporations whom operate in their countries. The plan is to offer generous government subsidies and tax cuts for corporations who enter what is called the “A-Corp” program. To qualify as an A-Corp, companies would have to contribute at least 3 percent of their payroll to pensions, 2 percent to training and education, and would have to set caps on salaries of the highest-paid employees.The cap on total compensation means that the highest-paid employee (probably CEO) could not make more than 50 times that of the lowest paid full-time worker. It seems reasonable for the highest paid employee to earn 50 times more, rather than the 350 times more that is currently typical. Senator Bingaman also proposes a small tax on short-term trading, which would generate enormous revenue, that could be used for reducing inequality.The former Secretary of Labor, Robert Reich, has also proposed a small transfer tax on the sales of shares of stock. He suggests that this might slow the movement of capital slightly, and decrease some of the negative effects of competition.

The suggestions above could be effective in reducing economic inequalities in the world if national governments committed to implementing regulations. Capping executive pay, discouraging short-term stock trading, and creating rules to protect the welfare of of the lower classes would be practical methods to approaching the problem of economic inequality. The problem is that the governments and media outlets of the world are primarily controlled by the wealthy and prevent much of these important changes from happening. Citizens must rise up and force their respective governments to protect them from the new global economy.

6. WHAT MORAL OBLIGATION DO STATES HAVE?

Obviously economic inequality is not an evil or morally unacceptable characteristic of a society. In fact, inequality is most certainly necessary to maintain a functional, healthy and motivated society. However, the extent that economic inequality exists in domestic and global society is what concerns us. As John Rawls said in The Law of Peoples, “The law of peoples….holds that inequalities are not always unjust and, that when they are, it is because of their unjust effects on the basic structure of the Society of Peoples, and on relations among peoples and among their members.” This is similar to the view held by this paper; it is the highly unjust effects of economic inequality that makes it morally wrong, but in my view the extreme inequality of relative gains in the world is also unjust.

Rawls provides three reasons for reducing inequalities within domestic society. The first reason for reducing inequalities is to relieve the suffering and hardships of those in poverty. Rawls further suggests that once the poor have what they need to be fully functional and effective in society, then there is no longer a need to narrow the gap between rich and poor. Second, Rawls suggests that economic inequalities lead to some citizens being, “…stigmatized and treated as inferiors…”, which he says is unjust. Finally, in accord with earlier findings of this paper, Rawls also suggests that a gap between rich and poor has profound implications on fairness in the political processes. Rawls believes that every citizen should have equal opportunity of attaining social or political positions. However, Rawls does suggests that public financing of political parties and campaigns could offset the gap in power between rich and poor people.

One rather radical proposition of Rawlsian theory is to imagine oneself behind a “veil of ignorance.” Basically, if we were to create new rules for a society and we knew that goods would be unequally distributed, how would we want them allocated? Rawls claims that most people would want goods to be equal, but would allow inequalities only if they were attached to positions open to everyone and advantaged all. This is Rawls’s difference principle, which states: inequalities in wealth, income, and social power are permissible only if they worked to everyones advantage and maximally benefit the least advantaged class in society. The current level of global inequality is in stark violation to this principle as it benefits those who are most advantaged. Despite the nature of global inequality, Rawls only prescribed the difference principal, and reduction of economic inequalities, to domestic societies.

However, Charles Beitz, a Cosmopolitan, has argued that both international interdependence, and the principle of respect for individuals, mandates that the difference principle be applied universally. As Beitz said, “Global economic and political inequalities are so great that one would think those who hold to liberal egalitarian principles in the domestic politics of the rich countries would be more concerned about them, and on different grounds, than many evidently are.” Beitz’s assertion seems reasonable. Clearly interdependence and globalization have changed the world so dramatically, that new rules are needed to prevent the change from increasing world inequalities. The reasons provided by Rawls for reducing inequalities in the domestic sphere are equally applicable to international relations.

Even if global inequalities were permissible, in a world of interdependence States have a moral obligation to address not only global disparities, but also to address disparities that are created domestically in other States. This is because economic self-determination does not exist and cannot exist in the new globalized economy. The economic situation of every country in todays world, is dependent on that of another. As Beitz said, “International interdependence involves a complex and substantial pattern of social interactions, which produces benefits and burdens that would not exist if national economies were autarkic.” If countries were autarkic, or self-sufficient, it might be ethical to ignore their national economies, but due to the level of interdependence that exists, states are morally obligated to mitigate the negative effects that the global economy may have on particular countries or groups of people.

CONCLUSION

To sum it up, the extent of economic inequality that now exists in the world is so extreme that it is unjust to let it continue. Furthermore, given the evidence provided, it should be concluded that the effects of economic inequality on health, happiness, crime rates, and political participation are morally and ethically unacceptable. Since everybody is in some way responsible for the trend of growing inequality, the only way to slow it down is through smart and comprehensive legislation. As Robert Reich said, “The only way for the citizens in us to trump the consumers and investors in us is through laws and regulations that make our purchases and investments a social choice as well as a personal one.”

National governments and international institutions have an ethical and moral obligation to protect a relative sense of economic equality worldwide. This would not only increase the well-being of millions of people around the world, but would also create a more stable and peaceful world. Global justice demands action to be taken.

REFERENCES

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Date: 2015-12-11; view: 615