Non-tax approaches to reduce inequality

farnaby

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I believe that high and rising inequality is an unethical and ultimately dangerous direction for a society (and humanity in general) to take. But I don’t get the constant emphasis on redistribution as the solution. Tax-based redistribution is a necessary stopgap but relying on it – and demanding more – just obscures the real causes of inequality in the first place e.g. wealth accumulation in fewer hands, rent-seeking and power imbalances extending from lobbying to nepotism/cronyism to downright corruption. In fact, redistribution exacerbates class differences – resentful high earners vs frustrated low earners.

We already have a highly progressive tax system that moves earners onto the highest tax rate with incomes of <€35k while leaving many paying no income tax. Rather than promoting equality, it enables employers to pay lower wages, while hollowing out the tax base. It is instructive that in far more equal countries than our own (the fabled Nordics) everybody gets a significant tax wedge.

So this thread is intended to explore non-tax related solutions to inequality.

1. IMHO bottom-up approaches will in the long run have a more benign impact on inequality than top-down redistribution. By bottom-up approaches I mean more widespread ownership of business and greater “productive power” in the hands of individuals. This may be summed up in GK Chesterton’s phrase:

The problem with capitalism is not that there are too many capitalists, but too few.
These ideas are related to distributism, discussed in detail on this forum a few years back (http://www.politics.ie/forum/economy/125343-communism-libertarianism-have-failed-distributism-our-hope-future.html). Opportunities include support/advantages given to business structures with widespread and often worker-led ownership such as co-operatives, mutuals etc.

The principle of subsidiarity should apply – if an outcome can be managed by smaller organisational units, it should be. Our economic policy favours multinationals over domestic SMEs. MNCs are good for many things but it should go without saying that tax-dodging, third world labour exploiting activities by multinationals are detrimental to reducing inequality.

2. Technological and educational advances mean greater opportunities to develop skills and adaptability to become more productive and independent. Self-employed people and contractors need greater regulatory support and protection (provided they’re paying their taxes and PRSI ;-) ).

3. Another approach to reducing inequality is to attack rent-seeking, which sucks income from the low- and middle- classes and gives it to owners of real estate, financial assets, insurance funds etc. while high legal fees and high legal compensation awards which ultimately come out of citizens’ pockets. I.e. reform of the property, banking and legal sectors which should have happened during the crisis years.

4. The “wealth management” industry also needs to be addressed. I respect someone who makes their first millions setting up a business. Not so much if the second batch of millions is made through investments managed by professional wealth managers. Not sure how to address this, possible tax and regulatory options.

5. There are two I’m not so sure about but list anyway:
- Unions – good for fighting genuine cases of low wages but detrimental in their current public-sector dominated form
- A return to one-income families. Controversial – but the two-income model becoming more widespread causes a stretch between those who have no option to be one-income families (no affordable childcare options, other obstacles) and marriages of ABC professionals who can afford childcare.
 


farnaby

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Bump for the evening shift.
 

Civic_critic2

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A lot of truth there. We are in an age of a new industrial revolution but the Irish are being subjected to high rents and mass emigration by the arseholes who control the country and they won't stop and suddenly become enlightened. So, "reform of the property, banking and legal sectors which should have happened during the crisis years" - is not going to happen, do we expect them to reform themselves? They will have to be defeated and not appealed to.
 

farnaby

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A lot of truth there. We are in an age of a new industrial revolution but the Irish are being subjected to high rents and mass emigration by the arseholes who control the country and they won't stop and suddenly become enlightened. So, "reform of the property, banking and legal sectors which should have happened during the crisis years" - is not going to happen, do we expect them to reform themselves? They will have to be defeated and not appealed to.
Yeah, started that OP positively but was quite depressed by the end of it, given the amount that depends on government changing strategy and policy, some of it at odds with the Washington consensus :(.

But there are many aspects of 1. and 2. that can succeed independent of or despite government inattention.
 

Sister Mercedes

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3. Another approach to reducing inequality is to attack rent-seeking, which sucks income from the low- and middle- classes and gives it to owners of real estate, financial assets, insurance funds etc. while high legal fees and high legal compensation awards which ultimately come out of citizens’ pockets. I.e. reform of the property, banking and legal sectors which should have happened during the crisis years.
This. And much more like it. You can't throw a stone in this country without hitting a well-connected corrupt cartel that keeps prices high and quality poor.
 

silverharp

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- A return to one-income families. Controversial – but the two-income model becoming more widespread causes a stretch between those who have no option to be one-income families (no affordable childcare options, other obstacles) and marriages of ABC professionals who can afford childcare.
Firstly, why is inequality a bad thing? people are competitive and if you mathematically penalised everyone they wouldn't bother getting out of bed.

On this point about one income families versus 2 the barn door is closed on that one, its just a fact of the modern age. It doesn't make economic sense to commercialise or subsidise childrearing when the wife earns a similar wage to the people looking after their kids. however one little step would be to let childminding slip back into the informal economy and not look to tax it, let "mary" down the road look after 3 or 4 kids in the house
 

Civic_critic2

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Firstly, why is inequality a bad thing? people are competitive and if you mathematically penalised everyone they wouldn't bother getting out of bed.

On this point about one income families versus 2 the barn door is closed on that one, its just a fact of the modern age. It doesn't make economic sense to commercialise or subsidise childrearing when the wife earns a similar wage to the people looking after their kids. however one little step would be to let childminding slip back into the informal economy and not look to tax it, let "mary" down the road look after 3 or 4 kids in the house
Right, we know not to come to you for any ideas. Clueless.
 

farnaby

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Firstly, why is inequality a bad thing? people are competitive and if you mathematically penalised everyone they wouldn't bother getting out of bed.
Focus on the "high and rising" caveat. A bit of inequality is natural and even beneficial. Hard work, skills and ambition should be rewarded.

But the self-perpetuating and accelerating accumulation of wealth we see today is not meritocracy in action.
 

GDPR

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Level the playing field as much as you can through education and that means no more fee paying schools combined with a rise in standards of both teaching and facilities for all state schools.
 

farnaby

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Level the playing field as much as you can through education and that means no more fee paying schools combined with a rise in standards of both teaching and facilities for all state schools.
Good points - I contrast with the Blairite "educational choice" policies in the UK which made middle-class families paranoid about send kids to the "wrong" school and willing to use "underhand tactics" to get them into a better school; while working-class families get blamed for educational failures because they made the wrong choice of school (their local)! Blair's Educational Legacy. (I.e. New Labour exacerbated inequality, not exactly new news.)

On the fee-paying school issue, my anecdotal experience is that it is the peer network and old school tie link into the protected professions (legal, medical, banking, other finance) that matters more than the quality of education. So not sure if abolishing the fee-paying nature of the school is going to be effective vs challenging that culture, OR fostering equivalent networks elsewhere in society.
 

GDPR

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Good points - I contrast with the Blairite "educational choice" policies in the UK which made middle-class families paranoid about send kids to the "wrong" school and willing to use "underhand tactics" to get them into a better school; while working-class families get blamed for educational failures because they made the wrong choice of school (their local)! Blair's Educational Legacy. (I.e. New Labour exacerbated inequality, not exactly new news.)

On the fee-paying school issue, my anecdotal experience is that it is the peer network and old school tie link into the protected professions (legal, medical, banking, other finance) that matters more than the quality of education. So not sure if abolishing the fee-paying nature of the school is going to be effective vs challenging that culture, OR fostering equivalent networks elsewhere in society.
The vast majority send their kids to fee paying schools for the educational & recreational advantage and there are major advantages to be had there, the old school network is just a bonus and imo would quickly fade away once those schools were opened up.
 

silverharp

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Focus on the "high and rising" caveat. A bit of inequality is natural and even beneficial. Hard work, skills and ambition should be rewarded.

But the self-perpetuating and accelerating accumulation of wealth we see today is not meritocracy in action.
" a bit" ? so person A risks everything and sets up a successful business lets say earns 500k per year person B is a surgeon and it takes 25 years to hit the top of their profession earns 200K , person 3 is a bus driver takes 1 year to get to the top of their profession and earns 35K. what inequality do you want to fix? migration comes to mind, dont flood the economy with infinite numbers of bottom feeders so the driver's salary isnt depressed and dont over tax him so that its difficult for him to start a family. otherwise have a competitive economy so that the lifecycle of companies isnt artifically supported, and low taxes so too many people dont end up in useless gov jobs and keep welfare low so that said bus drivers wonders why he bothers getting up in the morning and thus has his work devalued
 

Mercurial

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Fits the bill, but theoretically rather light-weight for your tastes Merc. Or is that the point you're making ;-).
I need to read more about it, but it seemed to fit the topic. I know of a couple of very clever people who are fans, so I assume there are some good arguments in favour of it.
 

Cormocodran

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Ultimately with increasing automation the argument for giving people free money may well be getting iron-proof. This is especially the case with rising inequality and concentration of capital in fewer and fewer hands if left unchecked. It has nothing to do with merit or hard work, it's just a system based on our current legal, tax and to a degree social priorities. It's also reversible, but is global in scale which is what makes it so dishearteningly powerful.

At some stage we have to ask ourselves why we're working as long or even longer than our parents despite massive productivity gains. The greatest tragedy of inequality is that ultimately we all have a certain amount of time alive and many never experience actual living because they're just ground-out trying to keep their heads above water and meet payments for housing, food, education etc. A system that does this by design and treats it as 'getting up off your arse' has to be questioned critically.
 


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