Home » Business » Income Inequality Breeds Discontent [analysis]

A YOUTUBE video titled Wealth Inequality in America has received widespread attention, garnering more than 15 million views on the video sharing website.

A French economist, Thomas Piketty, has published a book called Capital in the Twenty-First Century, which covers the same issue of uneven income distribution.

Almost one and half centuries after Karl Marx published Das Kapital, interest has again been revived in the issue of income inequality and its socio-political implications.

Without delving much into what exactly the video and books discussed, the central theme is that the rich get most of the income in the economy and they do so unfairly at the expense of the labouring poor.

Even in economies like the USA which gly aocates for a capitalist meritocracy, concerns have been raised about how money buys influence, economic access, privilege and political patronage.

Simmering discontent in the USA led to widely attended ‘Occupy’ protests in which people pitched up near the financial district around Wall Street to protest social and economic inequality, greed, corruption and the perceived undue influence of corporations on government.

In South Africa, service delivery protests are commonplace in poor settlements with unfair income distribution being a running theme. The problem also exists in Zimbabwe and although the food riots of 1999 are perhaps the most memorable display of public anger, discontent still runs deep to this day.

Zimbabwe’s income inequality is a bit of a paradox given that government openly follows what is meant to be a quasi-socialist ethos. Income gaps are difficult to measure in Zimbabwe because most people are no longer in formal employment.

As such their incomes are not published anywhere and because most do not pay taxes one cannot work backwards to determine incomes. The standard of living is however very telling.

The difference in lifestyles between the rich and poor is so glaring that one can fairly call it a tale of two parallel countries in one.

In a country where quality and availability of public utilities like water, power and refuse collection have fallen to appalling levels, the contrast is undeniable.

Rich folk, amongst whom are the public officers who have created the decline in the first place, are able to use their money to access alternative sources of these social services.

They can sink boreholes at their homes, rely on generators for power and dispose of their own refuse.

In the past few months newspapers have exposed various examples of top public servants earning ridiculous salaries while lower level workers receive a pittance.

Similarly in the private sector, management and executives usually have huge salaries with obscene perks while those below them earn barely enough to survive on.

In fact, in some of the companies accusations were that the top people got their obscene salaries on time whilst those on the lower rungs had their meagre earnings delayed by weeks.

To a certain extent, inequality is inevitable. After all, people are not equal in ability and hence you would expect their incomes would also be unequal.

The problem with inequality is when it becomes so systematic that a person’s lot depends not on the work they do but on things like political patronage, social affiliation and even inheritance.

Another problem with inequality is that it will eventually lead to societal discontent which can lead to violent and disruptive uprisings. South African service delivery protests are a case in point. They have often led to violent clashes between protesters and the police.

Mine workers in South Africa also often complain that they do most of the hard work and get little for it. In the ongoing strike by platinum workers, Lonmin has reportedly lost more than US$500 million due to forgone production.

Miners complain that they get low wages whilst management is handsomely paid. Should Zimbabwe’s income distribution continue to be skewed, it is a possibility that undesirable consequences may ensure.

Redistribution of wealth is obviously a touchy issue, especially amongst the rich elite that stand to lose from it.

Likewise, mainstream economists argue that redistribution discourages growth as it reduces incentives for capitalists save and invest to increase productivity.

Higher taxation for the super-rich is one suggestion that is popular with politicians. Yet many warn that diminishing the lot of the rich does not necessarily improve the fortunes of the poor.

Rather, they argue that eradicating poverty will improve everyone’s welfare.

Somewhere between the polarised extremes, one where income is redistributed by imposing punitive taxes on the super-rich and the other where the status quo is maintained lays a workable compromise.

It is inevitable that those who have been enriched by the current system should bear the burden of holding it up.

Unfair as it sounds it may be the only way to ensure harmony and stability. Some countries have introduced welfare payments for the poor but this system often leads to people developing an entitlement mentality rather than the incentive to work harder.

Improving the economy as a whole will go a long way to improving welfare for everyone.

If basic social amenities are available to all, it is less likely that the income gap will be as glaring as it currently is.

Source : Zimbabwe Independent

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