A list of causes of economic inequality
Some essays point out the figures of the huge and growing
economic inequalities in this world, the fact that so much of the
world is owned by so few people.
For example, Ends
of History and Future Histories in the Longue Duree by Benjamin
(Capitalism and Liberalism: An End of History?)
As noted by Thomas Piketty in Capitalism in the Twenty-First
Century, the concentration of wealth at the top of
present-day developed countries has once again reached the levels
last attained in the Belle Époque of pre-1914 Europe. The
financialization of the economy and the emerging class of
ultra-rich oligarchs are leading to a situation where not only
economic but democratic power is increasingly in the hands of an
The problem is to understand the causes of these inequalities.
Just blaming "capitalism" for these inequalities does not make any
sense, because this word is just a confusion of so many different
details of how things work now, including things that work
properly and things that don't. The confusion of everything is a
very comfortable view for simplistic minds looking for simplistic
solutions of just breaking everything, as if it would help. This
was carried by Marxism, with the results we know : ignoring the
logical necessities of what is needed to make an economy work
properly, and thus breaking everything, just results in a worse
situation than the one initially complained of.
Seriously, the problem of growing inequalities requires careful
analysis of its diverse causes.
The role of automation, and the nature of human intelligence
Technological progress replaces more and more unqualified jobs
by machines, which increases the inequalities of salaries
depending on qualifications, as only more intelligent tasks are
needed. There is an irreducible component in the inequalities of
qualifications, coming from the inequalities of innate
intelligences between people, to which the inequality of
salaries is becoming and more sensitive. There is nothing to do
against it because intelligence is really needed for making
things work and leading humanity forward !
Here are my philosophical reasons to see things in this way, related to the fact I don't believe in artificial intelligence in the way some do:
Even if human thought can sometimes be defective, and computing
power can be extremely helpful for some tasks that human thought
could not do, both abilities are anyway not comparable and there
will always be a component of understanding and creativity in
human thought that computers will never be able to replace.
A human job is an activity of processing data better than any known
algorithm for some given purpose of human interest. And there will
always be such cases.
Of course, computers are extremely useful and can still become more
and more powerful and useful (they will keep replacing
(automatizing) more and more current human works, and can operate a
new online economic and political system as I plan) but can never
replace them all. In particular there will always be human work in
programming computers to replace more and more other jobs whenever
they are somehow repetitive. Because the job of providing
instructions for computers to assist the execution of other jobs, is
one of the most creative works, that only thinking humans can do.
Still, the development of computers and automation will keep having
huge impacts on the job market, of course.
While some current cases of inequalities between humans happen to be
unfair indeed, the aspect of inequalities of salaries that is caused
by the inequality of innate intelligence between humans is a
necessary one that nothing can overcome.
- First because it will globalize the job market, letting jobs
be done at distance worldwide, thus reducing the gaps of
salaries across nations and potentially eliminating any need of
transport to go to work.
- Second, because the automation of unqualified jobs will keep
increasing the inequality of economic productivity and thus
incomes between humans according to their levels of
qualification and intelligence.
List of other causes
Here is my list of other explanations,
in no particular order:
Next part : Overpopulation
- The increased need of qualifications also makes the job market
more complex and fragmented, which makes it harder for people to
orient and train themselves to the needed skills. Good
information systems on the job market are needed, both for
directly finding jobs, and in advance for students to find out
what they need to learn. In the lack of such systems,
inequalities appear between the many kinds of professional
- The education
system makes little progress and can quickly
become obsolete with respect to the qualifications needs. It
creates inequalities between those who waste their life in the
system and those who escape, in case they actually need to
escape, i.e. they are able to create their job themselves
instead of serving the system.
- The globalization and virtualization of the economy increases
possibilities to avoid taxation, therefore increasing the inequalities
between the business which "follow the rules" as they were intended
to apply, and those which find ways around.
- Geographic inequalities take place between developed regions
and underdeveloped ones, as international trade makes a relative
worldwide uniformity of prices on goods that can be traded, but
there is no such a good worldwide job market yet, thus forcing
many people to work for local poor customers at low prices,
while they need to import special goods of high technology from
more developed countries anyway. The development of online work
will help to reduce geographic inequalities in salaries
- Bureaucracy (heavy, complicated laws on employment and
economic activity) is a burden that distracts many activities
from, well, productivity. And it is always going to create
inequalities between those who follow the rules and those who
don't, making fiscal optimization between countries and/or
hiding their activities in the private sphere or abroad. In many
cases, the idea of fighting against fraud and tax havens
inspecting activities to oblige them all to follow the rules, is
just a myth. Only material operations such as trade of natural
resources, and clearly visible material assets such as real
estate, can be taxed without risk of avoidance. Abstract things
such as transactions and jobs cannot be well regulated as long
as there will be incentives on hiding them into the private
sphere (such as through online jobs), and the very act of
putting taxes on official activities is such an incentive.
- The lack of general efficient cures to the
corruption problem, creates inequalities between the more
and the less corrupt countries, and corruption itself makes
unfair inequalities between people.
- Another cause could have been thought of :the lack of capitals on the market, due to the lack of savings
both by individuals and by states (public debts) could have increased the
price of capitals (real interest rates) comparatively to the
price of work, in the share of income in businesses. As
explained above, the only solution for the long term would be
Austerity Now ! But it turned out that the opposite happened: real interest rates strongly decreased in the last decades, even approaching zero, because productive goods
became cheaper and more people could afford to accumulate savings.
Still a burden persists on public budgets caused by the big amount of public
debts, leading to keep high taxes, themselves having perverse effects by the
resulting incentive to find ways around. But too low real interest rates can
become a cause of inequality too ! Here is how. Long ago, the role of the capital
market was that, savings made reflect the accumulation of some real value, such as
the creation of new machines, buildings or other productive goods which were useful
to produce more, therefore generating long term income in proportion to the interest rate.
Now this use is gone, since machines are now cheap. What happens instead is that there
are anyway some systems which provide some expectation of long term regular income,
but which are no more productive machines created by really
productive work ; they still basically exist due to other causes: some kind of titles of
ownership, such as land ownership, intellectual property or monopolistic positions.
Then, these titles of ownership get a monetary value which pops up from this
expectation of future income, roughly produced mathematically by taking the
amount of expected regular income and dividing it by the value of the real interest rate.
This results in a super DIVISION BY ZERO ERROR: dividing a strictly positive
expectation of future regular income by the zero value of the real interest rate,
gives an infinite capital value of these ownership titles...By the way, as a logical
consequence we can notice that a low real interest rate constitutes a big incentive for
creating systems that are expected to be able to capture income in the long term future.
It makes some people super rich in numerical value, but it is a wealth created from
nowhere and it is completely virtual.
In the case this whole profit is unfair, we cannot say these amounts of wealth
"were stolen" from the rest of people, so that I don't see much sense in the idea
of trying to redistribute it. Instead, it is the numerically
materialized anticipation of what "will be stolen" from them in the long term
future. Thus instead of trying to redistribute it, we might for example question the kind
of laws such as intellectual property laws which are expected to make these
long term capture of income possible.
But longer term expectations are a more unstable kind of stuff...
which results in making (some) speculators wealthier.
- Overpopulation creates inequalities between those who own the
lands and those who need to use them. Redistribution is no kind
of solution. Why should natural resources, which are actually an
expensive resource, be given for free to some kind of (possibly
dispersed, undefined) "groups" at the expense of the rest of
people, just because they make more children ? Any rule that
would reward fertility, which is anyway logically equivalent (no
matter if you like it or not) to any idea of free equal
distribution of the value of resources between people as
proportional to their number, is a wrong rule that must not be
adopted. The world needs a reduction of fertility in order to
save the planet. Of course the absence of redistribution, and
the resulting inequality between owners and non-owners, is also
quite often unfair. But the only real solution is to take the
problem at its root, that is not "capitalism" but
Up : On humanity's failures to steer itself properly