This article is not meant to advocate for a welfare society nor does it argue for a free market competitive society where winners-takes-all. The article doesn’t either provide a panacea to address socio-economic inequalities or take a position in the right-left wing political economy policy proposals. What is it then? Read on:
There are different types of economic systems that feature varying degrees of interventionism aimed at redistribution of income and wealth, depending on how unequal the society is and how does it feel about such inequality. Free market capitalist economies for example tend to feature high degrees of income redistribution while centrally planned economies feature very little income redistribution mainly because private capital, land income, wage rates and enterprise profits – the major drivers of income inequality in capitalist systems – are virtually nonexistence in such economies.
Undesirable as it may sound for the right-leaning conservative, today, wealth or income redistribution occurs in some form in most democratic countries through economic policies, some distributive policies attempt to take wealth, income and other resources from the wealthy and share them with the poor, or taking resources from the relatively unorganised sections of the society to the more organised – these redistributive policies and actions are normally pursued either in the form of political influence or for the purpose of poverty eradication and/or economic empowerment among many.
Fiscal policies are the most common used tools of wealth and income redistribution – for instance under the progressive income tax system, different persons pay different rates of taxes for different income – in the process the rich are required to pay taxes at higher rates, then within such system some of the tax revenue goes to finance social programs such as social welfare, decent housing, health services, education, water and sanitation, etc or other social programs that benefits the poor.
The other most common form of wealth and income redistribution is via subsidies – this tool enables redistribution of national income and wealth through subsidizing consumptions on things that improve the future earnings power of citizens, such as education, good health, etc. However, such subsidies are somehow funded by way of fiscal policy actions i.e. through general taxation, fundamentally these subsidies are meant to benefits the poor.
The other admittedly uncommon but a sustainable wealth redistributive mechanism (and which is the focus of this piece) is by way of assets ownership, especially financial assets such as shares or stocks or bonds as well as non-financial assets such as property. Ownership of financial assets as a tool of wealth redistribution in the society, can be achieved by way of pursuing policies that encourages wider share ownership of entities operating within the economy so that the GDP growth or the increase in value of financial assets and their profits would go back to the citizens, or specific special interest groups within the society such as employees or consumers of goods and services of specific companies. This can take a direct form of investment by individuals or via savings in mutual funds, or collective investment schemes or statutory pensions schemes where investments can be made in commercial and industrial assets.
Therefore, in our case, privatisation policies that encourages flotation of shares of state owned entities to a wider population, or legislative actions such as Electronic and Postal Communication Act (EPOCA) and Mining Act that have specific provisions for flotation of shares to the public and list those shares into the stock exchange are targeted measures towards, among other core objectives, wealth redistribution and income enhancement for the solidarity of the society that is pursuing a feeling that the society is made by one people sharing a common destiny – i.e. prosperity for many.
Floatation of shares by way of privatization or other such policy and legislative actions enable redistribution of part of the surpluses that the government and corporates operating in specific targeted strategic sectors have accumulated over the years of their growth to the people so as to enable the people hold shares in key sectors or companies operating in the country and therefore have tangible stake in the country’s economic growth and other successes. Opposite of this, distribution of financial assets within the economy remains highly skewed towards the few, and in such situations, even if there are increases in financial assets as part of the overall economic growth, such increase as normally reflected in the stock market – doesn’t benefit many, in the process jeopardising the intended social and economic justice.
In whatever form or design (either by way of progressive tax systems, or subsidies on welfare and spending, or an opportunity for assets ownership), the fundamental objective of wealth and income redistribution are to increase economic stability, social justice and opportunity for the less wealthy members of society and thus usually include the funding of public services. After all, it is only fair that a society should pursue policies that enables the creation of a larger middle class. A fair society is the one organised in a manner that also benefits the least advantaged, and where any inequality would be permissible only to the extent that it benefits the least advantaged — a good society have the moral obligation to help the poor among them.
Using statistics from 23 developed countries and the 50 states of the US, British researchers Richard G. Wilkinson and Kate Pickett show a correlation between income inequality and higher rates of social problems and social goods (i.e. mental illness, teenage births, low life expectancy, educational performance, women’s status, social mobility, etc). The authors argue that inequality leads to social ills through psychological stress, and the status anxiety that it creates. Furthermore, a 2011 report by the International Monetary Fund (IMF) found a strong association between lower levels of inequality and sustained periods of economic growth. These kinds of arguments can be accepted or rejected – depends on the political and social economic policy option that one stands for (right vs. left wing). I would choose to stand for what-makes-sense platform.
In this kind of arguments there are some for justifies the opposite by saying, but poor people would not hold into the financial assets that are afforded an opportunity to own, i.e. ownership in companies that float shares as part of implementing privatization policies or some specific legislative actions — the response to that is: with clear and beneficial intents, there can be many ways and means to discourage the immediate sale of financial assets (shares) for speculative cash gains. But I will also add, after all, economic empowerment doesn’t end with assets ownership, the intent should accommodate situations where selling of some assets (shares) for spending on socio-economic needs is a necessary hindrance.