Inequality is a necessary outcome of efficient markets – Is this a fair assumption?
Are rich people smarter? We could choose to apply economic policies that raise taxes on the rich and regulate powerful corporations. We could also raise wages for workers. But neoliberal economists warn that slows economic growth. And any form of government regulation is inefficient, raising wages always kills jobs.
In the US, the consequence is that top 1% has grown $21 trillion richer, while the bottom 50% have grown $900 billion richer. This pattern has repeated itself across the world. As middle class families struggle to get by on wages, neoliberal economists continue to opt for further austerity and globalization.
We need new economic policies that tackles inequalities. Neoliberal economic assumes the market is an efficient equilibrium system, which simply means if wages goes up, job numbers come down. The world isn’t that simple. Will you lose 20% of jobs if we increase wages by 20%? No. The wage increase among the lowest paid workers will see more spending in basic necessities. We will expect more economic growth.
The second assumption is that the price of something is always equal to its value. That means if you earn $5000 and I earn $50m, I product 1000 times as much value as you do. This can’t be true all the time. How can a chef who earns $5000 be product 1000 times lesser than a CEO of a large corporation? Simply put, people are paid based on their negotiation power, never really based on the value they produce.
As the problems we have become more complex, we face increasing technical complexity. We need high levels of social and economic cooperation. For us to continue solving problems for society, we need an economy that is not just based on flawed assumptions. For example, if you want to solve global warming, you cannot depend on the top 1% of earners. You need the buy in from everyone, even those underprivileged in the emerging economies. We have many global issues to solve in areas such as global health, global warming, and global violence. If we do not set up a system for better distribution of wealth, these problems will continue to stay