The other story on inequality: public versus private wealth

The narrative of inequality is largely framed as an ever larger gap between the top and bottom levels of income and wealth hierarchies and a greatly reduced middle level inhibiting opportunity for upward social and economic mobility or even simply maintenance of an adequate standard of living. Disturbing new research shows that in Australia, two thirds of adults feel that they are financially insecure.

However, there is another story which I contend is equally as important as the wealth gap between portions of the population – and concentration of wealth in the upper .01 per cent – but which gets much less airplay and is poorly understood. It is the large wealth inequality between public and private sectors of economies. This is immensely importantly as this wealth gap impedes the capacity of governments to tackle inequality through public investments. Indeed this is a key theme of the 2018 World Inequality Report.

Essentially, what the report shows is that there has been a massive disinvestment in the public sector since the 1980s in many countries through the selling-off of public infrastructure, privatisation of services, denationalisation (of profitable sectors that were once publicly owned) and deregulation of the economy. Essentially the asset base – the wealth of governments – has been dissipated and with that their ability to raise the capital they need for tackling major challenges including inequality and climate change as well as to invest in core areas of public infrastructure such as education, health services and transport.

The authors of the World Inequality Report which include Thomas Piketty and Gabriel Zucman, argue for increases in progressive taxation in most countries to counter the problems of an under-resourced public sector. Indeed Piketty most recently has argued for this in France where Macron ill-advisedly reduced company tax rates – while large portions of the population represented by the gilets jaunes movement, are struggling with living costs and their impôts (taxes).

However the World Inequality Report also acknowledges that much needs to be done to reduce offshore tax evasion, the subject of Gabriel Zucman’s seminal work, The Hidden Wealth of Nations. The other two mechanisms which are discussed in the World Inequality Report cover public debt reduction and inflation and how these have been used in certain historical contexts. However, practically it seems that better progressive taxation and the reduction of tax evasion are the most viable means of ensuring that there are the resources to tackle inequality and for investments in important  national infrastructure (of the type I discuss next)

A personal anecdote on public investment

In November, I had a first time experience one evening, as a patient with a broken wrist in the emergency department of a suburban public hospital in Melbourne. Like all patients, I had some hours in the waiting room before and between x-rays, seeing a doctor and the application of the cast by nurses. It was a salutary experience and my broken wrist was the least of it. There were a number of people clearly distressed by the long waiting times which that day were 8 hours across Melbourne bar life-threatening emergencies. One woman, a retired social worker, told me she was in dire pain for her condition and and very upset about the wait.

A nurse came to see her and told her, in a conversation I overheard, that the staff were under enormous stress unable to meet the demands and needs of patients. She said many staff got sick and had to take time off creating more pressures for other staff. Another problem was that the hospital had insufficient cubicles for the stream of emergency patients which also created long queues and waiting times. It was an eye-opener as to how under-resourced the Australian public hospital system is – unable to meet the need, one ordinary week night, and creating intolerable working conditions for staff. What does that say about public investment in Australia in a basic public service like an emergency department of a public hospital? It is a troubling story at many levels. 

By the time I write, my wrist is healed and the follow up appointments in the fracture clinic of another hospital went well and largely without long waits. But the experience in the emergency department of that other hospital points to an issue that I believe is at the heart of a serious issue in terms of inequality in these times – the sheer lack of public investment.

 

 

 

 

 

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