In today’s world there is no more divisive and politicized issue than inequality. Inequality has supplied interminable rhetorical fuel to politicians and activists, turning Thomas Piketty into an international celebrity and triggering innumerable “occupation” protest movements worldwide. What is not obvious is that emphasis on inequality solves anything.
No one can dispute the fact that inequality exists but the essential problem is poverty, not inequality. “The poor suffer because they don’t have enough, not because others have more, and some far too much”, says Harry Frankfurt. Why then do we not worry more about the poor than about the rich?
William Watson* argues that “focusing on inequality is both an error and a trap. It is an error because much inequality is ‘good’, the reward for thrift, industry and invention. It is a trap because it leads us to fixate on the top end of income distribution, rather than on those at the bottom who need help most.” In other words, combating inequality –therefore, capitalism- would lead to generalized impoverishment without ever diminishing inequality.
Inequality is the effect of an economic system that rewards and compensates creativity and innovation, inevitably generating differences in income in the process. The problem in countries like Mexico is that there are other elements that impact the result and that differentiate us from societies that, although manifesting high inequality levels, do not have poverty. For example, political use of the educative system (created to teach to a lesser degree than to control the population) has had the consequence of biasing the result, producing a majority population with little capacity for developing itself in the modern economy and a minority that possesses infinite possibilities of seizing upon opportunities. The same can be said for governmental concessions that favor concentration over competition or systems of permits (such as those for imports) which are an endless source of corruption. If we add to this total impunity, the ingredients of poverty and inequality are in the end uncontainable.
If one only wishes to observe the inequality and stops there, the solution becomes evident. Like the proverbial example of the man who, because he had a hammer in hand believed that all there was to do was to drive nails into the wall, those obsessed with inequality in truth have a more relevant and profound agenda, which is to undermine capitalism and stockpile more funds for the use of the bureaucracy.
In the discussion on inequality what is crucial is to define whether one is addressing a problem or an instrument. Inequality as a rhetorical instrument is highly useful for driving political careers, but does not lead to a solution of the problem and could even render it more difficult; inequality as governmental and social action objective obliges one to define priorities that should be seen to by public policy.
If one observes the distinct moments of the poverty-fighting programs that, from the seventies, have been the emblem of successive governments, the tension is plain between these two forms of understanding poverty as well as governmental action. In this manner, programs ranging from IMSS-Complamar to Solidaridad, and more recently Prospera, follow a political logic that, while doubtlessly procuring the watering-down of poverty, have an unmistakable, patronage-oriented rationale with electoral and political control aims. On their part, programs like Progresa and Oportunidades obeyed a technical logic without electoral or patronage benefit. The question becomes apparent: political tool or problem to be solved?
Inequality, above all the so widely imputed inequality in Mexico, embodies a complex origin and cannot be resolved merely with fiscal policy. In fact, the notion of raising the taxes of some to redistribute them to others has always entailed the result of diminishing growth (because it de-incentivizes investment) without benefiting the poorest, because the bureaucracy is not efficient in distributing those benefits and, perhaps more importantly, given that there is an entire institutional framework that actuality promotes poverty. The example of the fiscal reform of two years ago is more than eloquent: it affected the consumption of the poor and decreased the investment of the rich.
Attacking poverty is the country’s great challenge and there are not many ways to do it. The most obvious one is achieving high economic growth rates within the context of much greater competition to that to which we are accustomed, in addition to a radical change of course in public policies that are key for the poor, particularly education. For this to be attained we must advance in a nearly opposite direction from that which has characterized the country: we have to liberalize more, make the tax system competitive, generate conditions that make productive investment attractive (beginning with the absence of the counterweights to political power) and eliminate the biases that favor certain persons, officialdoms, companies and groups over others. A recipe like this might preserve the inequality but would have the effect of drastically reducing poverty, not with hand-outs but with real opportunities for productive employment.
Of course, it’s very easy to market inequality as a political project, but that doesn’t solve anything.
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