Inequality: the Facts and the Future
Total Page：16
File Type：pdf, Size：1020Kb
INEQUALITY: THE FACTS AND THE FUTURE August 2016 Note from the authors: The Commission is a project of the Chifey Research Centre, the ofcial think tank of the Australian Labor Party. This paper has been prepared with the assistance of Equity Economics and Development Partners Pty Ltd. The report is not a policy document of the Federal Parliamentary Labor Party. Commissioners have acted in their private capacities. The Commission’s publications do not represent the policy of any other organization. As in any collaborative process, there has been much give and take among the participants in developing this paper. We all subscribe to the broad analysis and principles articulated here. There may be specifc matters, however, on which some of us have diferent views. Publication details: Swan, Cooney et al: “Inequality: The facts and the future”, Chifey Research Centre Inclusive Prosperity Commission, August 2016. 2 Inequality: The Facts and the Future CONTENTS Whether you think it is due to technology or to globalization or to the mal-distribution of political power, something very serious is happening in our society… Lawrence H Summers Introduction 5 Executive summary 6 The scope of our work 8 Part 1: The facts 9 A strong egalitarian platform 10 ...But emerging economic threats. Inequality here is already rising 14 ....While new economic trends also challenge our equality 19 The conservative consensus ignoring inequality is creating a political “fork in the road” 22 Part 2: The future 23 Sign posts for inclusive prosperity - a very diff erent way ahead 24 Part 3: Beyond the fork in the road 31 A practical approach to reach our goals - policy strengtheners 32 A high pressure economy with strong aggregate demand 34 A modern employment regulation system 35 Support for innovation, cities and regional clusters - the future of jobs 39 A progressive supply side agenda 43 Education and access to health services for all 46 Taxes and transfers that promote fairness 49 Endnotes 53 Appendix 1: Extract from Koukoulas "How reducing inequality can enhance production and growth" 2015 3 4 Inequality: The Facts and the Future INTRODUCTION This is not some tepid third way Davos fudge in which we pretend the only response to growing wealth and income inequality and disruptive technological change is world class education and training. Wayne Swan MP The Inclusive Prosperity The Commission’s task has been This report will sit alongside new Commission is a major policy to develop a new economic policy analysis from the IMF, World Bank and project of the Chifl ey Research framework to guide Australia beyond inf uential publications such as Thomas the global f nancial crisis and the peak Piketty’s ‘Capital in the Twenty-First Centre, the think tank of of the mining boom. Much of that is Century’ which point to the need for the Australian Labor Party. contained in this, the Commission’s greater government involvement and Since its launch in 2014, the formal public report - Inequality: the facts regulation in many parts of the world, Commission has been exploring and the future. particularly through stabilising labour the threat to Australia’s future markets and restoring progressive Co-chaired by Wayne Swan MP (Federal taxation. economic growth presented Member for Lilley, former Deputy Prime by growing inequality – and Minister and Treasurer of Australia, The Commission has built on the new policies to respond. author of ‘The Good Fight’, Allen and trans-Atlantic report of the Center for Unwin, 2014) and Michael Cooney American Progress (CAP), chaired by ex- (Executive Director of the Chif ey US Treasury Secretary Larry Summers Research Centre, former speechwriter to and British Shadow Chancellor, Ed Balls Prime Minister Julia Gillard and author (see: www.americanprogress.org/issues/ of ‘The Gillard Project’, Penguin, May economy/report/2015/01/15/104266/ 2015), the Commission’s membership report-of-the-commission-on- is broad with high prof le and inclusive-prosperity/) of which Mr credentialed policy makers from across Swan was a commissioner. The Chif ey the spectrum. A group of academics, Research Centre is grateful for the business people and economists, along contribution of the Center for American with business and civil society leaders, Progress as a project partner for the including leaders of trade unions, have Commission. acted as Commissioners in their private capacities. We are grateful to Cameron Clyne, David Hetherington, Dave Oliver, Peter Whiteford, Rebecca Huntley, Stephen Koukoulas, Tony Nicholson and Verity Firth for their service. Amanda Robbins of Equity Economics has led the Commission’s staf . 5 EXECUTIVE SUMMARY If only ten percent of people win when the economy does well, ten percent of people will care if the economy does well. Michael Cooney The central argument of Inequality: This refects the growing evidence New economic trends are emerging as the facts and the future is a simple one. that excessive concentration of future threats to shared prosperity as Australia is well placed to resist the wealth and rising income inequality well. The global disruption to workers economic and political pressures which has destabilising efects on fnancial and business imposed by digital can make us more unequal over time. If markets and distorts investment technology, the rise of Asia, longevity we do this, our economy will continue to incentives. It also refects the emerging in Australia, and the end of the mining grow strongly and middle Australia will argument that sluggish global growth boom, are all challenges that could see the benefts of that growth in higher and weak economic demand are actually result in big benefts to the vested living standards. The alternative – to being reinforced by economic policies interests who beneft from a further go down the American road of rising and market outcomes which limit public concentration of wealth and income, inequality, slowing growth and stagnant investment, squeeze living standards while middle Australia misses out. living standards – would be bad for all of and restrict wages growth. us and political instability. Finally, the conservative policy Australia has a strong starting point. consensus is a political threat to This core argument stems from Our economy is stronger and fairer than Australia’s traditions of egalitarianism scholarship that is at once relatively that of most other countries. We have and social mobility; it will only fuel new, frmly established and both grown faster than others and been rising inequality. The conservative approaching a consensus among key more equal than others, and this is no plan for Australia attacks our tax base, international economic institutions. coincidence. But there are emerging weakens our labour market institutions, economic threats that demand a long- limits wages and incomes, and shrinks The IMF, the World Bank and the term policy response. Inequality has the social democratic state. It is driven Bank of England are among the global been rising for some time in Australia: by vested interests and reinforced by economic authorities warning that unemployment is rising and real wage conservative prejudices: a denial of rising inequality is a serious threat growth is slow, houses are harder to the inherent link between economic to the future growth of advanced aford, some kinds of health care cost equality and social mobility, and a economies. This is an important patients more than ever, education misunderstanding of the broader development in the global economic funding is inadequate and is often societal role of government and the debate. poorly targetted, and both pensions and relationship between economic growth We find an inverse relationship superannuation systems are threatened. and long-term fscal strength. To Inefective action on climate change and pursue this plan in coming years would between the income share a politics subject to deep partisanship be to lock rising inequality into the accruing to the rich (top 20 and short-term decision-making Australian political economy and lock percent) and economic growth. further darken the picture. middle Australia out of the benefts If the income share of the of growth and undermine the deep top 20 percent increases by 1 drivers of that growth. It also risks deep percentage point, GDP growth damage to public support for the type of productivity enhancing structural is actually 0.08 percentage reforms required to lift national income point lower in the following and enhance social mobility. five years, suggesting that the benefits do not trickle down.1 6 Inequality: The Facts and the Future The existing and emerging economic In Inequality: the facts and the future we A clean environment and good threats present a long-term policy aim to articulate a better way ahead by government are essential challenge, one decision-makers must identifying f ve ‘sign posts for inclusive underpinnings and must not be put at confront, preferably sooner rather than prosperity’: risk in pursuit of these objectives. later. However, it is the conservative policy consensus which is increasingly - good jobs and wages With the right choices made, and the forcing an urgent choice upon - housing you can af ord signposts well in view, the Commission recommends new policy measures to Australians. - health care when you need it get us there – a practical, credible and Australia’s economic future requires - education for the future progressive plan. a very dif erent framework from the - secure income in retirement conservative consensus – and a marked First, what we term a ‘high-pressure evolution from the economic approach These ‘sign posts’ are the tests of a economy’ with job creation and that led Australia out of stagf ation well-functioning economy and society economic growth grounded in high in the 1970s and early 1980s and into and the guide to an ef ective economic productivity and strong aggregate the long boom that gained enormous policy; they guide us to the choices we demand: based on full employment and traction in the early 1990s.