University of Victoria professor and economist Paul Summerville is providing guest commentary on The Agenda's blog. Over the course of four blog posts, Summerville explores a debate that has picked up in intensity since the financial crisis: whether our society has become too unequal, and what should be done to ensure equality of opportunity. Summerville's first post looked at how the debate over equality unfolded over the past century. Summerville's second post explained that there's an important difference between decreasing inequality and increasing equality. In this third post, Summerville argues that a society truly concerned about giving everyone the greatest possible chance to succeed needs its share of both winners and losers.
Unequal Outcomes are Vital
The Occupy Wall Street movement that captured the imagination of the world in the fall of 2011 neatly married the demand for equality of opportunity with a loathing of unequal outcomes. What easy targets the big Wall Street investment banks were with their other-worldly pay, over-the-top lifestyles, and government protected monopolies. This anti-rich rage fed demands around the world that the rich pay more taxes. Perhaps the best example of this phenomenon was the sweeping into power of François Hollande of France, who boasted that the top tax rate would rise to 75 per cent, even though that promise turned out to be unconstitutional.
Yet the great irony is that it is unequal outcomes that make equality of opportunity possible. Why? For one thing, because of the tax revenue that it can generate to sustain services accessible to all. But there’s another reason: equality of opportunity is sustainable precisely because unequal outcomes are what people strive for. The whole point of creating equality of opportunity is not for the opportunity itself but to empower individuals to live their lives to the fullest extent they can -- which in most cases can only be measured by how they fare compared to others. We require equality of opportunity to pursue unequal outcomes.
Equality of opportunity is a virtue when it is twinned with unequal outcomes. It is meaningless without it. What is the point of equality opportunity if success is discouraged by custom, law, or taxation?
Societies Programmed to Succeed and Societies Programmed to Fail
The depressing bleakness that characterized the later decades of Eastern Europe prior to the fall of Berlin Wall is a perfect illustration of the doom that awaits any society that suffocates equality of opportunity by forbidding unequal outcomes. There, equality of opportunity was the legal basis of the society. But unequal outcomes -- except those in high positions in the state -- were impossible. Hopelessness and stagnation resulted.
At the heart of any sustainable society is a market economy that creates enormous winners and losers. The challenge is how to tax and regulate the economy in such way as to ensure unequal economic outcomes provide the public revenue to invest in instruments of social justice, namely equality before the law, world class public education, the science of good health available to all citizens, and best in class public transportation.
Each provides the freedom to be able to live a full and productive life and be unequal.
Far from being incompatible, the unequal outcomes created by a market economy and equality of opportunity are in fact twin virtues to be embraced and celebrated. A strong economy with the massively unequal outcomes it produces, and social justice, are two sides of the same coin, and neither can survive for long without the other.
Balancing Between Extremes
With the fall of the Berlin Wall in 1989, the importance of unequal outcomes was affirmed as proof that societies without market-determined economic winners and losers could not survive. Similarly, the financial crisis of 2007-2008, and the repudiation of the Washington Consensus ("the market is always right") demonstrated that societies that ignore the importance of equality of opportunity -- expressed best in class justice, education, health and community outcomes -- are the least likely to be able to compete in the new hyper-competitive global economy created over the past quarter century.
Communism failed because it was built on the flawed principle of equality of outcomes, while the economic collapse centred on the high income countries in 2007-2008. The painful recovery ever since reminds us that capitalism built on unfulfilled promise of equality of opportunity is equally flawed and will fail just the same.
The hand-wringing about capitalism as being too hot where the market dominates or too cold where the state dominates misses the truth that ultimately the most sustainable communities find the balance between the twin virtues of inequality of outcomes and equality of opportunity.
Twinning unequal outcomes with equality of opportunity produces the kind of economic growth and social harmony that are the foundation for the next generation of economic and social success.
Successful societies ensure that peoples’ lives are not simply dictated by the circumstances of their birth. Because societies will fail where rich kids grow up to be rich adults and poor kids grow up to be poor adults.
Learning the Right Lesson
The tragedy is that a foul brew 30 years in the making of tax and spending cuts was successfully peddled as income-neutral and sold to gullible voters as a good thing for the "hard working individual," no matter how incapable those people might be in taking advantage of the economy that was created, resulting in Great Gatsby-like divisions in our society.
It would be equally tragic, in fact perhaps more so, if the lesson we took from the last 30 years of widening income inequality was that unequal outcomes are in themselves a bad thing.
In each, the opportunity to be successful, and the expression of that success in unequal outcomes, lays the great truth of the human condition; the importance, the centrality, of the dignity of choice that equality of opportunity helps makes possible, and the expression of that opportunity in unequal outcomes.
Tuesday's program looks at issues at the heart of the equality and fairness debate: pensions and the tax system. Tune in to TVO at 8:00 p.m. or 11:00 p.m. EDT. Or watch online at 8:00 EDT on our homepage.
Previous Posts in this Series: