Bob Hawke always said that he had great faith in the intelligence of the Australian people. This was not simply a method of sucking up – rather he genuinely had the view that Australian had never gotten an election wrong. I suppose I tend to agree with him. Labor deserved to lose the last election, and as much as it hurt my leftist heart to say, I think Tony Abbott deserved to take on the mantel of Prime Minister.

I am aware however of how he got there. I remember what he said, all of the promises (on health, taxes, pensions to name a few he made). But as of last week, neither Tony Abbott nor Joe Hockey could remember any of them. I am staggered that after the budget they still have the uphold to say to the Australian people that they have kept their commitments, and the absolute abhorrence of any suggestion that they actually broke an election promise.

I do not deny the need to cut back, the need to raise more tax revenue. While it is my view that the liberals have exaggerated the extent of the problem, it certainly is plausible that Labor might’ve allowed debt to rise too quickly. So perhaps a ‘tough budget’ was not all that uncalled for. But it’s who has been asked to do the ‘heavy lifting’ in fixing this problem. Virtually all of it falls upon those who can least afford it. In the words of Ross Gitting of the Sydney Morning Herald, “I give Joe Hockey’s first budgetary exam a distinction on managing the macro economy and a fail on fairness.”

Would a 2% debt tax be felt that heavily by those earning upwards of $400 000 a year? Probably not. But imagine a family in the suburbs with a mortgage and a couple of kids earning a combined income of $180 000 – the reality is that they would have no discretionary spending at all. The money that comes in all goes out in order the survive. Taking $80-100 a week out of those household budgets would be strongly felt. On top of that, every time one of their children gets sick, a co-payment will need to be forked out to visit the doctor. And by the time they get to the retirement age, pensions will be effectively reduced by changing the way that they are indexed.

All while corporate Australia gets off scot-free.

Justified by a so-called budget emergency, we are facing a number of budgetary measures that will see us go down the path of the U.S. A two-tiered education system that will see regional universities left behind, a weakened universal health care system, and the further degradation of our environment with investment into renewable energy no longer a priority. With the gaps between rich and poor projected to deepen, the reality is that we are heading into a future with entrenched inequality.

We are heading into a future dominated by inherited wealth as capital concentrates in fewer and fewer hands, giving the very rich every greater power over government, politics, and society.

A Cautionary Tale:

For the nobel prize winning economist Thomas Picketty, the levels of inequality in the United States “is probably higher that in any other society, at any time in the past, anywhere in the world.” Over 30 years, between 1977 and 2007, 60% of the US’s national income went to the richest 1% of Americans.

Picketty’s prize winning theory is quite simple. Construction the evolution of inequality, he derived a grand theory of capital and inequality. Generally speaking, wealth grows faster than economic output, a concept captured in the expression r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things remaining constant, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no equivalent natural forces against the steady concentration of wealth. Only a sudden case of rapid growth (from technological process or rising population) or government intervention can be counted on to keep economies from returning to the ‘patrimonial capitalism’ that concerned Karl Marx.

Who are the 1%? When we think about the 1%, we usually think of the Gordon Gekko’s of the world. But this way of imagining the rich is stuck in the 80s. What the 1% means today is the children of Gordon Gekko, the ones who have inherited this wealth. What this means is not only a path to a highly unequal society, but an oligarchical society.

This results in dynastic fortunes owning an ever-growing slice of the total national wealth. In situations where returns of capital are high but the growth rate of the economy is not, not only can people live very well off inherited wealth, they can pass on an even greater share the next generation. Dynasties become increasingly more dominant at the top of the economic spectrum and a tiny fraction of the population end up dominating.

This results is a situation where there are a few people so wealthy that they can effectively buy the political system. The political system will then serve their interests, and reinforce the shift of income and wealth towards the top. This can be observed in things like the “Forbes 400” list. It is no longer a list of self-made men. It is now full of inherited wealth. While high incomes (high salaries, bonuses) are still the dominant means of wealth accumulation in the United States, the story is changing. We’re going to be looking nostalgically on the early 21st century when you still had the pre tense that the wealthy actually earned their wealth. By 2030, it will all be inherited.

All while failing to pay workers a minimum wage of $10.10.

France during the Belle Epoque, the years before World War I, was arguably a society much more ideologically committed to equality that we are today. In practise, however, society was completely dominated by a few very wealthy families, and the prospect of seriously taxing the great wealth was impossible. This means it is very hard to do anything to improve the conditions of ordinary workers. What this shows is that it is possible to have a society that claimed to be democratic, where all men are created equal, but the reality however is very different.

The scale of inherited fortune in America is so great that it makes them invisible. Wealth is so concentrated that a large segment of society is virtually unaware of its existence.

Most people who don’t have a business or economics background have no idea what real wealth means. For some, having a million dollars makes you wealthy. Having a salary of several thousands dollars. While that is vastly more comfortable than most people, the sheer size of the fortunes I’m talking about is so far outside our normal experience that it becomes invisible. These are people you will never meet, let alone have an idea of what they control. Most people don’t realise just how far the commanding heights are from you and me.

One of the main things that sets Australia apart from America is our tax system. We have higher taxation overall, not just higher tax on higher income brackets. That means we are able to pay for things like universal healthcare, income support for people with low incomes, support for young parents. This is the redistribution of wealth. Redistribution is a dirty word in America, despite the fact that it is essential for having a decent society.

Because of lower taxes, the average American is said to be better off than the average Australian, but that’s is mostly due to longer work hours. However to be in the bottom fifth of Australia is far better than being in the bottom fifth of the United States. Australia has a significantly higher minimum wage, and a number of government programs. The levels of inequality is pretty similar amongst most advanced countries, but the levels of inequality of disposable income is much higher in the US than in other countries, and that is because of the tax system.

Conservatives have this idea that if the rich were less rich, this wouldn’t make much of a difference to the working class. This simply is not true. Imagine taking a few percent of the national income away from the top one per cent and redistributing it to the bottom 20 per cent. That would make an enormous difference. Small surtaxes on high incomes largely finance services like basic, affordable health insurance for all. This kind of Robin Hoodism isn’t about punishing the rich for punishments sake, it’s about  redistribution making a better society.

One of the biggest issues in the disparities of income and wealth is the differing views on what should be done about it. There is this level of harshness in the debate, mostly coming from those who are well off. These are the people who have an incredible ability to spin any criticism as an incredible injustice. This should worry us – because it’s one thing for a powerless person to act in this way, let alone from one who possess high levels of influence because of the money they control.

The 350 of top American corporations were paid an average of 331 times higher than the average American. That’s an average of 11.7 million compared to the average worker who made just $35,239. Not only do the 1% in America earn a staggeringly higher percentage of national income, they also pay less federal tax. The poorest 20% of Americans pay an average of 11% income tax. The richest 1% pay just half that.

All this makes truly repugnant the argument, heard so often from the rich, that inequality doesn’t matter. Of course it matters. Inequality turns government into a protection force for the 1%. It is bought: tax breaks, havens, allowing large cooperation’s to house their money in tax-free zones, loopholes, carried interest and so on

Perhaps the most startling conclusions I’ve come across came from a study conducted by Martin Giles and Benjamin Page of Princeton. Analysing data collected between 1981 and 2002, they concluded that “America’s claims to being a democratic society are seriously threatened…the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.”

Is that really the path Australia wants to follow?