5. How could economic inequality be reduced?

The trend of economic inequality will not end if nothing is done to stop it. If anything, inequality will likely rise in the coming future without comprehensive intervention. As Rodrik suggests, “Advances in transportation and communications technologies render national borders more porous to foreign competition than they have ever been, and nothing short of drastic government restrictions can alter that.” The problem is that the international market doesn’t have a supreme political authority to regulate it. Therefore, countries must regulate domestically in order to affect economic inequality globally.

In one proposal by U.S. Senator Jeff Bingaman, domestic governments would put strict rules on corporations whom operate in their countries. The plan is to offer generous government subsidies and tax cuts for corporations who enter what is called the “A-Corp” program. To qualify as an A-Corp, companies would have to contribute at least 3 percent of their payroll to pensions, 2 percent to training and education, and would have to set caps on salaries of the highest-paid employees.The cap on total compensation means that the highest-paid employee (probably CEO) could not make more than 50 times that of the lowest paid full-time worker. It seems reasonable for the highest paid employee to earn 50 times more, rather than the 350 times more that is currently typical. Senator Bingaman also proposes a small tax on short-term trading, which would generate enormous revenue, that could be used for reducing inequality.The former Secretary of Labor, Robert Reich, has also proposed a small transfer tax on the sales of shares of stock. He suggests that this might slow the movement of capital slightly, and decrease some of the negative effects of competition.

The suggestions above could be effective in reducing economic inequalities in the world if national governments committed to implementing regulations. Capping executive pay, discouraging short-term stock trading, and creating rules to protect the welfare of of the lower classes would be practical methods to approaching the problem of economic inequality. The problem is that the governments and media outlets of the world are primarily controlled by the wealthy and prevent much of these important changes from happening. Citizens must rise up and force their respective governments to protect them from the new global economy.

6. What moral obligation do states have?

Obviously economic inequality is not an evil or morally unacceptable characteristic of a society. In fact, inequality is most certainly necessary to maintain a functional, healthy and motivated society. However, the extent that economic inequality exists in domestic and global society is what concerns us. As John Rawls said in The Law of Peoples, “The law of peoples….holds that inequalities are not always unjust and, that when they are, it is because of their unjust effects on the basic structure of the Society of Peoples, and on relations among peoples and among their members.” This is similar to the view held by this paper; it is the highly unjust effects of economic inequality that makes it morally wrong, but in my view the extreme inequality of relative gains in the world is also unjust.

Rawls provides three reasons for reducing inequalities within domestic society. The first reason for reducing inequalities is to relieve the suffering and hardships of those in poverty. Rawls further suggests that once the poor have what they need to be fully functional and effective in society, then there is no longer a need to narrow the gap between rich and poor. Second, Rawls suggests that economic inequalities lead to some citizens being, “…stigmatized and treated as inferiors…”, which he says is unjust. Finally, in accord with earlier findings of this paper, Rawls also suggests that a gap between rich and poor has profound implications on fairness in the political processes. Rawls believes that every citizen should have equal opportunity of attaining social or political positions. However, Rawls does suggests that public financing of political parties and campaigns could offset the gap in power between rich and poor people.

One rather radical proposition of Rawlsian theory is to imagine oneself behind a “veil of ignorance.” Basically, if we were to create new rules for a society and we knew that goods would be unequally distributed, how would we want them allocated? Rawls claims that most people would want goods to be equal, but would allow inequalities only if they were attached to positions open to everyone and advantaged all. This is Rawls’s difference principle, which states: inequalities in wealth, income, and social power are permissible only if they worked to everyones advantage and maximally benefit the least advantaged class in society. The current level of global inequality is in stark violation to this principle as it benefits those who are most advantaged. Despite the nature of global inequality, Rawls only prescribed the difference principal, and reduction of economic inequalities, to domestic societies.

However, Charles Beitz, a Cosmopolitan, has argued that both international interdependence, and the principle of respect for individuals, mandates that the difference principle be applied universally. As Beitz said, “Global economic and political inequalities are so great that one would think those who hold to liberal egalitarian principles in the domestic politics of the rich countries would be more concerned about them, and on different grounds, than many evidently are.” Beitz’s assertion seems reasonable. Clearly interdependence and globalization have changed the world so dramatically, that new rules are needed to prevent the change from increasing world inequalities. The reasons provided by Rawls for reducing inequalities in the domestic sphere are equally applicable to international relations.

Even if global inequalities were permissible, in a world of interdependence States have a moral obligation to address not only global disparities, but also to address disparities that are created domestically in other States. This is because economic self-determination does not exist and cannot exist in the new globalized economy. The economic situation of every country in todays world, is dependent on that of another. As Beitz said, “International interdependence involves a complex and substantial pattern of social interactions, which produces benefits and burdens that would not exist if national economies were autarkic.” If countries were autarkic, or self-sufficient, it might be ethical to ignore their national economies, but due to the level of interdependence that exists, states are morally obligated to mitigate the negative effects that the global economy may have on particular countries or groups of people.