During the 1980s and 1990s, a number of countries were ruled by political parties upholding the credo of “market fundamentalism” as their governments vigorously pushed neoliberalism.
From the standpoint of this philosophy, economic disparities between different countries and regions and income differences among individuals are only natural. It said that people and enterprises of a society that has no disparities would lose vitality and incentives to work.
Market fundamentalists believe, therefore, that disparities motivate the rich to seek greater wealth and encourage the poor to work harder to overcome their poverty.
Very few people would regard disparities resulting from remunerations for individuals’ different efforts or talent as unjust. But disagreements would likely occur on the degrees of such disparities.
From the 1980s to the first decade of the 21st century, the pay of top corporate managers in the United States skyrocketed so much that it is no longer unusual for a CEO to earn several million dollars a year.
During the same period, though, 90 percent of the increase in national income went into the pockets of people in the top 20 percent of the income brackets. But there was with little or no trickling down to the bottom 20 percent.
In 1970, an average corporate CEO used to earn 45 times as much as an ordinary worker’s pay. In 2006, an average CEO earned 1,723 times more than an ordinary worker. Statistics for 2007 show that the wealthiest 1 percent of the population owned 34.6 percent of all assets and the top 20 percent 85.1 percent of all assets.
Such an incredible expansion of income disparity led angry youths to launch the huge protest movement “Occupy Wall Street” in November 2011 with the slogan of “We are the 99%.”
Against this background, 2012 presidential hopefuls of the Republican Party entered into primaries. They were pushed into an ambivalent position in which they have to win support from the rich while at the same time paying due consideration to low income people.
In April, Rick Santorum, who had claimed to be an orthodox conservative, was forced to withdraw from the race, thus assuring moderate conservative Mitt Romney of the GOP nomination.
The former governor of Massachusetts has a liberal tinge. But he is one of the richest men in the U.S. and once led a major investment firm on Wall Street. It is interesting to consider the issues with which he will take on President Barack Obama.
Exasperation against growing income disparity has also spread to Europe, where large numbers of protesters took to the streets. In the French presidential election last month, Francois Hollande, a Socialist, unseated incumbent Nicolas Sarkozy, ushering in the first leftist government in France in 17 years.
Hollande’s principal policies may be summarized as follows:
• Give top priority to achieving economic growth and expand employment — in stark contrast with his predecessor’s emphasis on maintaining fiscal disciplines and austerity programs.
• Seek to boost tax revenue by raising taxes on the wealthy and big corporations, rather than by raising the rate of the value-added tax. It has been reported that he will set three different corporation tax rates — 35 percent for large businesses, 30 percent for medium-size and small companies and 15 percent for the smallest enterprises.
• Work toward establishing a “positive” welfare society that will provide employment opportunities to the socially weak through improved vocational training and education.
• Regulate speculative activities by banks and hedge funds and prevent speculative money from disrupting the real economy.
• Reduce France’s reliance on nuclear power from the current 75 percent of the total electricity generation to 50 percent by 2025.
• Withdraw French troops from Afghanistan immediately.
• Approve same-sex marriage and child adoption by same-sex couples.
• Grant foreign residents the right to vote in local elections.
All these represent a French version of The Third Way, as advocated by British Prime Minister Tony Blair in the late 1990s. The outcomes of the general elections, in which leftist forces were expected to win, are likely to be helpful for Hollande as he tries to follow through these pledges.
Growing economic disparity is also conspicuous in Japan as exemplified by the recent sharp increase in the number of irregular workers.
Prime Minister Yoshihiko Noda, head of the Democratic Party of Japan, which is supposed to be a liberal group, has stated that the consumption tax is the fairest of all taxes. Is Noda not aware of the regressive nature of the consumption tax?
Even though Japan no longer rigidly follows its traditional workplace practices like lifetime employment and wages based on seniority, its unemployment problem does not appear as serious as in other industrial countries of the West.
But the moment has almost disappeared from Japanese society in which to entice people of the younger generation to follow their Western counterparts who have rallied around the “Occupy Wall Street” slogan. It is as if they had been so used to living in an egalitarian society that they have become insensitive to new phenomena like inequality and disparity, just as citizens of the former Soviet bloc states had been.
The manifesto with which the DPJ won the 2009 Lower House election was as liberal as anything could have been. Prime Minister Yukio Hatoyama, an idealist who sought to shift political power from bureaucrats to elected politicians, had to resign only nine months into power because he could not endure the gap that existed between his ideals and reality.
His successor Naoto Kan, who proclaimed to be a realist, was also short-lived in his office. A special law to promote renewable energy became his only notable legislative accomplishment.
Noda, who followed Kan, is under the complete control of bureaucrats of the Finance Ministry and is more conservative than liberal.
Japanese people had hoped for drastic changes in politics with the coming to power of the DPJ. But it must be said that their hope has been completely dashed.
Takamitsu Sawa is president of Shiga University, Japan.