6.7.2.3 Setting Intervention Policies for Inequality

(This is a current page, from the Patterns of Power Edition 3 book contents.  An archived copy of this page is held at https://www.patternsofpower.org/edition03/6723.htm)

Incomes vary across a vast range, from those who are starving up to the mega-rich.  The 6-layer model shown below is offered to provide clarity in defining objectives for policy interventions, so that people can see the justifications for each measure:

These levels, and the policy instruments which can be used to adjust the differentials between them, are described below, starting from the bottom:

  • A humanitarian intervention level might be defined as providing some of the basic requirements which are listed in Article 25 of the Universal Declaration of Human Rights, such as “food, clothing, housing and medical care” (Appendix 1). It can be seen as a moral imperative (4.3.5.1).  An economic case can also be made for helping developing countries to become self-sufficient (3.5.8).  The United Nations is a forum for negotiating the level at which aid should be given, and it can coordinate relief operations across the globe, but it currently has to be supplemented by private charity and non-governmental organisations (NGOs).
  • A national level of socio-economic entitlements for people who cannot work might be set somewhat higher than the humanitarian intervention level, if that country felt able to afford it. People in wealthier countries need more money to maintain a sense of dignity than those in poor countries: in Amartya Sen’s terminology they have a different “relational perspective”.[1]  National entitlements are negotiated in the country’s political system (6.7.1).
  • Politicians set a level for a minimum wage. The amount by which the minimum wage exceeds the level of welfare benefits is a motivation to work, which is part of its economic impact (3.3.3.3), and it is also important politically – so that those in work don’t resent the level of benefits paid to those who don’t work.
  • The national average income is, by definition, above the minimum wage; it depends upon a country’s economic performance.
  • The incomes of the wealthiest people tend to be very much higher than the average – a disparity which is increasing (3.5.6.2). The differences between incomes are a reflection of the economic inequality in a society.

There are several ways of reducing the disparities in people’s economic well-being, as described in the next section (6.7.2.4).

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[1] Amartya Sen described what he termed “differences in relational perspectives” in The Idea of Justice (chap.  12, pp.  255-6), in a section entitled Poverty as Capability Deprivation.  He also mentioned that Adam Smith had made the same point in the Wealth of Nations.