Why international inequality is the price we pay for freedom

Differences in wealth between the haves and have-nots are not inherently bad, although the richer set's excesses should be controlled for the benefit of society

By Ralf Dahrendorf  / 

Mon, Jan 23, 2006 - Page 9

In the last two decades, the world as a whole has gotten richer, but, while some national economies have advanced sharply, others have fallen farther behind. The increase in aggregate wealth has not led to the abolition, or even reduction, of poverty.

Much the same is true within countries. Almost everywhere, globalization has produced both a new class of multi-millionaires and an underclass comprising people who are not just poor in the statistical sense of earning less than half the national average, but who are excluded from opportunities that are supposed to be open to all.

Globalization's dynamism has benefited many, but it has also increased inequality. Is that necessarily a bad thing? There are many who think so. In fact, entire countries have a built-in egalitarian streak. They dislike the business leaders who take home huge sums even when they fail, and they hate to see poor and excluded people in their midst.

But, while it is comfortable to live in the social-democratic world of Scandinavia, Germany, and other European countries, many of them have purchased their equality on credit from future generations. Moreover, an egalitarian climate does not promote innovation and a sense of dynamic development. Creative individuals tend to leave societies in which there is strong pressure not to be different. Inequality is not merely compatible with freedom, but is often a result of and stimulus for freedom.

Is that the choice we have to make then: freedom or equality? Things are not quite so simple. A free society recognizes two limits to economic and general inequality. Both raise quite difficult practical questions, though they are clear in principle. Inequality is incompatible with freedom if it limits individuals' chances of participation in the political community, in the market, and in civil society. At the lower end of the social scale, this raises the old and vexing question of equality of opportunity. What is clear is that everyone must have access to elections and political parties, to education and the labor market, and to the associations of civil society.

In short, citizenship in the full sense of the word requires basic rights and the ability to enforce them. It also requires a basic economic status, including an income guarantee, which can be provided in a variety of ways.

One difficult question is where, exactly, to draw the line that defines the basic status to which all citizens are entitled. In most countries, it should probably be higher than it is now. Another difficult question is how the basic status is to be guaranteed.

The debate about individual income supplements versus general public services has become lively everywhere. It may well be resolved with different answers that accord with different countries' traditions, although tax credits and similar additions to people's incomes are more compatible with free societies.

At the upper end of the social and economic scale, a different issue arises. Many people object to business managers who take away in pay, bonuses, and stock options hundreds of millions of dollars from their companies. Indeed, there is a legitimate question whether the behavior of today's capitalists promotes the general acceptance of capitalism. But individual wealth becomes a problem only if and when it can be used to restrict others' chances of participation.

When wealth turns into unchecked power, something must be done to restrict it. What has come to be called money laundering, that is, the attempt to turn illicit gains into legitimate riches, provides one example of the need for action. There are others, including the question of inheritance taxes, which have long been regarded as a necessary component of a free society.

Nevertheless, while a free society recognizes limits to inequality, it also accepts that inequality exists, for it provides hope for many by showing what one might achieve with ability and luck -- or perhaps even luck alone. Inequality adds color and variety to societies; it is one of the marks of lively, flexible, and innovative countries. It is thus not bad in itself, even if its excesses must be capped in the name of citizenship for all. Social exclusion and personalized power through wealth are always unacceptable. But if we want freedom, then social and economic inequalities are a legitimate, and necessary, price to pay.

Ralf Dahrendorf is a member of the British House of Lords, a former rector of the London School of Economics, and a former warden of St. Antony's College, Oxford. Copyright: Project Syndicate/Institute for Human Sciences