The Ethics of Inequality

            Income inequality in America has recently become a hot-button issue in public discourse. This naturally begs the question of whether or not there is an established system capable of solving this issue that could be adapted from another country. This question had arisen from reading multiple articles dealing with equality, the most prominent of these are from the authors Robert Nozick and John Rawls. In terms of demographics it is shown that Scandinavian countries fare the best in terms of minimizing inequality. The value systems of America and Scandinavian countries vary incredibly, and are reflected in their social security systems. The differences in these systems bring up many questions. Firstly: what would Nozick and Rawls think about each of these systems  in terms of fairness of the system, and what the long run and short run effects on equality be? Additionally, do any hurdles to introducing a more equitable society exist in America, and what accounts for the willingness of Scandinavian countries to have these types of systems? Finally, is the type of system that Scandinavian countries have desirable in the United States?

In assessing these questions it is first necessary to understand the level of inequality in the United States relative to Scandinavian countries. In the United States, the lowest 10% of the population in terms of income accounted for 2% of income or consumption, as opposed to 30% for the top 10%, and the GINI coefficient (a number that measures income inequality, a higher number means greater inequality) in the United States stood at 45 in 2007. These numbers look worse when we put them into perspective by comparing them to those of Scandinavian countries.  For example, in Norway and Sweden the GINI coefficient stood at 25 and 23, respectively; in fact, Sweden currently has the lowest GINI coefficient in the world. In terms of income distribution in Sweden the lowest 10% of the population accounts for 3.6% of consumption, whereas the top 10% accounts for 22.2%. In Norway the distribution is largely the same, with the bottom 10% accounting for 3.9% of consumption, and the top 10% accounting for 21% of consumption. (1)

To understand how Rawls would feel about equality in America currently, one needs to understand his philosophical stance on the subject. Rawls was a proponent of using a tool called the “veil of ignorance.” What this entailed was organizing a society in such a way that everybody would agree to the principles which govern it, while completely ignorant to their own position in said society. (2) This would mean that an impartial group of citizens would agree on what social welfare programs would be in place without knowing their own position in the society they would be creating the systems for. The idea behind this process is that since the people agreeing on the rules are just as likely to be in a high position as a low position in this society, the systems they would put in place would be fair and equitable on aggregate.  In accordance with this view it would seem that Rawls would favor the Scandinavian system, as represented by Sweden and Norway, over the American system as by all objective metrics America has greater income inequality.

Where this becomes slightly obtuse is when one incorporates the rest of Rawls’ ideas into the model. Rawls believes that one should not get an advantage at the expense of another person in the system. On the basic level it would seem that this would also favor the Scandinavian model, as the income gap between the upper and lower classes is lower in Sweden and Norway, but this is largely due to redistribution of wealth. This brings into question whether or not Rawls would find this method to be satisfactory, as the people on the lower ends of the income spectrum are benefitting at the expense of those at the higher end of the income spectrum. This necessarily brings into question whether or not this method can be considered an unfair redistribution. Since the people in the lower income bracket were put at a disadvantage to begin with, is it necessarily bad that the rich get taxed at a higher rate? The answer to this question is subjective under the guidelines put forth by Rawls, and therefore cannot be definitively answered either way.

In order to further explore this question one can turn to the work of Nozick. The chapter “The Entitlement Theory” from his work “Anarchy, State and Utopia” addresses the question of what leads to an equitable society through the idea that in order to have a truly equitable and just society one must take into account all the forces that led to the current state. He calls this the “historical perspective.” He states that this historical perspective is counter to the predominant practice of using “time slices” in addressing inequality. He feels that time slices, or addressing a system as it stands at a single point of time regardless of the forces that created the system, is a fundamentally flawed way of trying to address the problems in a system and create true equality. He feels as though utilitarians do not have a complete view of the justness of the distribution of goods because if two systems have the same qualities on aggregate they are created equal. Nozick believes that in order to create a system with true equality and a just distribution of goods, one must take into account the underlying social biases and soft forces which created the current system. For example, if a group had received poor education relative to their peers due to a systematic failing of society, it would not be fair to categorize them in the same manner as the aggregate group, rather one must take this quality into account in making redistributive decisions.

Nozick feels as though a minimal state is the best form of government. In support of this idea he states that in terms of equality there have to be certain assumptions regarding the distribution of goods. He states that these three assumptions are: 1. A person who acquires a holding in accordance with the principle of justice in acquisition is entitled to that holding. 2. A person who acquires a holding in accordance with the principle of justice in transfer, from someone else entitled to the holding, is entitled to the holding. 3. No one is entitled to a holding except by (repeated) applications of 1 and 2. In this he assumes that all transfers of materials or goods are voluntary and justified, and therefore by definition equitable. (3) This assumption is therefore violated by differential treatment and opportunities for people of different classes in a society. This is because people in the higher classes can unjustly acquire certain things, such as an education by the virtue of the fact that they are afforded this opportunity. Nozick could, however, argue that there is nothing undesirable about such a distribution.

When one takes this view and puts its assumptions onto the current systems of America and Scandinavia, we can extrapolate how Nozick would view the current systems. In America we value economic freedom over economic equality. This is not necessarily a bad operating practice, but as a result America’s safety nets are not as robust as Sweden or Norway’s. Where this comes into contact with Nozick’s theories is in the area of deciding what the proper distribution should be. By taking Nozick’s theory and applying it to the current American system we can assume that there would be areas in which Nozick would agree that there has been a violation of the principle of justice in acquisition that should be rectified. This is because the upper class of American society has been able to leverage its position in order to attain outsized gains. For example, since school districts in the United States are funded by property taxes, the districts that are have more money are able to provide a more expensive, and therefore qualitatively superior education for their residents than an area that has less money. The children of citizens that are better off also benefit from their position from the fact that they benefit from their parent’s social connections. This clearly violates the assumption of justice in acquisition.

It can be said that this phenomenon is inherent to any culture by the virtue that those that are relatively better off often have more powerful social connections. The question then becomes what about the system is above the standard threshold for injustice, and what is the best method for addressing the flaws in the system. Scandinavian countries have tried to create equality through highly progressive tax rates. The theoretical backing to this method is that it will create equality of opportunity in the system. When one looks at the system overall, however, it can be argued that the Scandinavian models would also violate the theories of justice in acquisition and in transfer. It could be argued that the models violate the theory of justice above the standard threshold in the fact that since the social safety net is so strong, there is a lot of room for people who do not deserve to get advantages under the system to receive them. This is because they were not in their positions due to historical oppression, and therefore did not deserve to be benefactors of the redistribution overall. This argument is subjective in the fact that it is up to an individual to determine what rights are universal, and what rights should be up to the individual to provide. If universal rights are defined as universal health care, and income equality, then the Scandinavian model makes sense, and is not in conflict with Nozick. If universal rights are defined as equal opportunity, however, it can be seen that the Swedish and Norwegian models are overbearing. The reason why these models can be seen as violating the principle of justice in transfer is closely related to the reason why it can be argued to be violating the principle of justice in acquisition. In these models wealth is distributed from the higher income earners to the lower income earners regardless of the historical reason for the earner’s relative position. This violates the principle of justice in transfer because a large amount of these transfers are unjustified.

When exploring the Scandinavian progressive tax system through the viewpoint of Rawls, it is important to ask what people would agree to be appropriate tax rates in a society. Since America has a preponderance to value lower tax rates overall, it is questionable whether or not Americans, when put under a “veil of ignorance” would choose to have Scandinavian tax rates. This doesn’t mean that the Scandinavian system is less just than the American system, rather that Scandinavian values would not necessarily show through in a system made by Americans. This begs the question of whether or not the social programs of a society has to reflect the predominant value system of the society it serves in order to be a system that is just for that society. This expands into the question of the scope of the veil of ignorance. Does the veil have to be universal to a global society, or should it be universal to a specific society or nation? While this question is subjective overall, it brings forth a prospective answer to the differences in the value systems of America and Scandinavian welfare programs, and by extension, inequality in the societies overall. That is, they reflect the values of the society to which they belong.

Taking into account how these social scientists would view the differing systems in America and Scandinavia, the question then becomes which one is superior? This is a multifaceted question. For one, the systems in place can largely be seen as a reflection of the societies which they serve. Americans value independence, both socially and economically, whereas the Scandinavian systems are built around valuing equality. For this reason, I do not think that a Scandinavian style system would work in the United States, as the value system and social institution would not converge. In terms of which one is better, it is necessary to question what metric one is using to quantify superiority. If equality were the only measure the Scandinavian countries would far and away be the superior system. This measurement might be fairly clean-cut and neat, but it does not give the full picture of the impact of the system. In the end, however, the growing gap between the rich and the poor in the United States is a large problem economically and socially, and in the long run it may be of value to look to other models to help solve this problem. Nozick and Rawls may not have thought that they are perfect, but the Scandinavian systems are successful in reducing inequality, so maybe America can learn something from their social institutions after all.

  2. Rawls, John. A Theory of Justice. Delhi: Universal Law Co, 2010. Print.
  3. Nozick, Robert. Anarchy, State, and Utopia. Malden [etc.: Blackwell Publ., 2009. Print.
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2 Responses to The Ethics of Inequality

  1. MDHarbin says:

    You pose some great questions, but I particularly like the “veil of ignorance” discussion you provoke. I’m just not sure I want to become Nordic just yet…

  2. Jordi says:

    Very well-reasoned. I am unsure if in our reading it is clear you get to bring your “American-ness” or “Scandinavian-ness” with you. In other words, are cultural factors also to be excluded from the rational, ethical actors who make “the rules” ahead of time?

    Different point: i know we use equality as you do here, but it strikes me as a misnomer. Scandinavia is not a society of “equals.” There is less inequality to be sure, but it does not produce “same outcomes.” Why would this matter? Well, it may matter for how and why those tax policies are adopted.

    Finally, my own take on freedom and equality of opportunity here is that it is a very conflictual and negotiated relationship. Much of what we take for granted in US society came from periods of seeking to direct or alter the impacts of the most unregulated, rawest forms of capitalist political economy: five day work weeks, overtime, basic occupational safety, health insurance (of any kind), social security and so on.

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