The Great Divide: Unequal Societies and What We Can Do About Them

Singapore realised that an economy could not succeed if most of its citizens were not participating in its growth or if large segments lacked adequate housing, access to health care, and retirement security. By insisting that individuals contribute significantly toward their own social welfare accounts, it avoided charges of being a nanny state. But by recognising the different capcities of individuals to meet these needs, it created a more cohesive society. By understanding that children cannot choose their parents - and that all children should have the right to develop their innate capacities - it created a more dynamic society.

The problem of multinational corporate tax avoidance is deeper, and requires more profound reform, including dealing with tax havens that shelter money for tax-evaders and facilitate money-laundering. Google and Apple hire the most talented lawyers, who know how to avoid taxes staying within the law. But there should be no room in our system for countries that are complicitous in tax avoidance. Why should taxpayers in Germany help bail out citizens in a country whose business model was based on tax avoidance and a race to the bottom – and why should citizens in any country allow their companies to take advantage of these predatory countries?

To say that Apple or Google simply took advantage of the current system is to let them off the hook too easily: the system didn't just come into being on its own. It was shaped from the start by lobbyists from large multinationals. Companies like General Electric lobbied for, and got, provisions that enabled them to avoid even more taxes. They lobbied for, and got, amnesty provisions that allowed them to bring their money back to the US at a special low rate, on the promise that the money would be invested in the country; and then they figured out how to comply with the letter of the law, while avoiding the spirit and intention. If Apple and Google stand for the opportunities afforded by globalisation, their attitudes towards tax avoidance have made them emblematic of what can, and is, going wrong with that system.

People were surprised when the financial firm MF Global, headed by Jon Corzine, suddenly collapsed into bankruptcy last year, leaving victims by the thousands as a result of actions that may prove to have been criminal; but given Wall Street’s recent history, I’m not sure people were all that surprised to learn that several MF Global executives would still be getting their bonuses. When corporate C.E.O.’s argue that wages have to be reduced or that there must be layoffs in order for companies to compete—and simultaneously increase their own compensation—workers rightly consider what is happening to be unfair. This in turn affects their efforts on the job, their loyalty to the firm, and their willingness to invest in its future. The widespread sense by workers in the Soviet Union that they were being mistreated in exactly this way—exploited by managers who lived high on the hog—played a major role in the hollowing out of the Soviet economy, and in its ultimate collapse. As the old Soviet joke had it, “They pretend to pay us, and we pretend to work.”

In a society in which inequality is widening, fairness is not just about wages and income, or wealth. It’s a far more generalized perception. Do I seem to have a stake in the direction society is going, or not? Do I share in the benefits of collective action, or not? If the answer is a loud “no,” then brace for a decline in motivation whose repercussions will be felt economically and in all aspects of civic life.