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Addressing Wealth Inequality in a Reunited Ireland.
Unrestrained
income and
wealth inequality in functioning democracies, be by design or
neglect, will inevitably lead to social and political unrest and in
extreme situations to political violence.
Introduction
The prime cause of
income/wealth inequality in modern-day democracies including
Ireland, is the shrinking of middle-class households and their
cumulative share of the total national wealth. If this trend
continues, the wealthiest 20% of households will continue to
increase their share at the expense of the lower 80%. Such a
prospect, if unchecked, will stress the mainstays of functioning and
stable democracies i.e., social cohesion, government institutions
and economic systems.
This disparity in
income and wealth distribution is
fundamentally attributable to economic freedom, a mainstay of
democracy and the driving force in market-based economies. However,
in addition to economic freedom, there are other factors
at play
including economic policies, private equity,
trading platforms, professional
networking, inherited wealth and a plethora of other tangible and
intangibles assets that skews
the distribution of wealth in
favor of
the wealthiest households. As unfair as it may seem these
wealth
related advantages are not illegal nonetheless, as the consequential wealth
generated is passive income,
it should be subjected to a separate wealth
tax, especially for the ultra-wealthy/ultra-rich.
The challenge faced
by democracies embracing mixed-market economic systems, including
Ireland, is how to ensure that the national wealth, the product of
multiple factors including
income, household savings and asset
returns, is distributed as fairly as possible amongst national
households. There is no doubt that the system
favors wealthier households who have the resources, knowledge and
networks to game the system --- if so inclined. If that is the
essence
of a
mixed-market economic system, what then must be done to compensate
the disadvantaged, or level the field for less privileged players?.
The plight of the middle class in Ireland
The middle-class in
Ireland is primarily made up of practicing professionals, the
skilled trades, small business owners and productive farm owners. It
is the primary resource market for the economy. It provides the
intellectual property, knowledge base, the expertise and labor
needed to keep the economy afloat. The distribution of wealth should
reflect that fact but, owing to an uneven progressive tax system and
high living costs, many middle-class households are left with little
or no disposable income. They rightfully see themselves as victims
of social malaise, myopic government policies and greedflation,
pediments that left unchecked portend an uncertain future for middle class families. As a result, many of Ireland’s brightest
sons and daughters are leaving for greener pastures.
The following
information regarding wealth inequality in Ireland was sourced from
the
Household Finance and Consumption Survey (HFCS) 2020
published in May 2022 by the Central Statistics Office (CSO). In the
Income and Wealth Inequality section of the survey, Figure 8.2 plots
the distribution of the cumulative income/wealth versus cumulative
households along a Lorenz cur ve.
In addition to the Lorenz curve’s graphical
representation of inequality, the Gini coefficient, also included in
the survey is a statistical measure of inequality on a scale of
between 0 and 1, where zero would denote perfect equality and one
would denote perfect inequality. The following data taken from the
HFCS survey is based on cumulative totals.
10% of households
held 1.8% of gross household income and -0.6% of net household
wealth.
30% of households
held 9 % of gross household income and 0.4% of net household wealth.
50% of households
held 21.4% of gross household income and 7.8% of net household
wealth.
70% of households
held
40.4% of gross household income and 23.3% of net household
wealth.
90% of households
held 70.1% of gross household income and 54.3% of net household
wealth.
The top 10% of households held 29.9% of
gross household income and 46.6% of net household wealth.
The Gini
coefficient for gross household income was 0.43 and for net
household wealth 0.65.
Although these
percentages denote substantial inequality in gross household income
and net household wealth in Ireland, nevertheless they are in line
with most other countries with market-based economies in Europe and
elsewhere throughout the world.
That being said, there
are a number of European countries including Norway 22.7%, Slovakia
23.2% and Slovenia 24% who have lower Gini coefficients than
Ireland's 29.2%.
Source:
Gini Coefficient by Country 2024 (worldpopulationreview.com)
An examination of the
Lorenz curve in the linked HFCS survey clearly shows that
middle-class households are heavily leaned on with respect to their
share of the cumulative national income and wealth. The primary
reason for that
is that middle-class households are
saddled with proportionally higher taxes than upper-class households
who generally have other sources of income or are independently
wealthy.
How this
would change
in a
reunited Ireland
Wealth inequality
will be high on the list of priorities in the reunited Ireland
described in the articles published on this website. Acknowledging
that the mixed-market economic system that presently fuels Ireland’s
economy
will continue to do so in a
reunited Ireland,
as it still is the best system despite its flaws and also the system
the vast majority of Irish people want. Every
reasonable effort will be made to close the
loopholes that skews the distribution of the nation’s wealth to the
higher percentiles of households. Regulations and loopholes
that favor the upper classes to the detriment of
the others will be eliminated or
otherwise taxed appropriately.
Manipulating the
existing system of taxes and social programs will not achieve a
sustainable solution to the wealth inequality problem. In order to
achieve such an outcome, the existing tax system needs to be
overhauled to reduce the burden on the middle class. To compensate
for the resultant shortfall in revenue, a wealth tax will need to be
imposed on the ultra-rich.
Another
wealth-related issue that will be brought up to date is inheritance
tax. The question to be answered there is how much of the billions
that some individuals hold can be passed along
to future
generations as inheritance. Logically speaking, it is impossible
for any individual to
have earned billions in a lifetime through hard work
or well-regulated investments. The only way such a vast fortune could be amassed
would be through gaming the system. Therefore, the amount of a large
fortune that can be passed down to future generations of off-springs
must be curtailed as
they do not have a constitutional or divine right to live privileged
lifestyles
at the expense of ordinary citizens.
The age of dynasties is over.
In addition to
overhauling the tax system, a comprehensive review of the social
services system and associated programs will be conducted to
evaluate effectiveness and fairness and to determine why poverty,
homelessness, addiction, lawlessness and other antisocial problems
continue to increase and consume so much of the nation’s resources.
That will be done before any more resources are expended on
solutions that do not fix the problem.
It’s a given that a
certain percentage of any population through no fault of their own
will need assistance to survive. It’s a national responsibility to
ensure that their needs are
met. It’s also a given that
there are
other individuals who manipulate the system to collect welfare
or some other benefit
to which they are not entitled. To counter that problem, means
testing, compliance and
enforcement must be integral to the welfare system.
As Ireland would be a federal republic
after reunification under the Eire Athaontaithe proposal, social
services would no longer be an exclusive national government
function. Regional authorities would be responsible for the
management of delivery systems, means testing,
quality assurance, compliance and enforcement. An
inter-government agency would be
responsible for policy, draft legislation, regulations, quality and
compliance procedures and best practices. The inter-government
agency would also retain sole responsibility for all data storage
and retrieval systems for the regions.
Regional
and local control for the delivery,
means testing,
quality assurance, compliance and enforcement of
social services would help eliminate many of the problems associated
with centralized control.
In Conclusion
Irish Reunification is
much more than a prerequisite for civil and
political rights. It's
also a prerequisite for an enduring peace,
economic stability and sustainability, the fair and equitable
distribution of resources and burdens, and the
collective support of the social infrastructure. Reunification is
the quintessence of a just and inclusive all-Ireland
democratic society, a
desirable and achievable goal for all
but those with a stake in partitionist politics.
TMMTP
Date posted 4/29/2024
Updated 09/07/2024 |
