Economic Equality

Economic equality may have different interpretations based on different perspectives. Primarily, economic equality is closely identified with socialist and Marxian thoughts. In the Marxian perspective, economic-based class inequality is the primary form of inequality that informs all other dimensions. Economic equality demands change in the basic structure of society as it seeks social ownership of the means of production. Thus, social ownership of the means of production, abolition of classes and abolition of private property are the main aspects of economic equality as per the Marxian perspective.

However, to completely identify economic equality with the Marxian perspective alone may not be appropriate. There is an alternative interpretation of economic equality, which draws from the liberal–capitalist perspective in which economic equality implies equality in choosing economic activity, trade or profession. There are two basic assumptions in liberal–capitalist notion of economic equality: (i) equal right to private property, and (ii) equal liberty of contract. Equality of private property is the basis of entrepreneurial activity and economic freedom. Liberty of contract is considered as the basic factor that provides equality in contractual obligations and rights. Even, relationship between the capitalist and industry owner and the wage earner and worker is considered as contractual relations based on equality of choice. The one who has the capital and means of production and the one who has labour come together. They contract with each other capitalist to provide wage and worker to provide labour. This constitutes economic transaction based on free choice and equality of contract. The assumption behind equality based on liberty of contract is that there is no fixed capitalist and/or wager earner. They all are subject to social mobility and circulation. Thus, there is no permanent economic inequality. One can move from the labour class to become a capitalist. However, the opposite is not generally emphasized much.

A third perspective on economic equality is of welfare-based measures. The positive liberal and welfare perspective takes a position, which moderates the Marxian, and the liberal–capitalist positions. While accepting that equal right to private property is retained and without establishing social ownership of means of productions, the Welfare perspective seeks to provide economic equality through a variety of redistribution mechanisms. It includes: (i) redistribution of income and wealth in society through the means of differential or progressive taxation (more you earn, more tax you pay as tax rates are as per income slabs), (ii) transfer payments to those who are unemployed or unemployable (e.g., in India, age-old pension scheme, guaranteed employment to unemployed under Rural Employment Guarantee Programme, etc.), (iii) support to needy in providing a level-playing field in education, employment, etc. (iv) regulation of industrial relations and working conditions, etc.

Thus, economic equality has been understood differently which includes equality of economic transactions at the one end and social ownership at the other. Criteria that could be applied to present economic equality in the two perspectives may be what Nozick at the one end and Marx on the other end say. Nozick presents a libertarian perspective and would like economic equality to be based on the criteria of ‘from each according to what he chooses, to each according to what he makes for himself (with the contracted aid of others)’. This means one is entitled to get what one creates after choosing the means. However, the Marxian dictum of distribution in communist system invokes a somewhat different criteria, ‘from each according to his ability, to each according to his needs’. These are, of course, criteria of ideal distribution from libertarian and communist perspective, respectively. In reality, these are still to be applied and tested. What we get as economic equality is predominantly welfare-based initiatives and redistribution of income and other material benefits. It goes without saying that economic equality, or at least absence of extreme economic inequality, is very much required for successful operation of democracy. Aristotle had rightly desired that a predominant middle class, who makes a balanced state, is important for polity.

The Marxian diagnosis of economic inequality and class conflict in the liberal–capitalist society has been debated to test direction of his prediction. It has been argued that in the Western countries, a variety of social changes have occurred in class structure. The line of argument, that in Western industrial economies class inequalities as predicted by Marx and other Marxian theorists do not exist anymore, has been widely debated. James Burnham in his The Managerial Revolution argues that the ownership of means of production is no more with the capitalist class. This is because those who are managing the affairs of the industry and capital are not the same who have invested the capital. The separation of the owner and the manager of the capital have mitigated the Marxist rigour of conflict between the capitalist and the workers. Further, Raymond Aron, a political sociologist, while discussing Karl Marx in his book, Main Currents of Sociological Thoughts has argued that ownership of capital has become public. It means that shareholding of the companies and enterprises has become public and, in this way, industrial economies are no more based on the ownership of the capitalists in the sense Marx understood. German sociologist, Ralph Dahrendorf in his book, Class and Class Conflict in Industrial Society argues that working class is no more a class, as Marx understood. This is primarily because of what Dahrendorf says, ‘decomposition of labour’.⁵¹ By ‘decomposition of labour’, Dahrendorf draws attention to the differentiation of proletariat between manual, semi-skilled and skilled workers. This, in fact, is opposite to what Marx had predicted as proletrianization, that the capitalist economy would result in sharp class conflict and all members of lower middle class, lumpen proletariat; petty bourgeois would progressively join the rank of the proletariat. Dahrendorf argues that what is happening is contrary to what Marx pointed out. Two other sociologists, Clark Kerr and Jessie Bernard have argued that advanced industrialism requires skilled and highly educated workforce and such a workforce lives an affluent lifestyle. Contrary to proletrianization of the lower middle class, petty bourgeoisie and lumpen proletariat as predicted by Marx, is now argued, embourgeoisement of the labour class is taking place. This implies ‘the affluent worker adopt middle-class norms, values and attitudes … and life styles.’⁵² These arguments have further prompted sociologists like Jessie Bernard to state that ‘Marx was correct in emphasizing the importance of economic factors but wrong in his prediction of the direction of social change.’⁵³

To some extent, it is true that economic and urban development and state intervention have led to mitigation of extreme of inequalities and social mobility. However, culturally and attitudinally institutionalized behaviour and discriminations could not be easily rooted out from society. Many theorists have argued that many forms of social inequalities such as caste, class, gender and even racial, are subsiding due to industrial economy, increasing employment opportunity in the service sector and urban lifestyle. In fact, in India also, we can see expansion of the service sector such as banking, insurance, share market, credit rating, investment, etc., which employ skilled and educated workforce. Additionally, emergence of areas such as Information Technology (IT) for example, has altogether a different workforce requirement. Even in an industrial set-up, mechanization and automation reduces the manual workforce repquirement. In such a scenario, class based social inequality needs to be understood from a new perspective involving a subtle way of exploitation, for example, condition of employees in Business Process Outsourcing (BPO) sector, consumption and representation-based alienation (consumer driven entertainment, mass advertising as if market is a democratic haven) and progressive exclusion of a vast majority from any type of choice in education, employment and living (urban slums) etc.