The Case for Government Intervention in Reducing Inequality

 The Case for Government Intervention in Reducing Inequality

Rahul Ramya

28.07.2024 Patna , India

In today's world, the debate over the best way to reduce inequality and enhance the opportunities available to the poor remains a contentious issue. The failure of neoliberal policies and the mixed results of government intervention highlight the complexity of this challenge. This article explores why advocating for a system that empowers the poor and expands their freedoms is not only morally just but also a practical necessity. It argues for government intervention as the most effective means of achieving these goals, while addressing the potential drawbacks and historical lessons learned from different approaches.

Is there anything wrong with advocating for a system that allows the enhancement of a poor person's ability to live up to her potential and expand her freedom to achieve her dreams of a good, dignified life? If there is nothing wrong with such a stance, we should undertake practical exercises to find the ways to achieve this. We know that policies of neoliberalism—those based on an unfettered free-market philosophy—fail to generate any helpful environment, and trickle-down theories have long been proven a failed option. In such a situation, we have no other choice but to follow the policies of governmental interference. These include redistribution, financing high-return public investments through progressive taxation, and tilting the rules of the economic game towards ordinary workers through pre-distribution, which means changing the market distribution of income to make it more equitable.

The Role of Government Intervention

Why do we ask for intervention by the government and not another entity? The first reason is that the government is not a private body but a trustee of all of us and our collective trust. Second, no other entity is as all-encompassing as the government. Third, the government is ideally supposed to have no private interests. Fourth, a government, unlike a private entity, is bound to all citizens by both social and legal contracts, and no private entity has such characteristics. Fifth, except for the government, no other entity is empowered to make and implement rules on behalf of all people. Sixth, citizens can influence the government, not any private body, as every citizen has entrusted their contract to the government. Because of these reasons, we believe only the government can be expected to perform neutrally and discharge this function.

Historical Context and Flexibility of Social Democracies

We have a history of both neoliberal societies and government-intervened societies. In the former, we have seen that vast inequalities and the loss of freedom for the majority of the population are inevitable. However, we have also not always had good experiences with government interference. In the case of the government-intervention approach, we have two extremes. On the one hand, we have seen communist regimes where everything is decided by the government. This has resulted in a loss of freedom for all except those at the top, with even political elites having no secure future. Everything is opaque and unaccountable. On the other hand, we have the experiences of European social democracies, such as those in Scandinavian countries, and the New Deal of U.S. President F.D. Roosevelt. Both systems have their virtues and vices, but unlike their neoliberal, communist, and racist counterparts, they have ample flexibility to adapt to the aspirations of a larger portion of their citizens.

Addressing Potential Weaknesses

 Empirical Evidence

While the arguments presented are compelling, empirical evidence can strengthen the case for government intervention. Numerous studies have shown that progressive taxation and public investments in education, healthcare, and infrastructure lead to better social and economic outcomes. For instance, countries with higher levels of government intervention, like the Scandinavian nations, consistently rank high in global happiness and equality indices.

Inefficiencies and Corruption

One major critique of government intervention is the potential for inefficiency and corruption. While these concerns are valid, they are not insurmountable. Implementing transparency measures, strengthening institutions, and promoting civic engagement can mitigate these issues. Successful examples include the governance models in countries like Denmark and Finland, where high levels of public trust and accountability minimize corruption and inefficiency.

Complexity and Variation

The comparison between neoliberal and government-intervened societies must acknowledge the complexity and variation within these categories. Neoliberal policies have succeeded in specific contexts, particularly in fostering innovation and economic growth. However, a balanced approach that combines market mechanisms with robust government policies can provide a more sustainable and equitable framework. Mixed economies, like those in Germany and the Netherlands, illustrate how blending different elements can lead to better outcomes.

Conclusion

The case for government intervention in reducing inequality and enhancing opportunities for the poor is compelling. While there are valid concerns about the potential drawbacks, these can be addressed through empirical evidence, transparency, and a balanced approach. History shows that systems with flexibility and adaptability, like European social democracies, can effectively meet the aspirations of their citizens. By learning from past experiences and refining our strategies, we can create a more just and equitable society for all.