Drowning in the Rising Tide: Policy and Inequality in Australia

Yet despite this newfound celebrity, the contours of inequality are poorly understood. Over the past forty years, inequality has both risen and fallen depending on where you look.

Perhaps surprising, global income inequality - unless otherwise noted, “inequality” in this essay refers to income inequality - has fallen since 1980, continuing a decline that extends back over centuries. The biggest driver of this fall has been the exit of hundreds of millions of people from extreme poverty in Asia, and in particular, China. In 1988, more than half of China’s population lived on less than US$500 annually. Today more than half live on over US$2,000 a year. So at the global level, inequality continues its long-term decline.

But the public in Australia, and other developed countries, perceive that inequality is on the rise. And they are right: within rich countries, inequality has increased markedly. This is particularly the case in English-speaking countries, and it is true for both market incomes (before tax) and disposable incomes (after tax and transfers).

Other essays in this volume describe the scale and nature of rising inequality. The central question for this essay is why it has occurred, and specifically what are the policy decisions in Australia that have contributed to it.

Rich-world inequality has two drivers: technology and deregulation. Changing technology has allowed goods and services to be shared quickly and cheaply with billions of people. It doesn’t matter whether it’s an iPhone, or a song, or the scoring of a goal. This means that exceptionally talented people and companies can access vast audiences for their wares without the historical constraint of geography, and they garner extraordinary incomes as a result.

Steve Jobs, Bill Gates, Mark Zuckerberg, Larry Page and Sergey Brin have developed products that have been embraced by billions of consumers. Ed Sheeran recently occupied 16 places on the UK’s top 20 singles charts. Lionel Messi and Cristiano Ronaldo are the world’s matches are watched by 400 million people, three times the TV audience of the Super Bowl.