Smart and stupid ways to deal with inequality

AMERICAN Nobel Prize laureate Joseph Stiglitz was recently in town, and commented on the local economy’s prospects. According to the influential economist, who was named by Foreign Policy magazine on its list of top global thinkers, income inequality is a major challenge for the government to tackle.
“If a society makes someone like Bill Gates richer and richer, it does not mean it is performing well,” he said.
Macau is certainly capable of creating billionaires, but there are doubts regarding the sustainability of its middle class, not to mention the growing low-wage workforce (especially if we include the non-resident workers, since it is not conceivable to argue that the gov’t is ruling only for the wellbeing of the residents, ignoring a significant part of the population).
Chui Sai On has been trying to deal with inequality by increasing the cash handouts (in the last policy address it was announced that they were raised to MOP9,000 and 5,400 for permanent and non-permanent residents respectively) and subsidies targeted at the more fragile groups, such as the elderly. In this regard, it was announced that the elderly will see their pensions increase to MOP3,000 per month, with a subsidy of MOP7,000 a year. A social security scheme that allows some reassurance for residents’ older years is also being implemented.
Are these measures enough to keep the problem of inequality from growing to scandalous proportions? It seems that Mr Stiglitz didn’t have a take on that. It’s a pity, since the reply is so complex that a Nobel laureate could help.
The inequality problem is, of course, part of capitalism. As the humorist George Carlin said: “Capitalism tries for a delicate balance: It attempts to work things out so that everyone gets just enough stuff to keep them from getting violent and trying to take other people’s stuff.”
Recent examples in Switzerland and Venezuela showcase, respectively, smart and stupid ways to deal with the problem of inequality. In Switzerland, citizens are asked if companies should limit executives’ salaries to 12 times that of a company’s lowest paid employee. The referendum happened after public outrage over the levels of pay and bonuses for top management positions. As expected, according to Bloomberg, “Swiss corporations and the government have joined forces to oppose the so-called 1:12 initiative.” The proposal was rejected yesterday.
In Venezuela, South America’s biggest oil producer, President Nicolas Maduro initiated an “economic war,” using special decree powers to set a 30 percent cap on profit margins for businesses. Facing an annual inflation rate that has almost tripled since the start of the year, Maduro blames the “parasitic bourgeoisie” and has encouraged the looting of shops whose owners didn’t abide by the limits on profit margins.
Hugo Chavez’ successor has also announced other new measures, like the “early Christmas” in Venezuela starting Nov. 1. “We want happiness for all people,” he justified, informing  workers in the country that they will receive most of their bonuses and pensions nearly a month early.
But, Mr Maduro, what will happen when the real Christmas comes? Perhaps the oil exports will help – as the gaming slots surely help here – but will there still be money to distribute or shops to loot when Santa Claus comes down the chimney on Christmas Eve (the real one)?
Here’s a good question to be answered by Joseph Stiglitz or, even better, by the Deputy Ministry of Supreme Social Happiness, created in Venezuela to oversee anti-poverty missions.

(by PB, published in MDT)