The Uprising of the Pandemials. Federico Dominguez

and education has dropped significantly, while government employment has risen by 70% between 2001 and 2014, today at 3.9 million people. (71) The middle class not only pays twice as much in taxes than they did in 1962, today they must also pay for private healthcare and education, further reducing their available income.

      Ultimately, this irrational public spending fostered by politicians and state technocrats is paid for by the public. It translates into higher taxes on consumption and labor, which mainly affect citizens with lower incomes while also creating such a heavy tax burden on the private sector, reducing economic growth and preventing the creation of quality jobs. There is a false belief among the left that public spending is always redistributive. However, this is not always the case. We must properly analyze how that spending is being funded. Taking more from the poor to then give to the even poorer, with the state keeping some for itself along the way is not the best formula for improving the quality of life of the disadvantaged.

      THE NEXT CYCLE OF INEQUALITY

      Argentinian philosopher Mario Bunge said in a 2008 interview with local newspaper Perfil: “As long as there are clear disparities, there will be class struggles and interests. The truth is that when you meet basic needs, conflict is subdued and more constructive tactics are adopted.” (72) In a context marked by the pandemic crisis, inequality will be more exposed than ever and the temptation to try and solve it using methods that already failed in the past will be stronger than ever before.

      The current cycle of inequality will come to a close toward the end of this decade due to the inevitable shift in politics driven by the pandemials. The start of this new and inescapable cycle will either be thanks to a new generation of liberal governments that will tackle inequality pragmatically or by the arrival of populist governments that will reduce inequality using old-fashioned methods that may work in the short-term but will seriously affect investment and the economy’s ability to innovate, thus significantly impoverishing countries in the medium and long term.

      When you do the math, you can see that there is a lot of money available to reduce inequality without turning to populist policies: $5 trillion between tax evasion and corruption alone. Another significant amount by reducing inefficient public spending as we saw in Latin America. Also, scaling down deductions and applying an effective 40% income tax on the rich could collect several hundreds of billions of additional tax dollars. This huge mass of resources will be necessary to reduce taxes on consumption and labor, the main culprits behind the limited available incomes of the lowest earners. What is equally as important as increasing available resources –if not more so– is eliminating regulations that restrict the supply of goods and services that constitute the meritocracy basket.

      However, given the context of the overwhelming income disparity caused by technological change, this will not be enough. Income transfer programs like Earned Income Tax will also be necessary on a significant scale. Lastly, meritocracy depends on governments’ ability to finance free, quality healthcare and education for its entire population, whether it is provided by the state or by the private sector.

      As we saw throughout this chapter, inequality is a vast phenomenon that must be tackled from different angles. It is a problem that demands immediate action because, if left unaddressed, it could open the door to a new era of worldwide populism.