Once upon a time, there was a country in which people were gradually becoming more equal. That country was Ireland before the 1990s boom, writes Fintan O'Toole
Between 1973 and 1994, the gap between the incomes of poorer and richer households was narrowing. The decrease in inequality was slow and modest, but the trend was nonetheless positive. Then, as the boom took off, that trend halted. Over all the boom years, inequality has been maintained at relatively high levels.
The standard measure of inequality (the lower the number, the more equal the society), the Gini coefficient, was 30 for Ireland in 2000 and 32 in 2005.
And now, for the first time, the State is actively working to increase income inequality. The most interesting thing about last week's benchmarking report was not that it recommended no pay increases for most public servants, but that it strongly endorsed the trend towards pushing up the salaries of those who are already the highest earners. By deliberately widening the gap between, say, a departmental secretary, whose salary will have doubled since 2000, and a clerical officer whose pay will have risen at half that rate, the benchmarking body did precisely what it is supposed to do - reflect what is happening in the private sector.
The Irish boom has been essentially American-led, and it is therefore unsurprising that we have largely shadowed the American salary boom for top earners. In 1979, the average income of the top 5 per cent of families in the US was 11 times that of the bottom 20 per cent. In 2005, the ratio was 21 times.
Today, the richest 5 per cent hold more than half of total wealth. In Ireland, by the end of the 1990s, the share of total income enjoyed by the top 1 per cent of Irish earners was more than twice the level prevailing throughout the 1970s and 1980s. The top 5 per cent of the population holds 40 per cent of the wealth.
The significance of the benchmarking report, and of the earlier increases for high-level civil servants and Government Ministers, is that this tendency is now being subsumed into official State policy.
The prevailing right-wing view of all of this, articulated during the last government's term by Michael McDowell, is that this inequality is both "inevitable" and unproblematic.
The underlying assumption is that there is a trade-off between economic growth and equality. Neo-liberals see inequality as a necessary evil, an inevitable side-effect of a dynamic economy.
But this assumption is wrong. The rapid economic growth in the post-1945 period in both Europe and east Asia resulted in more, not less, equality. Serious inequality, on the other hand, damages economies. Studies in countries as different as South Africa, Russia and the US show a strong correlation between the level of inequality and the level of crime and social disorder. The costs of this social instability have been shown to take 1 or 2 per cent off annual growth rates. Big gaps in wage levels, meanwhile, lead to poor labour relations, low staff morale and decreased productivity, all of which have a negative effect on growth. Nor is it true, as right-wing analysts assume, that the rising wealth of the top echelon has no real cost for those who don't share it. The basic idea here is that resentment of the massive incomes of the elite is mere irrational begrudgery. In fact, it is perfectly rational.
Excessive wealth at the top carries a heavy price tag for the rest of us. It's not just that we have to pay for these huge salaries, either through our taxes or through the goods and services we buy. More importantly, the spending power of the wealthy forces up the cost of living for everyone.
The Irish property market over the last decade is a perfect example of this effect, with the €4 and €5 million paid for houses feeding back down the line to the ordinary semi-D.
The political costs of high levels of inequality are also high. Greed at the top erodes the idea of public service, by sending out the message that the so-called leaders won't do the job unless they're paid obscene amounts of money.
The power of moneyed elites feeds corruption that distorts democracy. The sense of being out of the loop leads to political disengagement by those at the bottom. This in turn gives an even greater incentive to political parties to concentrate on the demands of the better off, who are more likely to vote.
What we're now seeing, however, is a very deliberate policy of widening the gap. The weekly income of the top 20 per cent of the population is already five times more than that of the bottom 20 per cent.
For all the hype, most Irish people still get by on very modest earnings - 1.5 million workers earn less than €38,000 a year, and the average income per person is just €21,000 a year.
The €650,000 that the VHI proposes to pay its new chief executive is the disposable income of more than 30 ordinary Irish people. The director general of RTÉ can earn more than 16 of the licence payers who fund his wages.
How can such people live in the same world as those they are supposed to serve?