Inequality: Why Australia must not follow the US

[unhappycamper]

http://www.smh.com.au/comment/inequality-why-australia-must-not-follow-the-us-20140706-zsxtk.html



Inequality: Why Australia must not follow the US
Joseph Stiglitz
July 6, 2014

~snip~

There are several areas where Australia should be particularly cautious about imitating the US model. One of the reasons that the US has gone to the bottom of the league tables in economic opportunity is our education system, and especially the way higher education is financed. It is one of the reasons that only about 8 per cent of those in the bottom half get a college education. Australia’s income contingent loan program, HECS, is the envy of the rest of the world. It works. The best US universities are superb - the best in the world - but they are all either state financed or non-profits, supported by generous philanthropy. They compete vigorously in quality - but it is not conventional market competition, where price plays a pivotal role. The under-regulated for-profit universities excel - in exploiting children from poor families and in lobbying to make sure that they can continue to do so.

Another area in which Australia leads, and America fails, is health. The American mostly private health care system is probably the least efficient in the world - spending twice the percentage of GDP of Australia, with much poorer results, exemplified by a life expectancy that’s three years shorter. The country is perhaps the only in the advanced world not to recognise the right to access to healthcare, with the result that inequalities in health outcomes are enormous.

A third area where America trails is basic welfare support and systems of social protection. With almost one out of four children living in poverty, and with deficient public support, the prospects for their future are not rosy - and this will inevitably translate into weaker overall economic performance for the country. The combination of unequal education opportunities and access to healthcare and inadequate systems of social protection translates into poor average performance of our children - well below the average of the advanced countries in standardised tests, in contrast to Australia, whose children perform well above average. Contrary to what some in Australia’s government have suggested, support for poor families is not only a moral imperative, it is an investment in the country’s future.

Two big lessons of economic research over the past 10 years are that inequality is not the result of inexorable laws of economics but rather of policy; and that countries that adopt policies that lead to high inequality pay a high price - inequality not only leads to a divided society and undermines democracy, but it weakens economic performance. Hopefully, as Australia debates its new government’s budget and economic “reforms,” it bears this in mind.