The other inequality: how the state spends our money

Growing inequality between rich and poor across the world has rightly become the focus of much investigation and analysis. The Organization for Economic Cooperation and Development underlined the issue’s importance yesterday, reporting that income inequality has reached record highs in most OECD countries and remains at even higher levels in many emerging economies. In Greece, as might be expected, income inequality has worsened during the crisis, with our country showing the biggest divide among eurozone countries. In the EU as a whole, only Britain rates worse than Greece.

The comparison with Britain, however, suggests that inequality’s impact should not be measured only as the ratio between what the top 10 percent (or 1 percent) earns as opposed to the majority and the lowest 10 percent. What we should also focus on is what we pay the state and what we get in return in terms of services. Once again, Greece’s “particularities” can highlight problems that may be less visible in other societies. Immediately, we see the huge cost of the many plagues of Greece: tax evasion, inefficient bureaucracy, chaotic and often conflicting legislation, institutions’ lack of credibility and the triumph of moral hazard all conspire towards wasting the revenues that the state does gather.

This works to the detriment of those – rich and poor – who do contribute to society and benefits the cheats and freeloaders. The comparison with other countries is telling. In Greece a hard-working tax-paying, salaried employee will see more than half of his or her income going towards taxes, social security and other levies (including municipal fees, state television, taxes for third parties, and so on). Citizens of other EU countries may pay similar rates, but most of them can at least expect a reasonably high level of education and health services, and a smoothly functioning city and state. In Greece, after paying so much, we spend billions more each year on private healthcare and education for our children, while supporting a state apparatus that is scandalous not so much for its size (which is not much greater than in other EU countries) but for the burden it places on society.

The OECD report notes that improving job quality, reducing gender gaps and encouraging greater investment in education and skills are essential to tackling inequality. It stresses that high inequality is bad for growth, that it cuts into the social fabric of countries. For the past few decades, Greeks enjoyed an unprecedented level of prosperity and social equality (in the lack of a class system). But these treasures were not protected by self-discipline, by the accountability of state and other officials and by equality before the law. Before the crisis our society was riven by inequality; this was not directly related to incomes but to our relationship with each other and with the state, between each group and the whole. The road to recovery through justice is difficult. But at least now we can see it.

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