The Insufficiency of the Right (and, therefore, of the Left?)

Insufficiency regarding what? It could be related to many aspects, however, this discussion will be restricted to a criterion that usually benefits nations broadly: economic growth. There will be no fooling ourselves, though, that economic growth automatically grants us with absolute progress and happiness, nonetheless, it can be observed that it correlates considerably well with better living standards.

To alter the direction of the economy, both the Right and the Left have numerous mechanisms, but the essence orbits around the fundamental question of wealth distribution. The Left defends, almost always, an explicit and forced redistribution of income, which manifests itself, also almost always, through government programs; while the Right defends the opposite, an absence of such programs, equipping themselves with the argument that the economy would have self-regulation mechanisms embedded, and artificial controls would cause malfunction and inefficient behavior. This liberalist rhetoric has its roots in the works of important philosophers and economists such as Adam Smith and Friedrich Hayek, but would a free market really be the best path for the economy?

What has been seen throughout the last 40 years is a no – the philosophers of the past oversimplified reality; just as we abandoned the erroneous ideas about physics of the ancient Greeks, we should do the same with those of the more recent philosophers also. The two main evidences which attest these excessive simplifications are two extremely important statistics: the world’s GDP growth; and wealth concentration (which is deeply correlated with income inequality, the more common statistic).

According to the graph provided by The World Bank, it is possible to conclude that neoliberal policies widely implemented since the 1970s — facilitated by and together with globalization — have completely failed to maintain or increase the world’s economic growth — with an honorable mention to the only negative point of the graph, thanks to the close to effectively inexistent stock market regulation in the USA (and in the world generally) a bit before 2008.

The second statistic is, nonetheless, more relevant and frightening. As reported by the World Economic Forum — since 2015 — the planet has reached the impressive record of at least 99% of the world’s wealth being concentrated henceforth in the hands of only 1% of the population, with the tiniest detail: half of humankind will own less than 0.7%. But, although this statistic is indeed something negative, what would be its relationship with the whole economy? In a simple explanation, this disparity in the distribution ends up by drastically shrinking the global consumer market, in other words, without buying and selling, capitalism does not work.

These last data set the grounds for the reasoning behind the graph that synthesizes the insufficiency of the Left and the Right as economic guidelines: economic growth vs social inequality. Its construction has taken a long time to be accepted by the economists, nevertheless, its logic is very easy to understand.

First, imagine a society in which all the income is concentrated in the hands of a few — a scenario analogous to the medieval age —, it is then not so difficult to realize that economic growth would be close to zero, after all there is no buy-and-sell mechanism. Now, let us focus on the other end of the graph, where economic equality is complete and absolute: intuitively, there would also not be much economic advance, after all, the absence of meritocracy would not reward the above the average effort of any individual — note that, in this hypothesis, there would still be growth: as long as there are people who like what they do, there is no absolute need for extra benefits. Finally, after anchoring the extremes of the graph as close to zero, we can go on to the most important part: is there an optimum of economic growth? To answer this question, a mix of common sense and evidence is necessary.

As we implement meritocracy on both extremes, be it by rewarding more even or unevenly, the buy-and-sell mechanism is reactivated, and, thus, economic growth gets a boost. Logically, as there are almost zeros on both sides and we know that economic growth can be bigger than zero, this implies that, somewhere in the middle, there is at least one peak or optimum. The doubt about the uniqueness of this point of maximum has not yet been resolved by the scientific community, still, there is already an overwhelming amount of clues indicating it is indeed unique. Many studies, models and statistics reveal that incrementing the income of the wealthier part of the population ends up diminishing the pace of the economy (a 1% increase of the income of the top 20%, reduces growth by at least 0.08% in 5 years, according to the International Monetary Fund), while the same differential applied to the poorer population, on the other hand, results in helping growth.

After establishing the graph’s shape — an inverted “U” or a parabola with a downward concavity —, we can at last discuss the problematic dichotomy of the Right and Left. Both sides err because they do not optimize economic growth — advocating, in reality, zeros as ideals —, be it by the absence of meritocracy or by an indirectly verified extreme wealth concentration. However, given the reality, the mistake of the Right is harder to forgive: to defend (neo)liberalism after consciously knowing the aforementioned statistics is nothing less than promoting poverty and strengthening even more the power of the rich. With respect to the Left, due to the general global panorama, its existence is, perhaps, justifiable, as it acts essentially to balance the power between the rich and the poor; yet, it is imperative to realize that its existence is, in absolute terms, also insufficient to guarantee more progress to society.

So, how can we change the economic prognosis to something healthier? Briefly, the primordial is the focus on the more pragmatic, an ideology which would prime for efficiency and not for the Left or the Right, i.e., if one day we happen to be closer to the leftmost extreme of the graph (and to the left of the optimal point): that even the supposedly leftists advocate for less income redistribution! There is no more room to accept incomplete or flagrantly wrong theories, formulated in an era when there were not enough data to assuredly prove them. Let us not have government policies guided by extremist theories and discussions, but pondered by facts and data, under the much more important criteria of pragmatism and efficiency — in Brazil, especially today, after such delusion with both sides of the biparted politics, we might finally have the unique opportunity of rooting out this dichotomy once and for all.