The selfish way to combat inequality

Collectivist societies fail to achieve economic equality

September 05, 2017 12:05 am | Updated 12:05 am IST

For Sunday Magazine . Photo by Shaju John

For Sunday Magazine . Photo by Shaju John

A common belief, even among economists, is that inequality is greater in individualistic societies than in collectivist ones. Individualistic societies are generally considered to be selfish and uncaring towards fellow human beings, which, it is believed, should cause them to suffer greater economic inequality. It is further said that in the absence of wealth redistribution by the government, individualistic societies will tend to aggravate inequality.

“Are individualistic societies less equal? Evidence from the parasite stress theory of values”, a 2017 paper by Boris Nikolaev, Christopher Boudreaux, and Rauf Salahodjaev published in the Journal of Economic Behaviour and Organization , however, comes to a different conclusion. The authors find that income distribution is actually more equitable in individualistic societies than in collectivist ones. While this sounds counter-intuitive, it makes sense when the actual causes of economic inequality between people are considered.

What differentiates individualistic societies from their collectivist counterparts is their belief in individual freedom. So, while the population of an individualistic society might believe, for instance, that people are entitled to the fruits of their labour, collectivist societies put more emphasis on the collective welfare of society. For the same reason, individualistic societies prefer a smaller government that imposes lower taxes and regulations on everyone, while collectivist societies prefer a larger government to impose a greater burden on the rich.

Interestingly, however, the creation of a larger government to redistribute wealth and uphold social justice does not lead to less inequality. In fact, a larger government provides greater opportunities for special interest groups to capture it and forward their own agenda. This results in fewer economic opportunities for the wider population, which results in lower competition and greater economic inequality. Obviously, this is the opposite of what supporters of a collectivist government want, but reality works against their wishes.

On the other hand, under the rule of a smaller government, economic opportunities are available to a much wider population. Special interest groups have fewer opportunities to exploit the powers of the government, as there is less reliance on the government to guide the economy in the first place. This leads to greater competition in individualistic societies, which translates to lower levels of economic inequality, as confirmed by the study.

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