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The Duality of Economic Inequality: Finland and South Africa
In the early 19th century, Finland was one of the poorest and most underdeveloped countries in all of Europe. Although it had poor conditions for lucrative farming, Finland was an agriculture-focused country in which the majority of the population was involved in farming and forestry. As the hardworking farmers of Finland tended to their crops from sunset to sundown, the rest of Europe was caught in the vortex of industrialization. Even Finland, a country that was stubbornly devoted to agriculture, was unable to avoid the wave of industrialization sweeping through the globe.
Fortunately, this insidious wave had reached Finland fairly late compared to other countries in which the seeds of economic inequality had already been planted. Perhaps this was the reason that Finland experienced an extraordinary transformation from an impoverished agrarian economy to an ultramodern welfare state perfectly adapted to the process of globalization after World War II. Finland has put in a considerable amount of resources into creating social welfare and economic programs which have effectively nullified economic inequality in the country. Improvement of the underdeveloped education system beginning in the 1960s as well as the founding of new schools and making education free at all levels has boosted the skill level of Finland’s population. Furthermore, the 1940s saw significant financial and social development in the lives of children and mothers in the form of new freedoms such as maternity leave and cash allowances for children. The next decade saw the extension of pension plans to every citizen of the country. Emerging in the 1930s, national unemployment programs along with the creation of national health insurance and a public health-care system in 1970 further propelled the nation towards achieving an ideal level of economic equality. Finally, the fruits of Finland’s labor were fully realized in 1980 when the income distribution among Finland’s citizens rivaled that of the most economically equal nations in the world (Hjerppe).
In recent years, Successful inventions such as the Linux operating system and even more successful companies such as Nokia have uplifted Finland from its dim past of agriculture onto the shining global stage of modernism. Nevertheless, the truth is that a multitude of factors influenced Finland’s remarkable growth. The most prominent of these factors was the country’s ability to adapt to drastic changes in global circumstances such as the increase in economic inequality, while retaining superior political shrewdness.
Today, the seeds of economic inequality have grown into an outbreak of seemingly unextractable weeds and global economic inequality, as it is now called, is a continuously rising threat. Many countries have tried and failed to eradicate this threat within their borders, and very few have succeeded, Finland being an example of one. More importantly, it is imperative to understand why the majority of countries failed at this task. In order to accomplish that, we must study South Africa, the current world leader in economic inequality.
Max Ehrenfreund, a Harvard graduate who studies socioeconomics and economic history, wanted to understand why South Africa was so economically unequal. He completed an analysis of the economy of South Africa and concluded that despite having the world’s most progressive tax system, South Africa was also the world’s most socially unequal nation. This directly shows us that there is a correlation between social inequality and economic inequality. Ehrenfruend went on to publish an article stating that higher taxes on the rich don’t necessarily result in lower levels of economic inequality. His conclusions were further corroborated by the fact that Cape Town, one of the three capital cities of South Africa, was (and still is) one of the world’s most unequal cities. This was made very apparent with the clear and distinct racial and economic divides present in the famous city; it only goes to show that the roots of economic inequality are directly linked to social injustice in society.
As a matter of fact, Finland correctly identified this and quickly transformed itself into a welfare state while most other countries such as South Africa, increased their taxation of the wealthy minority, effectively failing to remedy the problem. The stark contrast between the economic situations in Finland and South Africa show how global income inequality is a direct result of social injustice, dysfunctional governments, and poor political decisions.
South Africa also lacks many of the public welfare programs that other developed countries possess. In the article published in 2017, “The Country With the World’s Most Progressive Taxes Has the World’s Highest Income Inequality,” Max Ehrenfreund explains how South Africa’s ranking in the list detailing the competency of various nations in addressing economic inequality is brought down by the country’s lack of standard federal programs such as minimum wage. 2017 was five years ago and the situation has not improved enough to see significant changes both nationally and globally. The fact that the world's wealthiest one percent earn twice as much as the bottom half of the population shows how the issue of global income inequality has become much more serious (Kurtenbach). Thus, understanding why Finland succeeded in dealing with this problem and why South Africa failed helps us closely understand the exact causes of socio-economic inequality and how to overcome said causes.
Aslan Abashidze, a former Vice-Chairman of the UN Committee on Economic, Social, and Cultural Rights, tackled the problem of global income inequality with the goal of finding possible solutions. In a paper published in 2021, he stated, “It is proved that social justice is the key condition of overcoming socio-economic inequality…thus opening a path to sustainable development.” In the same paper, Abashidze detailed the specific causes that establish the violations of the principles of social justice. He found that by delving deeper into the topic of social injustice, four "institutional traps" (barriers) are found at the roots of economic inequality. Understanding these "traps" allows us to understand the problems that need to be addressed in order to properly deal with the issue at hand.
The first trap states that low levels of education among the population of a country lead to a lower level of qualification of workers in the labor market. To elaborate, lower levels of education stem from a lack of higher education or a lackluster education. In the article “Socio-economic Inequality as a Barrier on the Path of Sustainable Development,” Abashidze explains how the increase of discrepancies in the global economy and the deceleration of economic development are a result of improper use of human potential. The world is advancing faster than any other point in human history and innovation demands highly proficient personnel. Lack of higher education can create a large level of unemployment as the educated workers will be in top positions while the majority will be either unemployed or in low-paying positions. For reference, Finland has one of the best education systems in the world with no required standardized testing and a healthy work-life balance (Hjerppe). On the other end, South Africa’s public education system is abysmal due to the era of apartheid in which schools for white students were far superior to those for other ethnicities (Ehrenfreund). This is a clear indication of a dysfunctional government making poor decisions and choosing to ignore the main problem. As a result, the absence of adequate schooling enlarges the gap between the rich and the poor, ultimately raising the level of economic inequality.
The second “institutional trap” is a spawn of gender and age injustice in the labor market. In South Africa, rural women have a duty to perform multiple roles in their daily life which inhibits their ability to work. In the article, “The Plight of Rural Women’s Development Agendas in Democratic South Africa,” Gabi Mkhize explains how rural women have reproductive roles including “cooking three meals, collecting firewood, fetching water, and child care” which prevent them from being at the center of the workforce in society. Most women in South African society are expected to run the household and are overloaded with family burdens while the men are given priority and endowed with economic power (Mkhize). In consequence, these gender differences account for increased social inequality which consequently increases the amount of economic inequality. According to Abashidze, an increase in the level of unemployment among young women by 1% leads to a reduction of the rate of economic growth by about 1% which also leads to an increase in the inequality of incomes by about 3%. In contrast, Finland is one of the highest-ranking countries in the world on the Gender Equality Index (Hjerppe). This also accounts for Finland’s rapid economic growth because the country’s citizens are given equal opportunity to work.
Surprisingly, the third trap shows how subsidiary financial support actually lowers the population's motivation for work. The portion of the population below the national poverty level should ideally be decreased for the goal of reducing socio-economic inequality. However, financial support in the form of subsidies does not allow this to happen. Financial support, in most cases, will not be enough to lift the poor above the national poverty level (Abashidze). This is largely due to the fact that the poor would be forced to rely on financial support for long periods of time while those who have high-paying jobs continue to get richer and pay higher taxes. Most of the time, the majority of these taxes are not used for social welfare which is clearly shown in the case of South Africa. Thus, as financial subsidies keep more people below the national poverty line, the gap between the rich and the poor grows larger, increasing socio-economic inequality.
The final “institutional trap,” digital modernization, has an unusually large effect on socio-economic inequality. After all, digital modernization is one of the key factors that separates a developing country from a developed country. Although South Africa does possess advanced technology, it is still considered a developing country due to high unemployment and poverty rates (Ehrenfreund). Finland, on the other hand, is one of the most technologically advanced nations in the world and is considered a developed country due to the high quality of life (Hjerppe). In the article “Socio-economic Inequality as a Barrier on the Path of Sustainable Development,” Abashidze states that digitization “positively influences society and the economy” while also “improving the state of the environment and reducing inequality of incomes” at the national and global level. Therefore, high unemployment and poverty rates can partially negate the positive effects of digitization as shown in South Africa.
Global income inequality is a looming threat that most countries don’t expect or pay attention to. It is a clear indicator of social injustice and it has a high potential to cause financial crises in the future if it remains largely unaddressed. Unsurprisingly then, nations that proudly label themselves as "global superpowers" find themselves at the bottom of lists in terms of economic equality while nations at the top of these lists, such as Finland, are often some of the “happiest” nations on earth. This tells us that social justice is the most important condition for overcoming economic inequality with the formation of a balance in the global economic system being a result of solving the aforementioned problem. We, as humans, must take initiative and help improve the economic situations in many countries such as South Africa in order to avoid future tragedies.
Aslan Kh Abashidze, et al. "Socio-economic Inequality as a Barrier on the Path of Sustainable Development: '' Institutional Traps" and Perspectives of Overcoming Them." The International Journal of Sociology and Social Policy, vol. 41, no. 1/2, 2021, pp. 62-75. ProQuest Central Student, dx.doi.org/10.1108/IJSSP-03-2020-0069.
Ehrenfreund, Max. "The Country with the World's Most Progressive Taxes Has the World's Highest Income Inequality." Washingtonpost.com, 17 July 2017. Gale in Context: Global Issues, link.gale.com/apps/doc/A498665138/GIC?u=anna70394&sid=bookmark-GIC&xid=8fb1dc06. Accessed 22 Mar. 2022.
Elaine Kurtenbach The Associated Press. "Rich Will Get Still Richer Unless Policies Change: Report." Points of View Reference Center, EBSCOhost, 16 Dec. 2017, search.ebscohost.com/login.aspx?direct=true&db=pwh&AN=Q4KHSON2017121644480043&site=pov-live.
Goldberg, Gertrude Schaffner. "Economic Inequality and Economic Crisis: A Challenge for Social Workers." Social Work, vol. 57, no. 3, 2012, pp. 211-24. ProQuest Central Student, dx.doi.org/10.1093/sw/sws005.
Hjerppe, Riitta. "An Economic History of Finland." EH.net, Economic History Association, 10 Feb. 2008, eh.net/encyclopedia/an-economic-history-of-finland/#:~:text=Finland%20was%20an%20agrarian%20country,these%20primary%20industries%20in%201900. Accessed 29 Mar. 2022.
Mkhize, Gabi. "Good Governance in Check: The Plight of Rural Women‘s Development Agendas in Democratic South Africa." African Journal of Gender, Society & Development, vol. 9, no. 2, 2020, pp. 219-219–235. ProQuest Central Student, doi.org/10.31920/2634-3622/2020/9n2a12.