The appropriateness, or otherwise, of income and wealth inequalities in advanced societies serve as a key focal point for contemporary cultural, economic, political and social discourses. A highly skewed distribution of income and wealth has been suggested to not only slow economic growth. Recent research also indicates that inequality may exacerbate non-economic maladies such as poor health and other social outcomes, as well as the abuse of political power. Concerns that the degree of inequality has become excessive have built momentum for reforms of taxation, government expenditure and regulation, not to mention recommendations of wholesale changes to public governance systems. In short, inequality seems to have become the major issue of our times.

To some degree the substantial consideration given to inequality in recent years reflects the sheer diversity of philosophical perspectives over the nature and consequences of income and wealth disparities. Classical liberal philosophy – which emphasises the virtues of freedom in economic, social and political dimensions for individual dignity and human flourishing – proves as no exception to this rule. This statement may surprise some, given that classical liberalism and its proponents are stereotypically portrayed by its critics as being unresponsive or dismissive of issues raised by extreme inequality. My view is that such portrayals of liberalism are unwarranted, and in this context my book Inequality: An Entangled Political Economy Perspective serves as an explicit attempt to interpret the basis and significance of economic inequalities from a distinctly classical liberal conceptual approach.

The study of inequality should be grounded in conceptual and analytical frameworks that are contextually aware of human action, in all its semblances, and the environments in which action is situated. A distinguishing feature of my book is that it considers income and wealth inequality from the heterodox political economy perspective of ‘entangled political economy.’ The entangled political economy approach conceives action by individuals and groups to be undertaken in intersecting relations of economic, political and social affairs. In suggesting that the economic is not divorced from the social, the social not divorced from the political, and so on, my book illustrates that the determinants of inequality are complex and its redress not necessarily amenable to simplistic solutions.

The entangled political economy perspective suggests inequality is highly likely to prevail under the range of economic-political configurations found in most societies. On the one hand, unequal rewards within the economic domain may be obtained by dint of factors such as choice, effort and luck, which are not presumed to be equally distributed amongst the populace. On the other, classical liberal scholars have indicated that economic inequality can result from government policies which artificially enrich some people in society, well as unwarranted (formal and informal) discrimination against members of ‘out-groups’ somehow deemed unworthy of due consideration and regard. The argument is that inequality that emerges from interpersonal interactions amongst economic, political and social networks may be considered problematic, or not, depending on what kinds and relative strength of determinants driving those skewed income and wealth outcomes.

Some network configurations in entangled political economy will lead to an unequal flow of income, and unequally distributed stock of wealth. To the extent that these outcome patterns are informed by actions consistent with the principles of voluntarism, mutuality and respect, and that these patterns are amenable to contestability and challenge, there seems little ground for policy concern. By contrast, economic inequality patterns reflecting the exercise of undue coercion by government, wherein tax, spending and regulation is discriminatorily applied, and flouts rule of law principles, is deemed as unacceptable and thus is a candidate for reform. Given the relation between economic and social inequality, income and wealth inequality owing to acts of discrimination and intolerance against certain social groups is also regarded as a target for reform under classical liberal principles. In short my book explicates a distinction between liberty-consistent (‘good’) and liberty-inconsistent (‘bad’) sources of inequality, providing policymakers with clearer guidance concerning which inequality sources to remedy.

In Inequality: An Entangled Political Economy Perspective a host of reform solutions are proposed to ensure that government policies do not worsen the inequality problem. Given that many of the politically-generated sources of income and wealth inequality are derived from the arbitrary and discriminatory application of taxing, spending and regulatory powers, we focus upon improving the quality of fiscal and regulatory rules. Not only should tax systems have flatter rate structures to incentivise productive entrepreneurship and innovation, but that tax bases should be broadened to reduce the fiscal discrimination which often favours the rich. Governments should focus on providing uniform pure public services, leaving other services to be contestably provided by an assortment of players in polycentric economic networks. Regulation needs to be designed and applied in ways to avoid a suppression of market competition that favours the wealthy few. These anti-inequality proposals firmly reflect a tradition of classical liberal theorising emphasising the desirability of rules to restrain the arbitrary exercise of political power.

The history of humankind is ashamedly paved with inequalities generated as the result of discriminatory practices, either entrenched in informal custom or formal legislation, preventing people from striking deals to cooperate with others. To the extent that such discrimination remains, entangled political economy is characterised by liberty-inconsistent income and wealth inequalities. Whereas some of the key manifestations of racism, sexism and xenophobia have been removed from the statute books of some countries, there is scope for additional anti-discrimination reform to be achieved. As my book illustrates reforms of this calibre will, among other things, enable diverse people to trade peacefully, learn about each other’s priorities and, consequently, help promote social toleration.

It is my hope that Inequality: An Entangled Political Economy Perspective provides modern classical liberals a basis to think through the admittedly complex issues of economic inequality in a reasoned manner. To do this, I believe we should assess the basis of inequality, the circumstances in which inequality harms (or does not harm), and the most appropriate institutional and policy reform measures to attend to the harmful aspects of inequality. The upside resulting from such an approach to inquiry, in my assessment, is sizeable.

Mikayla Novak is a Postdoctoral Research Fellow with the School of Economics, Finance and Marketing, RMIT University, Melbourne, Australia. Her book, Inequality: An Entangled Political Economy Perspective is the first published under the Palgrave Studies in Classical Liberalism series.