We're starting to give up on the ideal of Australia as a nation of equals

This was discovered in a series of experiments involving two people — one of whom had $100 and the other who had nothing.

The person with the money was told they must offer an amount to the other — with each keeping the amount agreed.

Older economic theory assumes the person with nothing should be happy to receive as little as one dollar. After all, they are then better off than they would be with nothing.

Australia has a class system, and it has real consequences in people's lives. Explore the full series.
However, the theory seemed to bear little or no relationship to practice.

It turned out that most people would rather have nothing than accept anything less than about $40. That is, people expected to receive a fair — rather than equal — share of the money.

What might explain this behaviour which seems, on the face of it, not to be rational?

In my opinion, the best explanation is that those insisting on fairness did so because they could see no fundamental basis for distinguishing between themselves and the lucky person who had the $100 in hand.

Growing sense of discontent

In other words, there is a presumption that — at the most basic level — people are equal in intrinsic dignity.

This idea is deeply written into the ethical codes of most societies. Whether arising out of religious beliefs (e.g. that all persons are made in the image of God) or from the work of philosophers like Immanuel Kant (all persons belong to the "kingdom of ends"), the idea runs deep that human beings possess intrinsic dignity — that can neither be earned nor diminished.

It is this concept of "respect for persons" that lies behind the prohibition of slavery — or any other practice that reduces a human being to the status of a mere tool to be exploited by others.

Yet, in recent years, there has been a growing sense of discontent — and this is despite a general increase in affluence across the developed world.

It used to be that the feeling of being marginalised was experienced by those who were literally on the margins of society.

The most egregious cases of deprivation, in Australia, have fallen on a significant number of Indigenous Australians — precisely because of a failure to acknowledge their fundamental equality.

However, that unsettling feeling has been spreading.

'Nation of equals' ideal losing credibility

My sense is that a growing number of Australians feel that the mythic ideal of Australia as a nation of equals is losing all credibility.

They are angry. They are disappointed. They are vengeful. Above all, they are fearful that the nation's underlying "social compact" could have been so carelessly broken — and that the presumption in favour of basic equality has been replaced by indifference to a widening gap between: city and country, "elites" and ordinary folk, the "haves" and "have nots", the "political class" … and just about everyone else.

In essence, a very large number of people have come to feel they are just cogs in a machine — counting for nothing more than their capacity to work and vote.

They feel they serve a system that is indifferent to their hopes and interests — and that will exploit and discard them at will.

They feel robbed of their intrinsic dignity — and the basic equality that is their due.

Opportunity not merit-based, but 'accident of birth'

Economics as a discipline — and the market as a tool — were originally conceived of as means for increasing the stock of common good. Smith had no time for a kind of dog-eat-dog, let-it-rip economy. He championed a free market that depended on the maintenance of solid ethical foundations.

He denied the legitimacy of those who lie, cheat or use power oppressively because all such vices distort the market.

Furthermore, the market was supposed to be an arena in which all could transact as equals — not in terms of outcome but in terms of opportunity.

Despite this idea being written into competition legislation, we seem to be a long way from realising Smith's ethical ideal.

Technically, the market is "open" and "free". In reality, too many people are denied the basics in education, health, civic infrastructure, etc. to be on a genuinely equal footing.

Worse still, the lack of opportunity, for some, has nothing to do with merit — but everything to do with mere accidents of birth.

We can and should do better. We should reform markets — and our democratic politics — to realise their original purposes as arenas in which all are fundamentally equal.

CEDA research: Read and download How unequal? Insights on inequality.

This article was originally published on ABC Online here.