Wednesday, January 23, 2013

The real cause of growing global inequality

At a global level, the top 1% (60 million people), and particularly the even more select few in the top 0.01% (600,000 individuals – there are around 1,200 billionaires in the world), the last 30 years has been an incredible feeding frenzy.

Inequality has grown dramatically in many countries. In the US the share of national income going to the top 1% has doubled since 1980 from 10 to 20%. For the top 0.01% it has quadrupled to levels never seen before.

This goes way beyond America. In the UK inequality is rapidly returning to levels not seen since the time of Charles Dickens. In China the top 10% now take home nearly 60% of the income. Chinese inequality levels are now similar to those in South Africa, which are now the most unequal country on earth. Even in many of the poorest countries, inequality has rapidly grown.

Globally, the incomes of the top 1% have increased 60% in 20 years. The growth in income for the 0.01% has been even greater. Following the financial crisis, the process has accelerated, with the top 1% further increasing their share of income.

The luxury goods market has registered double digit growth every year since the crisis hit. Whether it is a sports car or a super-yacht, caviar or champagne, there has never been a bigger demand for the most expensive luxuries.

These are some of the statistics collected together in “The cost of inequality: how wealth and income extremes hurt us all”. This is Oxfam’s contribution to an avalanche of analyses and opinions tumbling out in the days leading up to the gathering of the super-rich and their hangers-on in Davos this week.

Mostly they are aimed at trying to steer the discussion and debate amongst the rich and powerful leaders of the global corporations who make up the membership of World Economic Forum.      

But in its oh-so-gentle warning “Occupy protests demonstrated the increasing public
anger and feeling that inequality has gone too far”, Oxfam isn’t telling the WEF something it doesn’t know already. “Severe Income Disparity” is, after all, one of the top ten global risks featured in the report the WEF commissioned for itself.

There may well be quite a number of well-meaning, even enlightened multi-billionaires in attendance, in between visits to the ski slopes. After all, Bill Gates and Warren Buffet are way up there on the list of the world’s richest and having seen the writing on the wall they’ve committed to giving away truly huge amounts of money. Buffet is even calling for greater taxes on the rich.

Oxfam argues that extreme wealth and inequality is economically inefficient, politically corrosive, socially divisive, environmentally destructive, unethical and not inevitable. The charity lists a range of measures to reduce the gap that have worked in the past, and could work in the future.

But what they don’t do is to look behind the shocking statistics to explain why the disparity between rich and poor has grown so far and so fast in the last 30 years. If they did, they’d be looking at a profit-driven social, economic and political system which for its survival ensures that the ownership of the world’s resources is concentrated in fewer and fewer hands

In the good times, at least, the value of those resources expands by putting more and more people to work and paying them a declining share of what they produce until they are no longer able to afford the things they produce. And then, in the consequential bad times (like now), the same system is driven to destroy the surplus capacity that is the result of all that accumulation.

So yesterday, the International Labour Organisation reported that the number of unemployed globally is expected to pass the 200 million mark this year. The WEF has nothing to offer humanity and the anger that Oxfam refers to needs to be channelled into making the Davos gathering history.

Gerry Gold
Economics editor

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