What is wrong with the world? - Fair Marketeers

So this week Oxfam released a report on global income inequality, which found that the world’s 85 richest people have a higher combined wealth than the world’s bottom 3.5 billion people (that’s with a ‘B’).

Less is not always More.

Less is not always More.

I can’t fathom the enormity of this statistic, but I’m trying to.  On average, each of the top 85 has more wealth than 41 million people in the bottom half of the world.  That’s more than the population of Argentina.  And that’s just the average!  If you were thinking about someone like Carlos Slim (net worth: $72 billion) the result is multitudes higher (closer to the population of Brazil).

Not that I’m going to rail against the accumulation of wealth; it’s not the fact that people are rich that bothers me, it’s the enormous and growing disparity between the rich and the poor, which has led to not only economic, but political, disempowerment among the world’s poorest people – wherever they happen to be.

Jeffrey Sachs (one of my favourite economists) wrote about the ‘Bottom Billion’ – that is, the world’s billion poorest people – and the fact that their poverty does not respect traditional borders of ‘poor’ countries.  Many of the bottom billion actually live in middle-income countries, but are unable to improve their status in life due to structural, or political, factors, such as caste systems.

The UN Millennium Development Goal to halve the rate of poverty in the world was achieved well ahead of time, to great fanfare in the global development community. But most of these gains were due to the last decade of unprecedented economic growth in China in India, rather than the efforts of the international development community.

Poverty

The global financial crisis, and the food price spikes that have resulted from commodity price volatility and scarcity due to climate change, have done much to erode the hard-won and fragile development gains achieved among the world’s absolute poorest in the past couple of decades.  One telling statistic highlighted in the Oxfam report is that, in America, since the beginning of the GFC in 2008, 95% of economic growth has accrued to the wealthiest 1% of people, while the bottom 90% got poorer.  This is the greatest shift in income inequality in decades (also, not in the report, but I read recently that African-Americans had their net worth halved in the crisis and still haven’t made back most of those losses).

It’s even worse in the developing world.  In a global development environment of ‘one step forward, three steps back’ the impact of the global economic fallout from the GFC has been acutely felt.  Not just in the form of inflating food prices, but also reductions in the global development budget as national Governments turn to ‘austerity’ to please their constituents with a philosophy of ‘charity starts at home’.

How did we reach this point of international shame and disgrace?  It can quite easily be traced directly back to a small handful of egomaniacal gamblers on Wall St and the complicity of the government institutions that allowed them to operate with impunity and without any reference to the real world.  The value of derivatives traded every day on the world’s exchanges dwarfs the global economy several times over, with almost all the trading handled by computer programs; there is no basis in reality for the world’s financial markets any more.

So yes, we live in a world where a few hundred degenerate gamblers can bring the global economy to its knees, bankrupting entire countries (as Goldman Sachs did to Greece) and setting the world’s poorest buggers back to an economic stone age – and the most they suffer for it is missing their $5 million bonus for a year or two before getting right back on the gravy train, heading back out for $500 steaks at Club 21 as if nothing ever happened.  What a world; truly a land of opportunity. But I digress.

The real loss of power has been political; in the US, the Citizens United case has placed this issue in stark contrast.  Democracy can be bought, and its corporations and political corruption that got them there.  For the first time ever, the majority of members of the new congress are millionaires.  The US Parliament is filled with vested interests and values-based politics is dying a very quick, and irreversible, death.

At the other end of the spectrum, the poorest in the world, even in democratic countries, are being increasingly drowned-out by the sound of money.  In India, the world’s largest democracy, slavery is still a day-to-day reality.  We’ve seen recently their outrage that the US saw fit to arrest one of their ‘high-caste’ diplomats for enslaving and mistreating a domestic worker.  The fact that ordinary Indian citizens see it is her right to mistreat her maid is a damning indictment on the still intact caste structure of that society, and the distance they still have to travel until they reach the democratic ideal upon which Ghandi founded his freedom movement.  Again, I digress.

Economic development empowers individuals in a way little else can.  The enormous growth experienced by the BRICS countries in the past two decades has brought hundreds of millions of people from the darkness into the global economy.  But the ‘trickle-down’ effect of this growth is not automatic – the poorest have still been left behind.

political_suffering

Government planning and interventions – such as social protection programs must be put into place to support the transition of very poor people up the slippery pole to financial independence.  But as the power in democracies concentrates into the hands of elites, these interventions become less likely than ever to occur.  And thus, the gap between rich and poor widens further.

Absolute global poverty is on its way to elimination.  Bill Gates has predicted that in the next 20 years little of it will be left, and what is left will be behind the borders of oppressive regimes, like that in North Korea, where the global development community and gains from economic growth cannot reach ordinary people.

This may well be the case, but as long as the threshold for ‘poverty’ in the World remains at $1.25 a day, it’s clear we still have a long way to go towards closing the gap.