This is a continuation from yesterday.
Growing inequality
French economist Thomas Piketty from the Paris School of Economics recently published Capital in the Twenty-First Century. Some see him as the most important thinker of his generation and praise the depth of his research.
His book questions the myth (held strongly in the US) that capitalism improves the quality of life for everyone. Piketty says this is not so. His research, based on accumulated historical and economic data, shows there has been an unstoppable rise of a tiny elite controlling more and more of the world’s wealth. He insists inequality is getting worse and capitalism cannot solve this problem of growing inequality. In fact capitalism tends to concentrate wealth in the hands of fewer and fewer people — the rich get richer and the poor get poorer.
Piketty’s thesis, supported by his extensive research, is that financial inequality in the 21st century is on the rise and is accelerating at a very dangerous pace. The real danger is that, if this process is not arrested, poverty will increase at the same rate and we may well find the 21st century will be a century of greater inequality and therefore greater social discord than the 19th century. This, he says, will have political implications which can create a serious crisis.
Piketty argues for a progressive tax, a global tax, based on the taxation of private property. This may be unpopular and difficult to accept but, he says, it is the only way. Andrew Hussey in The Observer April 13, 2014 comments: “As poverty increases across the globe, everyone is being forced to listen to Piketty with great attention. But although his diagnosis is accurate and compelling, it is hard, almost impossible, to imagine that the cure he proposes — tax and more tax – will ever be implemented in a world where, from Beijing to Moscow to Washington, money and those who have more of it than anyone else, still call the shots.”
This, of course, resembles what Ian Robertson (1977:254) stated years ago: “Poverty exists because our society is an unequal one, and there are overwhelming political pressures to keep it that way. Any attempts to redistribute wealth and income will inevitably be opposed by powerful middle and upper call interests. People can be relatively rich only if others are relatively poor, and since power is concentrated in the hands of the rich, public policies will continue to reflect their interests rather than those of the poor.”
These statements re-enforce the need to “stand in the way of global corporate juggernauts” as David Cameron advised or, as Wilkinson and Pickett suggest, we must oppose the small minority of the super-rich who dominate political and economic decisions. As Luke’s gospel states: “We need ‘to pull down the mighty from their thrones and lift up the lowly’.”
Ravi Batra is another economist worth quoting in the context of inequality. He published a book called Greenspan’s Fraud (2005) in which he makes a scathing indictment of Alan Greenspan’s economic policies over two decades which had huge implications both nationally and globally.
Batra argues Greenspan’s policies extracted millions of dollars from the American middle class and sharply benefited the rich, while protecting big business. Batra exposes the fraud of Alan Greenspan’s free-market economics and shows how his advice has led to the extremes of scandalous inequality which plague the US and other parts of the world today.
According to Batra, Greenspan worked steadily for over two decades to sell out America’s sovereignty and economic interests to those of the multinational corporations he so loved, and to sell out the working people of America (and their Social Security Trust Fund) to the super-rich who Greenspan has always represented. His macroeconomic tax policies created great inequality.
The rich became richer while the middle class and the workers of the US suffered. We have seen above how Greenspan had to confess publically that his market driven neo-liberal policies based on deregulation were faulty.
Smiley and West (2012:45) report that “The wealthiest one per cent of US citizens control nearly 42 percent of the wealth, and the top 400 citizens have wealth equivalent to the bottom 150 million citizens”. Consequently they state: “America is often regarded as “the greatest country” on earth, first among all Western nations and the leaders of the free world. But is this identity still true?”
Benefits of greater
equality
James Galbraith, director of the University of Texas Inequality Project quotes these words of Adam Smith, author of The Wealth of Nations, promoter of free markets and the creator of the concept of the “invisible hand” who said: “Servants, labourers and workmen of different kinds make up the far greater part of every political society. What improves the circumstances of this greater part can never be regarded as an inconvenience to the whole.”
He was in fact promoting social justice and the common good. However Galbraith notes: “We have found, firstly that worldwide inequality has been rising sharply under globalisation. … We think it clear that the financial order of the past 30-plus years cannot deliver sustainable economic development worldwide. Therefore it is necessary to rebuild an architecture of stabilisation and control. The alternative will be increasing political instability and human misery.”
As far back as 1969 in his book The Meaning of Development Dudley Sears wrote: “Greater equality should be considered an objective in its own right. Inequalities are objectionable by any religious or ethical standards.
The social barriers and inhibitions of an unequal society distort the personalities of those with high incomes no less than those who are poor.”
A recent book by Richard Wilkinson and Kate Pickett (2010) The Spirit Level — Why Equality is better for Everyone is extremely important. Its message (supported by an abundance of evidence) is that societies which have a high level of inequality are bad for everyone in them, including the well-off. The evidence shows the greater the degree of inequality in a society, the greater are the social and health problems as well as the crime rates and numbers of people in prison. Some countries of the world may be materially successful but, despite their affluence, they are failures because they are socially dysfunctional. They write: “Reducing inequality is the best way of improving the quality of the social environment, and so the real quality of life for all of us. This includes the better-off. It is clear that greater equality, as well as improving the well-being of the whole population, is also the key to national standards of achievement and how countries perform in lots of different fields.”
The US tops the list for inequality and stands in stark contrast to Norway, Sweden and Denmark. It is argued that real development is not just a matter of continually increasing economic growth according to free-market neo-liberal ideology. Rather real development involves making sure the benefits of economic growth are distributed with a greater sense of fairness and justice for the common good — that is, for the good of all the people.
Conclusion
So a number of influential people in the field of economics — many of them former economists in the World Bank, the IMF or the World Trade Organisation — have been sounding serious warnings about the economic system of extreme neo-liberal, free-market capitalism which underpins globalisation.
In particular they associate growing poverty and inequality with this extreme form of capitalism and call for a more inclusive form of capitalism which promotes the common good not individual greed. It is not simply a matter of having greater economic growth. The economy should work to the benefit of all not just the few. Economic growth needs to be better distributed with a greater sense of fairness and justice if we are to talk about true development.
This will demand progressive taxation, decent wages for workers, social welfare programs, and an ethic of sharing and concern for the common good as opposed to the growth of greed and individualism.Stiglitz (2013:359) states: “It is not a matter of eliminating inequality altogether or creating full equality of opportunity. It’s just a matter of reducing the level of inequality and increasing the extent of equality of opportunity.”
The economy must be people-centred. Everyone should have the basic necessities for a decent human life in terms of food, housing, health care and education and be able to exercise their social, cultural and political rights. Thus we need “inclusive capitalism” or “democratic socialism” or “capitalism with a human face”. Whatever we call it we must work for a more just, compassionate and inclusive society.
* Bibliography:
Batra, Ravi 2005 Greenspan’s Fraud: How Two Decades of his Policies Have Undermined the Global Economy ( Palgrave McMillan); Chang, Ha-Joon 2011 23 Things They Don’t Tell You About Capitalism (London: Penguin Books); iketty, Thomas 2010 Capital in the Twenty-First Century.
Robertson, Ian 1977 (New York: Wirth Publications); Smiley, Travis and Cornel West 2012 The Rich and the Rest of Us (New York: Smiley Books); Stiglitz, Joseph E. 2002 Globalisation and Its Discontents (New York: Norton) 2003The Roaring Nineties (New York: Norton) 2013 The Price of Inequality (London: Penguin); Wilkinson, Richard and Kate Pickett (2010) The Spirit Level – Why Equality is Better for Everyone (London: Penguin Books)
* Fr Barr is a Catholic priest and a social worker. The views expressed are his and not of this newspaper.
