It’s time to radically reduce inequality
Date: 31 October 2014
Last night I was defending the proposition that wealth needs to be aggressively reduced, alongside Jeremy Corbyn MP and Adam Swift at Warwick University.
This is more or less what I said:
In January, Oxfam found – looking at on 2013 figures – that the 85 richest people in the world, had the same wealth as 3.5 billion poorest. That’s half the world’s population. Just last week Oxfam released new research showing that the number of billionaires had doubled between 2009 and 2014, while most of the rest of the world was facing welfare cuts, recession and falling levels of real income.
In March Kasia Moreno from Forbes updated the figures and found the situation had changed. Now it only took 67 of the richest people to match the wealth of the 3.5 billion ‘poorest’.
By the time the article was published, it had changed again. It now took only 66 people.
At an economic level, this is desperately unstable as many pro-capitalist thinkers recognise. Very early in the financial crisis the Financial Times published a special supplement called ‘Capitalism in Crisis’, with thoughtful articles concerned that capitalism is eating itself.
Last week Credit Suisse published a report saying that the richest 1%, globally own more than 48% of global wealth:
“this is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past”
They’re quite right. The last time the 1% controlled such a large part of the economy in the US was just before the Wall St Crash.
Both the scale of inequality and the speed at which it is rising, leaves most people stunned. But if you need a clearer argument as to why you should worry, I would give four: that if you’re interested in eradicating poverty, in democracy, in the happiness of people or in fairness, we must do something radical about inequality.
You can’t separate poverty from inequality
There has been a push over the last 30 years to claim that there is a huge difference between poverty and inequality. This has been part of an attempt to make efforts towards poverty eradication palatable to an increasingly dominant right-wing agenda, especially in the US.
The beauty of separating poverty and inequality is that you can care about ‘the poor’ while not worrying about the need for any of the radical changes which might upset your lifestyle. You can both be “intensely relaxed about people getting filthy rich”, as Peter Mandelson said, and also care about very poor people getting less poor. This was core to the Blair government’s concern with global poverty.
The problem is that you can’t separate these concepts. You are left with a very narrow, incomplete and technical idea of what poverty is.
I would contend that poverty isn’t simply about short-term purchasing power, but a lack of control over the resources needed for a decent life. Poverty is about lack of power. And that lack of power is a direct consequence of others having too much power – ultimately too much control over resources.
You can try to alleviate suffering at the very bottom. This is what depoliticised poverty goals are all about. For instance, you could give the poor money (or vouchers) to rent the resources they need. That might lead to an improvement in their ‘human development indicators’, at least short-term. But ultimately this secures the control of the very few and makes the power disparity even worse. This is the history of far too much ‘development’ and ‘aid’ over the last 20 years.
Even head of World Bank now says: “Inequality is not just a problem in itself: countries with rising income inequality, the effect of growth on poverty has been dampened or even reversed.”
We can see it in practice. In Africa, where we are told by the financial press that a miracle is taking place, growth rates are booming. But in many of these countries poverty is rising at the same time. Look at Mozambique or Nigeria. Luanda, capital of Angola is the most expensive city in the world while half the country lives in poverty.
In other words, serious levels of inequality are being embedded in this economic model and, despite growth, people’s lives at the bottom are actually getting harder. Trickle down doesn’t work. You can’t have inequality and a contented ‘poor’.
You can’t separate inequality from democracy
Wealth clearly confers power, and that power is exercised in a self-interested way. Elites exercise power in their own interests, though of course they can be more or less ‘enlightened’ about this. In very unequal countries, political candidates are not too different from paid-up mouthpieces for the elite. In the US what is effectively ‘buying candidates’ is not only accepted but getting worse.
Throughout Europe, political parties in no way represent the diversity of views in the general population, let alone the interests of the majority of people. People are more and more alienated. Democratic spaces are closed down. We’re unable to even debate issues which would have been considered quite mainstream in the past – like this one – in most of the media.
Of course there is resistance to this – the brilliant protests organised by Occupy London for instance. But the political elite, which includes much of the media, is unable to even respond to this let alone answer the desperate lack of power people feel.
I haven’t even talked about other aspects of democracy here. Does anyone believe that wealth has no bearing on how people experience justice? Compare how we treat crimes of the poor (most notably displayed in the wildly disproportionate jail terms handed down after the 2011 riots) with crimes of the rich (the lack of justice meted out to those who caused the financial crisis).
Democracy, equal rights, access to justice are all impossible to square with anything like the levels of inequality we currently see.
Inequality makes people unhappy
In fact inequality is more important than poverty in predicting serious social problems. In the excellent and well-known book the Spirit Level by Richard Wilkinson and Kate Pickett, the authors show a very strong link between inequality and… life expectancy, mental illness, teen birth rates, violence, the percentage of populations in prison, drug use, unmanageable debt. Inequality makes these things much worse. Not just a few percentage points worse, but many times worse.
And indeed inequality even changes the way we view each other – human beings. Inequality is related to how much we trust each other. It’s related to our willingness to recycle and to support aid budgets in more equal societies.
For these reasons it isn’t just the poor who are worse off, the very rich are worse off in some sense. Bear in mind that, making a poor person a bit better off is likely to be far more meaningful to their lives than making a rich person a bit better off.
So from a utilitarian point of view, inequality makes no sense at all.
Inequality makes for an unfair society
The elite – through their investments, their lobbying for various laws, their direct responsibility as CEOs of corporations or political appointees, are surely more responsible for the financial crisis than ordinary members of society. They are certainly much more so than those who have lost the most from that crisis – that’s to say the poorest.
Despite this, the top 1% of US society received 95% of all income gains made in the 5 years since the crash. And it just keeps on getting better.
Last year Bill Gates became the richest man in the world again. He increased his wealth by $15.8bn to nearly $80bn. Consistent with the logic of our times, Gates is known for his vast philanthropic ventures, but doesn’t think the US should raise its puny minimum wage.
Collectively all of the world’s millionaires got 11% richer last year – the richest most of all. On the back of one of the worst periods of austerity in modern history, the total wealth of the richest 1,000 individuals, couples or families in Britain jumped 15% last year. This isn’t the ‘1%’, it’s the 0.003%.
In an unequal world, the richest can cause epoch-changing problems and everyone else has to bear the consequences. If we want to tackle inequality, we must challenge the power of the 1%.
We lost the debate.