No less an authority on economic affairs than God’s son apparently suggested that ‘the poor will always be with you’. Even the heathens amongst us may be forced to concede that he may have been on to something. To judge by Oxfam’s recently released report, Working for the Few, not only are the relatively impoverished still around despite miraculous levels of development in much of Asia, but their ranks may actually be expanding – and not just in the ‘developing world’ either.
One part of this story is troublingly familiar, although perhaps not as bad as it once was. The distribution of wealth is strikingly uneven across the world, and it’s getting worse rather than better.
And yet this is a complex picture full of paradox and contradiction. Although there are still many very impoverished people in the world, this is partly because there are simply a lot more of us. The proportion of desperately poor people as part of the sum of humanity has actually declined.
This happy state of affairs is primarily thanks to the historically unprecedented economic take–off of East Asia generally and China in particular. As long as we don’t look too closely at the impact of China’s economic expansion on the environment, the escape from poverty of millions of recently poor peasants has got to be a cause for celebration. And yet in China, as in so much of the rich world, income inequality is becoming a source of social tension.
But it is not just China’s depleted ranks of socialists that are becoming exercised by economic inequality. On the contrary, Barack Obama and International Monetary Fund head Christine Lagarde have both recently voiced concern about what they see as the socially corrosive impact of growing levels of inequality in Europe and especially the US. Oxfam’s report makes it clear why they are worried.
Half the world’s wealth is owned by 1% of the population. The bottom half of the world’s population owns the same as the richest 85 – yes, that’s eighty-five – people. The problem is arguably even worse in the land of opportunity. In the US, 1% of the population captured 95% of post-financial crisis growth since 2009. The idea that living standards will always rise and that the coming generation’s achievements will exceed those of its predecessors has become a myth—unless you’re in the top 1%, of course.
The authors of the Oxfam report claim such outcomes have political origins. Financial deregulation, “globalisation” and taxation regimes that are either designed to favour the wealthy, or which are easy to avoid, have exacerbated growing levels of inequality. Not only is there less wealth available for states to redistribute than there otherwise would be, but the very idea that this is something governments ought to do is now regarded as a quaint, economically illiterate anachronism.
Perhaps so, but it is striking—and encouraging—that even some of the world’s most prominent plutocrats are concerned about the lopsided distribution of wealth. Warren Buffet famously questioned whether it was morally acceptable that his secretary should be paying a higher rate of tax than he did. The answer in any society with claims to civilised, let alone sustainable, is surely an unambiguous “no”.
Likewise, while Bill Gates is no doubt a model of enlightened philanthropy, one might be forgiven for asking whether he should have quite so much money in the first place.
It seems remarkable that in the wake of the worst financial crisis since the Great Depression we are even having these sorts of debates at all. The incentive structures that operated in the world’s financial markets led directly to patterns of behaviour that served individual rather than collective interests with disastrous, all too well known consequences.
Paradoxically enough, the financial sector justifies exorbitant rewards for its employees because it operates in a global market for talent. Globalisation has a very different impact further down the food chain where wage levels are actually driven down rather than up by international competition. And yet entry level jobs in the manufacturing sector have also generally been the point of individual and economy-wide take-off across the world. It was ever thus.
What’s different now though, it seems, is the ability of the top 1% to capture – and keep – a disproportionate share of the wealth generated by what is always an inescapably collective endeavour. True, some bright spark in the IT sector may have a good idea that generates extravagant, if deeply mystifying wealth, but they do so in as part of a broader social environment: we all inherit a set of values and skills that none of us could have generated alone.
The key variable here is access to the sort of education that will allow entry to lucrative jobs and industries. As the Oxfam report makes clear, family background remains a critically important determinant of life chances and earning potential. However, the chances of young people realising ‘the American dream’, or even just getting a job in Europe, are slimmer than they have been since the Depression. This is not a recipe for social harmony; it’s easy to see why Lagarde and Obama are worried.
Global economic integration and liberalisation have no doubt played a huge part in lifting millions out of poverty. And yet this is not a process that can or should be left entirely to the mercies of the market place. Getting high worth individuals and corporations to pay their fair share is not simply normatively desirable and equitable, but it could provide the wherewithal for much needed investment in social infrastructure – and not just within national borders, either.
Even if we only want to close down the tax-dodging activities that Oxfam rightly decries, the need for international cooperation remains an inescapable fact of life. The comparatively poor may, indeed, always be with us, but their lot could be less starkly at odds with that of the plutocracy.
There comes a point at which disparities of wealth and opportunity become so grotesque that they are not so much an incentive to achieve, but a motivation to rebel.