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by Alexandra Endres
Monday, Jan. 25, 2016 at 4:03 AM
Whether inequality harms or benefits was disputed for a long while. It could motivate individuals to more effort and stimulate growth, one side believed. It takes the chances for education and development from those who are poorer, the other said... Money buys power.
OXFAM STUDY: SIX REASONS TO BE OUTRAGED
The chasm between poor and rich is scandalously great. This is a very practical problem, not a moral problem. Why inequality harms everyone. A commentary by Alexandra Endres
[This article published on January 18, 2016 is translated from the German on the Internet, http://www.zeit.de.]
These numbers describe an obscenity. The richest 62 persons on the planet altogether have a wealth of .76 trillion – as much as the poorer half of humanity, around 3.5 billion persons. And the inequality is growing very quickly. A report released by the development organization Oxfam shows this.
Such a distribution of wealth is a scandal. Being indignant about this has nothing to do with envy. The great concentration of riches is harmful for all of us. Here are six reasons.
1. FREEDOM, EQUALITY AND BROTHERLINESS
Striving for human rights may be full of pathos. Still we must remember: “All persons are born free and equal in dignity and rights,” the Universal Declaration of Human Rights proclaims, Article One, Paragraph One. Western societies appeal to these central values.
But no one can be free with an empty stomach. In its recent study, Oxfam estimates more people could escape extreme poverty if the inequality were not so great. Equality obviously does not mean the state has to guarantee the same living conditions to everyone. However everyone must have the chance of developing and taking his or her life in hand. Something is very wrong when the economic system and the hierarchy of power in politics prevent this and the accumulation of tremendous wealth is possible for a tiny part of the world.
2. EXCESSIVE INEQUALITY BRAKES GROWTH AND DEVELOPMENT
The functional economic perspective is for everyone who is helpless with pathos. For a long while, whether inequality damages or benefits was disputed. Inequality could motivate individuals to more effort and stimulate growth, one side believed. It takes chances for education and development from those who are poorer, the other said. Perhaps the truth in the theory lies somewhere in between. Then inequality would be motivating as long as the difference was not insurmountably great.
But that seems to be happening in practice. One-and-a-half years ago Janet Yellen, the chairperson of the US Federal Reserve, warned of an inequality that destroys promotion prospects. The OECD organization of industrial countries sees economic growth and social peace in danger. The International Monetary Fund comes to a similar conclusion. These institutions are not suspected of any socialist machines. Their expertise must be taken seriously.
3. HARD WORK DOESN’T MAKE PEOPLE RICH
Big achievers earn their wealth. Is that true? That is the meritocratic defense of inequality. But it does not function any more because the chasm between the incomes has become so excessive. According to Oxfam, the head of India’s largest IT-firm receives 416-times as much as one of his typical employees. In the US, the salaries of corporate CEOs rose 90-times faster than their average co-workers since the end of the 1970s. Presumably this has much more to do with the development of stock prices in the past decades than with their achievements.
A glance at the latest Forbes list shows: many super-rich made their money with technology (Bill Gates, Mark Zuckerberg), in the financial branch (Warren Buffet, George Soros) or with consumer goods or cheap fashions (Amancio Ortega von Zara, Stefan Persson from H & M). Many of them probably worked hard. But they simply had the happiness or stroke of good luck to be in a lucrative branch. Many workers slaved away to exhaustion and received a pittance. The seamstresses in Myammar cited by Oxfam are only one example. If you ask the migrant workers in German slaughterhouses (abattours), they would agree: hard work doesn’t automatically make people rich.
4. MONEY IS MISSING ELSEWHERE
According to Oxfam, the wealthy of the world have parked .6 trillion in tax havens like Switzerland, Luxemburg or Singapore. The richest businesses and private persons employ a huge crown of investment advisors and lawyers to secure their wealth from tax authorities. The taxes that they do not pay are then missing in the public treasuries: for education, investments, health insurance and income support.
Money Buys Power
This is not only true for the industrial states. The rich elite from threshold countries also use tax loopholes. The economist Gabriel Zucman calculated that 0 billion in tax revenue is missing every year from the governments of the world. That is more than the whole global aid to developing countries.
There were other reasons than tax optimization for the extreme riches of the 62. Some of the causes lie in the national policies of their countries of origin and can hardly be influenced by international initiatives. But should the struggle against tax havens be abandoned?
Certainly, the additional tax money would not automatically be used sensibly. Corruption and waste or extravagance would not disappear only through better tax laws. But with them governments would at least have a chance of forming a better politics – and in the ideal case would be controlled by their citizens.
5. INEQUALITY HARMS DEMOCRACY
Democratic control is a good keyword. The philanthropic foundations of Bill Gates and others do much good. But they set their priorities without the input and influence of citizens for whose well-being they are engaged. How would it be if businesses paid their due taxes instead of shifting wealth abroad?
Much more dangerously, money buys power in the US for example. Nearly half of the 62 super-rich from the Forbes list – used as a basis for Oxfam’s report – come from the US. The well-to-do between New England and California finance the candidates of both parties in the election campaigns and obviously expect a return favor – for example in the form of tax loopholes as the New York Times recently reported in detail.
In many other countries, the political and economic elite are warmly connected. The closer their relations, the harder it is for outsiders to climb to their circle (see 2nd point). In some states where the inequality is very great, the rich feel closer to their class compatriots abroad than to the poor at home. They have their place of residence in the North and send their children to school there. Their life-perspectives are elsewhere. Why should they be anxious about better conditions at home? So democracy erodes through the enormous inequality.
6. WE CANNOT SCREEN OURSELVES
Europe has long lived like a gated community. But that works less and less in a globalized world, as the refugee crisis shows. Seen globally, the inhabitants of industrial countries are the rich. When the growing inequality leads the poor at home to see every fewer perspectives for themselves, then they will come to us.
That alone should be enough reason to strive for more equal conditions. Whether the elite meeting place Davos is the right place, as Oxfam claims, can be left undcecided. Little will change without public pressure.
Alexandra Endres, Arbitration Courts: A Dirty Gold Rush, January 2016 https://www.indybay.org/newsitems/2016/01/19/18782020.php
Thomas Palley and Gustav Horn, Restoring Shared Prosperity, December 2013, 211 pp
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