A PROBLEM WAITING TO EXPLODE
80 per cent of wealth goes to a few hands, and the crumbs to all the others, who pay most of taxes, writes
AMONG Bloomberg’s many profitable activities is the convenient Bloomberg Billionaires Index that has just published its findings for 2017. It covers only the 500 richest people, and it proudly announces that they have increased their wealth by one trillion dollars (RM4.02 trillion) in just one year. Their fortunes went up by 23 per cent to US$5 trillion (to put this in perspective, the US budget is now at US$3.7 trillion).
That obviously means an equivalent reduction for the rest of the population, which lost those trillion dollars. What is not widely known is that the amount of money in circulation stays the same; no new money is printed to accommodate the 500 richest billionaires!
In fact, Forbes, the magazine for the rich, states that there are over 2,000 billionaires in the world, and this number is going to increase and increase fast. China has now overtaken the US, by having 594 billionaires compared with the US’ 535 — and every three days a new millionaire is born.
There is even an exclusive club of billionaires, the China Entrepreneur Club, which admits members only by the unanimity of its 64 members at present. Together, they have US$300 billion, 4.5 per cent of the Chinese GNP. As a norm, the Chinese wealth is a family affair, which means that in 10 years they will leave a heritage of one trillion dollars, most probably to their sons; and the amount of inherited wealth is going to rise to US$3 trillion in 20 years.
All this staggering amount of money in a few hands (eight people have the same wealth as 2.3 billion people), brings us to three relevant considerations:
WHAT is happening with the world debt;
HOW are governments helping the rich to avoid taxes;
THE relation between injustice and democracy. None of those perspectives gives space for hope, and least of all trust in our political class.
Let us start with the world’s debt. The International Monetary Fund says the gross debt of the non-financial sector has doubled in nominal terms since the end of the century to US$152 trillion. This is a record 225 per cent of the world GDP. Two thirds come from the private sector, and one third from the public sector.
GDP is an inadequate indicator. Growth is a macroeconomic index. If 80 per cent goes to a few hands, and the crumbs to all the others, who pay most of the taxes; it is not an example of growth, it is just a problem waiting to explode.
What is more, nobody is thinking about the increase in the deficit. The total private debt at the end of the first quarter of 2017 was US$14.9 trillion, with an increase of US$900 million in three months. While salaries increased from US$9.2 billion in 2014 to US$10.3 billion in the second quarter of 2017, the debt of families rose from US$13.9 billion to US$14.9 billion in just four months.
Which growth are we talking about? In fact, we have 86 per cent of the population facing increasing debt, but poorer at the same time, because of the concentration of wealth in just one per cent of the population’s hands.
This should be a cause for concern for any administration, leftwing or right-wing: in fact, it is not surprising that the 400 richest men in the US, led by Warren Buffet, have written to Trump telling him that they are doing fine and that they do not need a tax rebate; and that he should worry about the poorest part of the population.
The amount of money hidden away in tax havens has significantly increased since 2005, sharpening the divide between the super-rich and the rest of the world. And this is why there was a lot of pressure to oblige banks to open their accounts to fiscal inspectors, and pressure on the Bahamas, Hong Kong, Panama and other third world countries.
Globalisation is obviously rewarding capital, not human beings. Well, this is having an impact in politics, and not the best one. There is everywhere an increasing number of losers, especially in rich countries, also because of technological development, and a shift in consumption. A classic example are the coal mines that Trump wants to resurrect, to make America great again.
But coal is inexorably being phased out because of climate concerns (even if not fast enough), and automatisation reduces considerably the number of workers to be employed. Robots will in 2040 be responsible for the production of 42 per cent of goods and services, up from the present 16 per cent.
Which means around 86 million of new unemployed, in the West alone, according to the International Labour Organisation. Those left out from the benefits of globalisation look at the winners, whom they see as well connected to the system.
This results in the globalisation of resentment and frustration, which in a few years has led to the rise of the rightist parties in all European countries, triggered Brexit, and Trump.
Once upon a time, the left was the banner-bearer of the fight for social justice. Now it is the right!
The genie is out of the bottle, and the powers that be do not even try to put it back. Utter hypocrisy, vested interests, and the lack of vision have regrettably replaced policy. IPS
Robots will in 2040 be responsible for the production of 42 per cent of goods and services, up from the present 16 per cent. Which means around 86 million of new unemployed, in the West alone, according to the International Labour Organisation.
The writer is founder of IPS Inter Press Service and President Emeritus