By Roberto Savio
SAN SALVADOR, Sep 12 2013 (IPS)

A recent report by the Centre for Analysis of Social Exclusion at the London School of Economics called attention to the fact that, at the present rate of inequality, by the year 2025, the United Kingdom will have returned to the unequal society of the end of the 19th century. In other words, we are going back to the times of Queen Victoria!

In 2010, the incomes of the chief executives of the 100 largest companies in the U.K. increased by 49 percent, while the average pay rise was just 2.7 percent. According to a European Banking Authority report, in 2010 and 2011, 2,436 U.K. bankers earned more than one million euro per year, against 162 in France and 36 in the Netherlands.

Nearly 50 percent of the funding of Britain’s Conservative Party comes from the financial sector. No wonder that British Prime Minister David Cameron is obliged to choose the City over Europe.

Roberto Savio. Credit: IPS

The world trend is exactly the same. In China, there are 1.3 million millionaires. In its last report, Forbes the magazine for the rich happily informs its readers that the 2013 Forbes Billionaires list now boasts 1,426 names – including 122 in China – with an aggregate net worth of 5.4 trillion dollars, up from 4.6 trillion dollars. “We found 210 new ten-figure fortunes,” it says.
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What this means is that the combined wealth of the Forbes billionaires is now larger than the U.S. budget, which is 3.8 trillion dollars for this year. Actually, they overtook the U.S budget three years ago. And if we take just the ten billionaires at the top of the Forbes list, together they hold an amount of 451.5 billion dollars.

In other words, we could fill a 300-seat plane with the 300 richest persons in the world, yet their wealth exceeds the combined wealth of three billion people: nearly half of humankind.

Nobel laureates Paul Krugman and Joseph Stiglitz have written extensively on how social injustice hampers development and creates economic crisis, and Krugman has documented the increase in inequality which accompanied the crises of 1929 and 2008. In the 1930s, huge steps were taken to tackle inequality and vested interests.

In today’s world, this should be our main reflection (a reflection not being made by U.S. President Barack Obama). We should not forget that in the era of Charles Dickens, Karl Marx was writing about the exploitation of children in British mines.

In 1848, Europe was shaken by a wave of uprisings triggered by the extreme exploitation of workers by the capitalists born out of the industrial revolution. After the unrest was put down, trade unions were created, and a progressive political movement was born.

Marx gave a scientific framework to an ongoing wave. And, when the (unsuccessful) Russian revolution of 1905 was followed by the successful Soviet revolution of 1917, a threat to capitalism was established.

During the period between the two world wars, efforts were made everywhere to prevent other countries from taking the path of Russia. Trade unions became legal and part of the establishment, the Left entered parliament, and there were a number of initiatives to accommodate the demands of the people. No right-wing party in power ever tried to scale down social conquests; at most it slowed them down.

The Second World War dramatically changed the global scenario, sowing the seeds of the Cold War. After the International Monetary Fund and World Bank were set up in 1944 as guardians of a global monetary system, the United Nations was established in 1945 in the name of world governance.

The values for world governance had a very strong social content, also contained in national constitutions: social justice, equality, participation, workers rights, human rights, advancement of women, education for all – and the list continues. But, let us pause for a second: would it be possible today to adopt the Universal Declaration of Human Rights, or the present charter of the United Nations? And have the U.S. committed to paying 25 percent of the costs?

With the collapse of the Berlin Wall, a new world was created. Capitalism, not the West, was the winner. And globalisation understood as total freedom for capital and investments (not for goods and people) would bring wealth through the trickle-down theory.

Here I have bowed to the principle of modern journalism to say in a few words what should be argued in a much lengthier and better-documented analysis. But so much has been published on fiscal paradises and tax evasion that, hopefully, no statistics are needed here; suffice it to recall that fiscal paradises host 32 trillion dollars.

The American Bankers Association has recognised that it spent 800 million dollars last year lobbying against the Dodd-Frank financial reform law (Dodd-Frank Wall Street Reform & Consumer Protection Act) passed over three years ago.

The law, passed at the height of the banking crisis, triggered a broad consensus on the need to regulate, but that is now gone. The financial system has adopted the Asian proverb: When there is a strong storm, lie down and wait until it goes away. So now, after three years, of the 398 rules under the Dodd-Frank law, 240 (60 percent) have not yet been implemented.

President Obama has called for a speedy conclusion. But, until now, Obama has only met once with the regulators and that was in mid-2011.

So the real question is: in a vastly unjust society, does democracy work? Or does it become just a formal mechanism to accommodate those inside the system, and ignore the excluded? Do those 300 sitting in the plane of extreme wealth have the same view of the world as the three billion poor left on the ground? And if not, does their view of the world counts as much as that of the 300 people on the plane?

Because we know well that in Victorian times people were not equal in that kind of democracy … and we all know how much blood and suffering it took to bring the world to the period of expansion aiming at social harmony that we had until 1989. But have you heard these kinds of questions among the Obamas, the Merkels, the Camerons, the Rajoys or anyone else, on this return to the past?

Without forgetting the case of Silvio Berlusconi, the Italian billionaire who created and funded his own party, served as prime minister for the best part of 20 years, was found guilty of fraud against the state and now holds the government of Italy in the balance. He is part of today’s democracy – but is this real democracy?

(END/COPYRIGHT IPS)

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By Roberto Savio
ROME, Mar 11 2013 (IPS)

For those who think that Occupy Wall Street, the Indignados in Spain, the World Social Forum and the numerous manifestations of protest worldwide are expressions without concrete outcomes, the result of the Swiss referendum on Mar. 3 on capping the salaries and bonuses of banks executives should make them think twice.

Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News. Credit: Courtesy Roberto Savio

Like it or not, two-thirds of the Swiss, who are not exactly a revolutionary people, have given the shareholders of financial institutions the right to decide salaries and bonuses of their executives.

Another referendum — on limiting the salaries and bonuses of company executives from all sectors to a figure that does not exceed 15 times that of the average salary of their employees — is due shortly.

At the same time the European Commission and the European Parliament have reached an agreement on capping bank executives’ bonuses at an amount equal to their annual salary. If the shareholders decide, it can be twice their annual salary, but no more.

The howling of the bankers, while expected, is very interesting in explaining the reasons for their rejection of the results. The first, basically from the United Kingdom, is that the gap between London and Europe is increasing. The financial sector accounts for ten percent of the British gross national product (GNP) and the Anglo-Saxon world has been riding the wave of bankers’ increasing bonuses and salaries much more than elsewhere. In a good year, a bonus can be ten times higher than a salary.

But it is a fact that the UK is moving, as the last local elections showed, toward an increasingly anti-European sentiment, and as long as London keeps applying the brakes, Europe will never become more integrated.

Second, the bankers say that the result will be higher fixed salaries, which would hurt shareholders even more, while high bonuses are more flexible. Thus good executives would move to Wall Street, or Hong Kong, Shanghai or Tokyo, and Europe would be left with second-class executives.

Now, it is widely known that high bonuses reward risk-taking, which is one of the causes of the dismal performance of the banking system. Furthermore, this argument ignores that there is a growing consensus on the need to go back to the pre-Bill Clinton era, when commercial and investment banks in the U.S. were separated, precisely to reduce the high-risk culture that has led to increased unemployment and poverty worldwide.

The third argument is the most interesting, and shows how much the world of banking has grown into its own delusion. Bonuses are mostly given in the form of a “clawback bonus”; they are deferred and often paid in the form of stocks, and they can be retracted. The big banks, like the Royal Bank of Scotland or Barclays, have used clawbacks, and bankers say that this threat has itself become a powerful deterrent to risky or unethical behaviour.

Now, no data are available on how much this clawback has been used anywhere. What is available, however, is information on the innumerable fines that have been applied to the big banks for fraud. Suffice to remember that the very lenient American regulators have slapped fines of more than three billions dollars on the big banks.

Let us just recall some specifics: 8.5 billion for fraudulent foreclosures on home loans to ten banks (including Bank of America, Citigroup, JP Morgan Chase), followed by a similar settlement of 557 million dollars to Goldman Sachs and Morgan Stanley. The case of the fraudulent fixing of the Libor rate (the rate of exchange among banks) has cost UBS alone 1.5 billion dollars up to now. The director of Barclays has been obliged to resign.

Where is the effect of the clawback bonus as a wall against risky and unethical behaviour?

The world crisis, which was entirely engineered by speculative finance in the U.S. and erupted in 2008, coupled two years later with the crisis of sovereign debt, an entirely European affair. This has led to the unprecedented blackmail of governments by the markets and to the uniform medicine of austerity, with Greece as the clearest example of its impact on the people.

Viewed in this context, news that the 100 richest people in the world added 240 billion dollars to their wealth in 2012 is even more obscene. Clearly, they had no need of that money, in human terms.

The top two percent of the world’s population (60 million people) now possesses as much wealth as 2.5 billion people. The top 0.01 percent (600,000 persons) has as much wealth as two billion people.

There are now 1,200 billionaires in the world. Simultaneously, we are facing a serious food problem. Every day, there are 192,300 new mouths to feed, 70 million every year. According to the Food and Agriculture Organisation (FAO) the reserves of food have gone down by 2.6 percent, while the cost keeps going up (cereals by 10 to 35 percent, depending on the product).

Yet, according to the World Bank, we throw away 40 percent of food in the rich countries. So, with the 240 billion piled up in a year by the 100 richest people, we could eliminate many of the world’s problems.

Two billion more people are expected in a few decades (by 2050). The system is not able even to accommodate the current seven billion. How will it accommodate two billion more, coming from the poorest parts of the planet?

The answer is obvious: we have the wealth, but it is not distributed justly. As the saying goes, the rich become richer while the poor get poorer.

Consequently, people are getting fed up, as the Swiss referendum has clearly shown. Everywhere discontent is seeping into the polls, with protest parties flourishing everywhere.

We are in transition to a different system. This can be done through peaceful and cooperative means, or by a continuation of this growing social injustice. History has many lessons on this issue, and it is useless to recall them. We all read them at school, even the 100 billionaires. So, as the Swiss referendum shows, it is not awareness that is lacking: it is political will.

(END/COPYRIGHT IPS)

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