By Roberto Savio
ROME, Jan 22 2015 (IPS)

Every day we receive striking data on major issues which should create tumult and action, but life goes on as if those data had nothing to do with people’s lives.

A good example concerns climate change. We know well that we are running out of time. It is nothing less than our planet that is at stake … but a few large energy companies are able to get away with their practices surrounded by the deafening silence of humankind.

Roberto Savio

Another example comes from the world of finance. Since the beginning of the financial crisis in 2009, banks have paid the staggering amount of 178 billion dollars in fines – U.S. banks have paid 115 billion, while European banks 63 billion. But, as analyst Sital Patel of Market Watch writes, these fines are now seen as a cost of doing business. In fact, no banker has yet been incriminated in a personal capacity.

Now we have other astonishing data from Oxfam – if nothing is done, in two years’ time the richest one percent of the world´s population will have a greater share of its wealth than the remaining 99 percent.

The richest are becoming richer at an unprecedented rate, and the poorest poorer. In just one year, the one percent went from possessing 44 percent of the world´s wealth to 48 percent last year. In 2016, therefore, it is estimated that this one percent will possess more than all the other 99 percent combined.

The top 89 billionaires have seen their wealth increase by 600 billion dollars in the last four years – a rise of five percent and equal to the combined budgets of 11 countries of the world with a population of 2.3 billion people.

In 2010, that figure was owned by 388 billionaires, and this striking and rapid concentration of wealth has, of course, a global impact. The so-called middle class is shrinking fast and in a number of countries youth unemployment stands at 40 percent, meaning that the destiny of today’s young people is clearly much worse than that of their parents.“In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production”

It will probably take some time before those figures become part of general awareness but it is a safe bet that they will not lead to any action, as with climate change. U.S. President Barack Obama is the only leader who has announced a tax increase on the rich, although he stands little chance of succeeding with his Republican-dominated Congress.

In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production. But up to a point: 34 percent of today’s billionaires inherited all or part of their wealth, and – interestingly – “inheritance tax is the most avoidable of levies”, as James Moore noted Jan. 20 in The Independent.

The “father of modern times”, late U.S. President Ronald Reagan, saw it clearly when he said that the rich produce richness, the poor produce poverty. So let the rich pay less taxes.

Well, in a just-released report, the U.S. Institute on Taxation and Economic Policy notes that in 2015 the poorest one-fifth of Americans will pay on average 10.9 percent of their income in taxes, the middle one-fifth 9.4 percent, and the top one percent just 5.4 percent.

Now, 20 percent of the richest billionaires are linked to the financial sector and it is worth recalling that this sector has grown more than the real economy, and has regulations only at national level. At global level, finance is the only activity which has international body of some kind of governance, as do labour, trade and communications, to name just a few.

Finance is no longer at the service of the economy and citizens. It has its own life. Financial transactions are now worth 40 trillion dollars a day, compared with the world’s economic output of one trillion.

At national level, there are now attempts half-hearted attempts to regulate finance. But let us look what is happening in United States. The new bland regulation is the Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank, and it does not go as far as restoring the division between deposit banks, which was where citizens put their money and which could not be used for speculation, and investments banks, which speculate … and how!

This separation was abolished during the U.S. presidency of Bill Clinton, and is considered the end of banks at the service of the real economy. In any case, the lobbyists on Wall Street are intent on having the Dodd-Frank chipped away at, little by little.

There is some schizophrenia when we look at the relations between capital and politics. The U.S. Supreme Court has eliminated any limit to contributions from companies to political elections, declaring that the companies have the same rights as individuals. Of course, there are not many individuals who can shell out the same figures as a company, unless you’re one of the 89 billionaires!

Meanwhile, banks are not only responsible for the corruption of the political system, and for the illegal activities which have earned them billions of dollars, they are also responsible for funding only big investors, and leaving everybody else out from easy credit. The efforts of the Chairman of the European Central Bank,  Mario Draghi, to have banks give credit to small companies and individuals has gone largely nowhere.

But a new and imaginative initiative comes from the very stern Dutch bankers. All 90,000 bankers in the Netherlands are now required to take an oath: “I swear that I will endeavour to maintain and promote confidence in the financial sector. So help me God”.

This is not so much oriented towards the customer, and it is very self-serving; and it brings God in as the regulator of the Dutch banking system. Perhaps the Dutch bankers have been paying heed to the words of Goldman Sach’s CEO Lloyd Blankfein who said at the time of the financial crisis in 2009 that bankers were “doing God’s work”.

Well God will have to be actively involved. All the three biggest Dutch banks – Rabobank, ABN Amro and ING Groep – have been involved in scandals that have hurt consumers, or were nationalised during the financial crisis, costing taxpayers more than 140 billion dollars. In one case, Rabobank was fined one billion dollars.

New York’s Wall Street and London’s City are said to be open to the idea of introducing a similar oath.

It is probably only that kind of Higher Power which could turn the tide in this world of growing inequality and lack of ethics. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

The author can be contacted at utopie@ips.org

Excerpt:

By Andrew MacMillan
ROME, Jan 13 2015 (IPS)

About a week ago my wife was taken to hospital and diagnosed with pneumonia. She was promptly treated with antibiotics and, wonderfully, is now on the mend.

What has struck me about this experience is not so much the high professionalism of the health workers or their up-to-date hospital equipment but the fact that she has become immersed in what can best be described as “a culture of caring”.

Andrew MacMillan

She and the other patients in her ward are looked after round the clock by an extraordinary team of state-employed nurses in a quiet, efficient and courteous way that inspires confidence.

I suppose that there is nothing particularly unusual about this. Caring for others is a very natural human trait. Everywhere, mothers care for their children; sons and daughters care for their aging parents; and neighbours rush to help each other when they hit problems.

Perhaps, however, “modern” societies – if one dares to generalise about them – are driven more by the quest for individual material wealth than by any widely expressed wish to do things for the general good of humanity.

Unless you live in Bhutan, your country’s performance is measured not in terms of the happiness of its people but by the growth of its Gross Domestic Product; bankers and businessmen reward themselves with salary bonuses rather than with extra time with their families; and those who enjoy the highest pinnacles of wealth vie with each other over the size of their fleet of private jets or the tonnage of their personal yachts.

The idiosyncrasies of the super-rich and celebrities would not matter much if they had not become the new role models for people who aspire to “do well” in life and if their wealth did not entitle them to a voice in the corridors of world power. It seems odd that Presidents and Prime Ministers flock each year in January to [the World Economic Forum in] Davos to rub shoulders with the rich and famous, but perhaps this is simply a tacit admission of the influence that the latter have.“I believe that most people, at heart, want to see globalisation bring greater fairness and justice
even if this comes at the partial expense of our own material well-being”

Much of the recent material gains all around the planet is the result of the processes of globalisation that have successfully combined inventiveness, capital, low-cost but increasingly skilled labour and cheap transportation in new ways that have flooded the world’s markets with an amazing array of tantalising goods.

This apparent success of globalisation, however, may distract political attention from the idea that it could perhaps work better in everyone’s interest.

It seems absurd that 6 billion mobile phones have been produced and sold but 800 million people still go hungry every day; that, as people travel further, faster and more frequently, diseases such as Ebola spread more rapidly and more widely but the institutions responsible for protecting us from increased threats remain desperately under-funded; and that governments hesitate to upset their voters by acting to trim greenhouse gas emissions while, as predicted, the increasing frequency of extreme weather events is repeatedly wreaking havoc upon the unfortunate.

We tend to take these problems for granted rather than face up to the need to identify how to best manage globalisation in the interests of humanity.

I believe that most people, at heart, want to see globalisation bring greater fairness and justice even if this comes at the partial expense of our own material well-being.

I do not think that there are many people who, if asked, would want to see others starve for lack of food, who welcome greater weather instability or who think that it is right that their children should suffer from the environmental damage that results from our unsustainable lifestyles.

In a sense, President Lula of Brazil put this idea to the test during his successful 2002 campaign. Breaking out of the normal political mould, he did not promise his voters higher incomes but simply pledged that all Brazilians would enjoy three meals a day by the end of his term in office.

He unveiled his Zero Hunger Programme on his first day as President, with the State assuming the responsibility for assuring that all the poorest families in the country could fulfil their right to food. There was huge outpouring of popular support for his efforts to create the more just and equitable society that has now emerged.

What many of us would like to see is the emergence of a new international consciousness of social justice similar to that proposed by Lula and embraced by Brazilians twelve years ago.

It must be founded on a growing public recognition of the unique role that multilateral institutions have to play in ensuring that globalisation is harnessed to benefit all people, especially the poorest of the poor. It must also assure greater inter-generational fairness in the use of our planet’s scarce resources.

Nowhere is the need for greater fairness more apparent than in the realm of food management – where we face a crazy situation in which, though ample food is produced, the health of more than half the world’s population is now damaged by bad nutrition.

It is fitting that the Secretary-General of the United Nations, Ban Ki-moon, should have launched his personal “Zero Hunger Challenge” in Brazil in 2012 when he called for the elimination of hunger “within my lifetime”.

The fact that the current Director-General of the Food and Agriculture Organization (FAO) – the United Nations agency that that oversees global food management – is José Graziano da Silva, who was the Brazilian architect of Lula’s Zero Hunger Programme, inspires confidence that it will do all in its power to bring about a world without hunger.

We can already see a renewed FAO in action – committed to ending hunger and malnutrition, more focused in its goals, working as one and embracing partnerships for a better present and future. Four more years will allow Graziano da Silva to consolidate the transformations he has begun and realise their full effect to the benefit of the world´s poor and hungry.

Hopefully 2015 will be a year in which the world’s leaders will become the champions of the justice and fairness – the caring society that my wife has experienced – to which so many of us aspire.

At the very least, they should pick up the thought that, as in Brazil, it should be a perfectly normal function of any self-respecting government to ensure that all its people can eat healthily.

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

Inequality out in the open. Credit: A.D. McKenzie/IPS

By A. D. McKenzie
PARIS, Dec 12 2014 (IPS)

For years, many policy makers, including economists, have clung to the belief that if states do nothing to boost income equality, market forces will cause wealth to trickle down to the poorest citizens and contribute to overall growth.

That theory is now being increasingly debunked as experts affirm that the broadening gap in income is creating far-ranging problems for many societies.

In a new report  published on Dec. 9, researchers at the Paris-based Organisation for Economic Cooperation and Development (OECD) argue that “reducing income inequality would boost economic growth”.

Their research shows that countries where income inequality is decreasing actually “grow faster than those with rising inequality,” and the analysts would like to see governments take stronger action to reduce inequity.“Today, the richest 10 percent of the population in the OECD area earn 9.5 times the income of the poorest 10 percent; in the 1980s, this ratio stood at 7:1 and has been rising continuously ever since” – OECD

“The single biggest impact on growth is the widening gap between the lower middle class and poor households compared with the rest of society,” says the report titled ‘Trends in income inequality and its impact on economic growth’, and “education is the key: a lack of investment in education by the poor is the main factor behind inequality hurting growth.”

According to Michael Förster, a senior analyst in the OECD’s Social Policy division, one reason “the poor and lower middle classes are being left behind in unequal societies” is that they do not have the resources to spend on their own or their children’s education, compared with wealthier citizens,.

He said that governments needed to revise strategies that are based on outdated economic theories.

“The common assumption used to be that the more you did to enhance equality, the more you would hinder growth,” he argued. “So the idea was that if you take too much from the top earners, through taxes, you will have less growth. We haven’t found evidence for that. What we have found is that increasing inequality is bad for growth.”

For example, rising inequality is estimated “to have knocked more than 10 percentage points off growth in Mexico and New Zealand over the past two decades up to the Great Recession,” says the OECD.

Meanwhile, in the United Kingdom, Italy and the United States, the “cumulative growth rate would have been six to nine percentage points higher had income disparities not widened.”

OECD Secretary-General Angel Gurría said that this “compelling evidence” proves that addressing high and growing inequality is “critical to promote strong and sustained growth” and needs to be at the centre of global policy discussions.

“Countries that promote equal opportunity for all from an early age are those that will grow and prosper,” he added.

However, some scholars maintain that the consequences of inequality are hard to prove. American economist Jared Bernstein and others have pointed out that it is difficult to establish a firm connection between the inequities in education and economic growth.

These analysts acknowledge that wealthier parents do spend more overall on educational tools and “goods”, and that children from rich families often study at elite institutions in contrast to children from poor backgrounds who may attend lower-quality schools, but they have disagreed on the social or economic effects.

With the “new evidence”, OECD researchers say that the main means through which inequality affects growth is by “undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development.”

“People whose parents have low levels of education see their educational outcomes deteriorate as income inequality rises. By contrast, there is little or no effect on people with middle or high levels of parental educational background,” the OECD said in a statement.

According to researchers, anti-poverty programmes will not be enough to create greater equality of opportunities in the long term.  Essential measures will include “cash transfers and increasing access to public services, such as high-quality education, training and healthcare”, the OECD says.

Förster stressed that the inequality study focused on income and not wealth. But recent discussions have centred on both, particularly in France since the election of Socialist President François Hollande in May 2012.

Soon after his election, Hollande announced plans for a 75 percent tax on all income over one million euro, and a watered-down version of the plan was approved by French courts a year ago, even as many wealthy families fled to Belgium and elsewhere.

Economists of different political colours have argued about whether the increased taxation is good for the economy, and the debate has grown more heated with last year’s publication of Capital in the Twenty-First Century by renowned French economist Thomas Piketty.

A lecturer in Paris and internationally, Piketty advocates a global tax on wealth. He has carried out studies showing that income inequality has grown in many countries, alongside 30 years of declining tax levels.

The gap is particularly marked in the United States, but even in “egalitarian” France, the top one percent earned an average of 30,000 euro monthly in 2010, compared with 1,500 euro per adult of the poorest 50 percent.

According to the OECD, a similar situation exists in many of its 34 member countries, which include European nations and others such as Mexico, Chile and the United States.

“Today, the richest 10 percent of the population in the OECD area earn 9.5 times the income of the poorest 10 percent; in the 1980s, this ratio stood at 7:1 and has been rising continuously ever since.”

Bucking the trend, income inequality has been falling in Chile and Mexico, but the incomes of the richest are still more than 25 times those of the poorest in these two countries.

The OECD’s Latin American Economic Outlook 2015, produced with regional partners and also launched on Dec. 9, focuses on the role of education and skills, and experts said more needed to be done to “raise educational standards and address persistent and substantial socioeconomic inequalities.”

Förster told IPS that the organisation hoped governments would consider the findings as a basis to change policy, “otherwise we won’t get out of the current situation.”

(Edited by Phil Harris)

By Judith Niehues
COLOGNE, Sep 20 2014 (IPS)

Thomas Piketty, a French economist who works on wealth and income inequality, has triggered a debate on the distribution of income and wealth in many countries. This is no small issue because views on income inequality and concomitant redistributive preferences are crucial to the design of tax and transfer systems.

Particularly in many European countries, society is concerned about distributional issues, reflected in recurring debates on redistributive policies. However, a study presenting international survey data on subjective perceptions of inequality and redistributive preferences reveals that perceived and actual inequality diverge quite substantially in many of these countries.

Dr Judith Niehues

According to the 2009 Social Inequality Module of the International Social Survey Programme (ISSP), more than 50 percent of Germans strongly agree that differences in income are too large.

Correspondingly, a similar portion of Germans thinks that it is “the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes” – a questionnaire item which is commonly used to capture subjective preferences for redistribution.

Regarding this majority of critical views on inequality, social justice and redistribution are topics for debate that continually feature on the political agenda in Germany – reflected in the current introduction of redistributive policies, such as a minimum wage and additional pension benefits for mothers.

On the other hand, in the United States – which is characterised by a far higher degree of actual income inequality – people are less concerned about income differences, and they do not see any reason for redistributive state intervention. There is virtually no empirical relationship between the actual size of inequality within a country and how critical people view these income differences to be.

The missing link between inequality and its assessment is not specific to these two countries. In a sample of 23 European countries and the United States, there is virtually no empirical relationship between the actual size of inequality within a country and how critical people view these income differences to be.

Obviously, there might be a range of individual and national factors which may explain cross-country differences in critical views on income differences and related redistributive preferences.

For example, in line with the argument of the “American exceptionalism”, people in the United States might just accept certain inequalities as incentives because they believe in the chance of upward mobility.

On the other hand, Germans may be more convinced that income positions arise from luck or other exogenous circumstances, thus regarding inequality as more unfair, and therefore they might demand more state redistribution.

However, current research on mobility reveals that there is a tendency for countries with higher inequality to also be associated with less income mobility.

Looking instead at how types of societies are perceived – a questionnaire item also included by the ISSP – gives some clues: 54.2 percent of Germans believe that the bulk of the German population lives rather at the bottom of society.

To what extent does this perceived type of society match with actual income distribution in Germany? Although there are different ways of demarcating society into a “bottom”, a “middle” and a “top”, studies generally reveal that the middle class represents by far the largest group in German society.

In particular, independently from the chosen definition of income groups, people on middle incomes are far more numerous than those at the bottom of the income distribution scale. This rather pessimistic view on income equality is typical of the European countries studied.

In most countries, the population significantly overestimates the degree of inequality. This is particularly true for former socialist countries such as Hungary, Slovenia as well as the Czech and Slovak republics.

In Hungary, for example, 56.6 percent of the population views Hungarian society as “a small elite at the top, very few people in the middle and the great mass of people at the bottom”, although the country is characterised by one of the lowest income inequalities in the European Union.

Thus, it is not that former socialist countries view already small income differences as much more critical, but that the population is just not aware of the small level of income inequality.

The situation is different in the Scandinavian countries. Here the various populations are much more realistic about the low levels of inequality and truly identify their societies as “typical middle class models”.

In contrast to the European countries, the United States reveals a completely different picture: U.S. citizens substantially underestimate the extent of inequality in their country. The lower income group in the United States is considerably larger than Americans suppose

This varnished view on inequality in the United States is not new – but it is rather new that in European countries it tends to be the other way round.

These results provide an explanation of why redistributive policies find more support in some countries than in others.

Although results from previous ISSP surveys suggest that cross-country differences in views on inequalities and redistributive preferences tend to change slowly, it would nevertheless be interesting to see if critical views on income differences and redistributive preferences would change if citizens were aware of the actual degree of inequality in their countries.

Interestingly, the overestimation of inequality is adversely related to the absolute level of living standards in corresponding countries. Thus, it might also be the case that the perceived structuring of the society is more associated with absolute levels of living standards than commonly suggested.

(Edited by Phil Harris)

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