Growing Inequality Under Global Capitalism

Jomo Kwame Sundaram and Anis Chowdhury

Income and wealth inequality has increased in recent decades, but recognition of the role of economic liberalization and globalization in exacerbating inequality has never been so widespread. The guardians of global capitalism are nervous, yet little has been done to check, let alone reverse the underlying forces.

Global elite alarmed by growing inequality

The World Economic Forum (WEF) has described severe income inequality as the biggest risk facing the world. WEF founder Klaus Schwab has observed, “We have too large a disparity in the world; we need more inclusiveness… If we continue to have un-inclusive growth and we continue with the unemployment situation, particularly youth unemployment, our global society is not sustainable.”

Christine Lagarde, IMF Managing Director, told political and business leaders at the WEF, “in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability.” Similarly, World Bank President Jim Yong Kim has warned that failure to tackle inequality risked causing social unrest. “It’s going to erupt to a great extent because of these inequalities.”

In the same vein, the influential US Council of Foreign Relations’ journal, Foreign Affairs, carried an article cautioning, “Inequality is indeed increasing almost everywhere in the post-industrial capitalist world…. if left unaddressed, rising inequality and economic insecurity can erode social order and generate a populist backlash against the capitalist system at large.”

Much ado about nothing?

Increasingly, the main benefits of economic growth are being captured by a tiny elite. Despite global economic stagnation for almost a decade, the number of billionaires in the world has increased to a record 2,199. The richest one per cent of the world’s population now has as much wealth as the rest of the world combined. The world’s eight richest people have as much wealth as the poorer half.

In India, the number of billionaires has increased at least tenfold in the past decade. India now has 111 billionaires, third in the world by country. The largest number of the world’s abject poor also live in the same country — over 425 million, a third of the world’s poor, and well over a third of the country’s population.

Africa had a resource boom for a decade until 2014, but most people there still struggle daily for food, clean water and health care. Meanwhile, the number of people living in extreme poverty, according to the World Bank, has grown substantially to at least 330 million from 280 million in 1990!

In Europe, poor people bore the brunt of draconian austerity policies while bank bailouts mainly benefited the moneyed. 122.3 million people, or 24.4 per cent of the population in the EU-28, are at risk of poverty. Between 2009 and 2013, the number of Europeans without enough money to heat their homes or cope with unforeseen expenses, i.e., living with “severe material deprivation,” rose by 7.5 million to 50 million people, while the continent is home to 342 billionaires!

In the United States, the income share of the top one per cent is at its highest level since the eve of the Great Depression, almost nine decades ago. The top 0.01 per cent, or 14,000 American families, own 22.2 per cent of its wealth, while the bottom 90 per cent, over 133 million families, own a meagre four per cent of the nation’s wealth. The top five per cent of households increased their share of US wealth, especially after the 2008 financial crisis. Meanwhile, the richest one per cent tripled their share of US income within a generation.

This unprecedented wealth concentration and the corresponding deprivation of others have generated backlashes, arguably contributing to the victory of Donald Trump in the US presidential election, the Brexit referendum, the strength of Marine Le Pen in France, the Alternative for Germany, and the ascendance of the Hindutva right in secular India.

“Communist” China and inequality

Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country. China has supplied cheaper consumer goods to the world, checking inflation and improving living standards for many. Part of its huge trade surplus — due to relatively low, albeit recently rising wages — has been recycled in financial markets, mainly in the US, which helped expand credit at low interest rates there.

Thus, cheap consumer products and cheap credit have enabled the slowly shrinking “middle class” in the West to mitigate the downward pressure on their living standards despite stagnating or falling real wages and mounting personal and household debt.

China’s export-led development on the basis of low wages has sharply increased income inequality in the world’s largest country for more than three decades. Beijing is the new “billionaire capital of the world,” no longer New York. China now has 594 billionaires, 33 more than in the US!

Since the 1980s, income inequality in China has risen faster than most! China now has one of the world’s highest levels of income inequality, rising mainly in the last three decades. The richest one per cent of households own a third of the country’s wealth, while the poorest quarter own only one per cent. China’s Gini coefficient for income rose to 0.49 in 2012 from 0.3 over three decades before when it was one of the most egalitarian countries in the world. Another survey put China’s income Gini at 0.61 in 2010, greatly exceeding the US’s 0.45!

Originally published by Inter Press Service.

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The Widening Gap between Rich and Poor

Jayati Ghosh

We all know that the world is an unequal place, both across and within countries. We also know that across the world, people are expressing their anger and disgust at this inequality. This is increasingly revealed in extreme and often paradoxical political results. In the USA, a vote against the establishment has just delivered to power the ultimate crony capitalist, Donald Trump. In the United Kingdom people voted to leave the European Union in the false expectation that curbing migration will improve their own life chances. In India the poor, disgusted by a corrupt self-enriching elite, support a bizarre and drastic demonetisation that leads to their own further impoverishment while leaving the supposed targets, the corrupt rich, relatively unscathed.

But here’s the thing: inequality has been a hot topic of international discussion for around a decade, but in that time, it has got worse, not better! Since the time when international organisations took up this issue and Thomas Piketty published his global bestseller on inequality, the evidence is that the problem has intensified, not reduced.

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Unreal in Pampered India

Sunita Narain

Many years ago, when Delhi’s air pollution was as high as it is today, my colleague Anil Agarwal and I had gone to meet a high-ranking, responsible government official. This was in the mid-1990s, when air was black because we did not even have the most rudimentary fuel quality and emission controls. The official was genuinely stumped by our demand that government should take steps to control runaway pollution. He kept asking, “But is Delhi really polluted?” I was equally flummoxed; air was foul and black. How could he miss it?

Then I realised that his world was not mine to see. He travelled from his home, located in luxuriantly green Lutyens’ Delhi—also known as the New Delhi Municipal Council (NDMC), where government resides—to his office, also in the same verdant surroundings. Nowhere did he see any dirt; nowhere did he smell the air. And as it was not seen, it could not exist, so nothing needed to be done.

This incident came to my mind when I read that the Government of India had decided to select New Delhi—Lutyens’ Delhi—for the smart city makeover. Under this scheme, 20 cities have been selected based on “rigorous” criteria to improve urban living. The Government of India will now provide funds and expertise to make the city “smart”—defined as innovative approaches to improvement in urban services. This means that the government will spend on facilities to make its own living area even better and more removed from the squalor, poverty and pollution of the rest of India.

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World Bank Researchers Punch South Africa’s Poor and Coddle the Rich

Subsidized white capitalists and oppressed activists are amongst those who must “not be named”

By Patrick Bond

“South Africa can claim to have one of the world’s most redistributive public purses,” argues Johannesburg Business Day newspaper associate editor Hilary Joffe, drawing upon World Bank research findings. But not only is this nonsense. The Bank’s silences about poverty and inequality speak volumes.

To illustrate this in next-door Lesotho, Stanford University anthropologist James Ferguson’s famous book The Anti-Politics Machine criticized the World Bank’s 1980s understanding of Lesotho as a “traditional subsistence peasant society.” Apartheid’s migrant labor system was explicitly ignored by the Bank, yet remittances from Basotho workers toiling in mines, factories and farms across the Caledon River accounted for 60 percent of rural people’s income.

Ferguson explained: “Acknowledging the extent of Lesotho’s long-standing involvement in the modern capitalist economy of South Africa would not provide a convincing justification for the ‘development’ agencies to ‘introduce’ roads, markets and credit.”

Using Michel Foucault’s discourse theory, Ferguson showed why some things cannot be named. To do so would violate the Bank’s foundational dogma, that the central problems of poverty can be solved by applying market logic. Yet the most important of Lesotho’s market relationships – exploited labor – was what caused so much misery.

Three decades on, not much has changed. Today, the Bank’s main South Africa research team reveals a similar “Voldemort” problem. Like the villain whose name Harry Potter dared not utter, some hard-to-hear facts evaporate into pregnant silences within the Bank’s latest “South African Poverty and Inequality Assessment Discussion Note.” Bank staff and consultants are resorting to extreme evasion tactics worthy of Harry, Ron and Hermione.

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Let Them Drink Pollution?

The tragic crisis in Flint, Michigan, where residents have been poisoned by lead contamination, is not just about drinking water. And it’s not just about Flint. It’s about race and class, and the stark contradiction between the American dream of equal rights and opportunity for all and the American nightmare of metastasizing inequality of wealth and power.

James K. Boyce

The link between environmental quality and economic inequality was spelled out more than two decades ago in a memorandum signed by Lawrence Summers, then chief economist of the World Bank, excerpts of which appeared inThe Economist under the provocative title, “Let them eat pollution.” Starting from the premise that the costs of pollution depend on “the forgone earnings from increased morbidity and mortality,” Summers concluded that “the economic logic of dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.”

A different logic is supposed to underpin U.S. environmental policies. The Federal Water Pollution Control Act mandates that water quality standards should “protect the public health” – period. Its aim, as former EPA administrator Douglas Costle once put it, is “protection of the health of all Americans.” Under the law, clean water is a right, not something to be provided only insofar as justified by the purchasing power of the community in question.

Even when cost-benefit calculations are brought to bear on environmental policy, the EPA uses a single “value of a statistical life” – currently around $8.7 million – for every person in the country, rather than differentiating across individuals on the basis of income or other attributes.

In practice, however, the role of costs and benefits in shaping public policies often depends on the power of those to whom they accrue. When those on the receiving end are poor, their interests – and their lives – often count for less, much as the Summers memo recommended. And when they are racial and ethnic minorities, the political process often discounts their well-being even more.

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The Plutonomy Is Doing Fine

Matias Vernengo

The new issue of the Credit Suisse Global Wealth Report (2015) has been published. Below is the distribution of global wealth.

regional composition of global wealth distribution

Nothing has changed much since we posted the previous version here. As I commented regarding the previous version, the poor are fundamentally in Africa, India, and Asia-Pacific (mainly Bangladesh, Indonesia, Pakistan, and Vietnam), while the wealthy are in the United States, Europe and Asia-Pacific (i.e. Japan). China has more people in the middle section of the wealth distribution than at the extremes.

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Letter from Delhi, Part 1

Air Pollution as Environmental Injustice

This is part 1 of a two-part series from UMass-Amherst professor of economics and regular Triple Crisis contributor James K. Boyce. This part focuses on disparate exposure to air pollution in Dehli. Part 2, to be posted next week, focuses on solutions to the problem.

James K. Boyce

Arriving in Delhi in January, at the height of the winter pollution season, you notice the air as soon as you step off the plane. A pungent smell with hints of burning rubber and diesel fumes assaults the nose and stings the eyes. On the highway into the city center, a digital screen shining through the smog displays the current level for suspended particulate matter. You don’t need to understand what the number means to know it’s bad.

Delhi has extensive parks, broad avenues, beautiful buildings (like the tomb of Mughal emperor Humayan, shown below), and a vibrant culture. But casting a pall – quite literally – over it all is the worst air pollution of any major city in the world.

Humayan's tomb

Humayan’s Tomb

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Mapping Environmental Injustice

Race, class and industrial air pollution

Klara Zwickl, Michael Ash, and James K. Boyce

America’s corporate polluters are not color-blind. Nor are they oblivious to distinctions of class. Studies of environmental inequality have shown that minorities and low-income communities often bear disproportionate pollution burdens (for overviews, see Ringquist 2005 and  Mohai et al. 2006). In other words, rather than being an impersonal “externality” randomly distributed across the population, the distribution of pollution mirrors the distribution of power and wealth.

These disparities result from decisions by firms to site hazardous facilities in the most vulnerable communities and from decisions by government regulators to put lower priority on environmental enforcement in these communities. To some extent, the disparities may also reflect demographic changes as pollution leads affluent people to move out, neighborhood property values to fall, and poorer households to move in. But even after controlling for income differences, racial and ethnic minorities typically face higher pollution burdens, a finding that implies that disparities are a result of differences in political power as well as purchasing power (Boyce 2007).

But the US is a big country, and it is not homogenous. Electoral politics, social movements, industrial structure, residential segregation, and even laws and regulations differ greatly across the regions. The extent and pattern of environmental inequalities may vary, too.

In a recent study (Zwickl et al. 2014), we examine regional variations to tackle two key questions. First, is minority status or income more important in explaining environmental disparities? Second, is higher income equally protective for whites and minorities in affecting pollution exposure?

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Is All Growth Good? The Case of China

Sara Hsu

Since the seventies, with the assertion by Gunnar Myrdal that economic development should prioritize equality, economists have increasingly come to believe that not all types of growth are wholly “good.” Growth that ignores human well-being and equality are viewed as problematic.  Certainly growth that results in severe environmental destruction, as in the case of China over the past twenty years, cannot be classified as good, either, despite the country’s much-lauded successes during this period.

Real-world views of growth depicted in the mainstream media do not fall in line, however, with the economic development literature. The focus on China’s growth in the news has distracted from a more balanced view of the looming inequality problems or polluting production methods in the world’s most populous nation.  As China’s growth has slowed, headlines have read, “China’s Economic Growth at Stake,” “China’s Economic Growth Slows,” and “China’s Second Quarter Growth Slows.”

Even when inequality and pollution problems are described, they are considered separate from the growth process—as “side effects” of growth rather than issues that detract from the extent of growth itself. Headlines read, “China Blocks Access to Air Pollution Data,” “China Declares War on Pollution,” or “China’s Wealth Disparity Erupts in Protest.” It could, however, be argued that such destructive types of growth both take away from “good” growth and dampen positive growth in the long-run, so we should read about growth and its associated externalities within the same context. This is clearest in the case of pollution, where natural resources are destroyed and rendered unusable to future generations.

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Pollution Inequality and Income Inequality

James K. Boyce

This interview with regular Triple Crisis contributor James K. Boyce (Political Economy Research Institute, University of Massachusetts-Amherst) appeared originally at The Real News Network. Prof. Boyce describes the findings from his recent study showing that, in the United States, inequality in exposure to air pollution is even more unequal than inequality in income. The study, issued by the Institute for New Economic Thinking, was co-authored by Boyce with Klara Zwickl and Michael Ash.

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