Wednesday, January 21, 2015

The rich get richer

While politicians mount their soapboxes to discuss the state of the union, and leaders gather in Davos to discuss the state of the global economy, it's a good time for us to consider the problem of an ever-widening wealth gap.

Consider a large family that eats together from a common kitchen. However, in this family one member eats like a king, nineteen more members manage a nutritious diet, and the remaining eighty members struggle to exist from the leftovers of the other twenty. That is what we have in the world today. And the inequities are getting greater, not less.

A 12-page Oxfam report (Wealth: Having It All And Wanting More) issued a couple days ago, describes the current situation as follows: "In 2014, the richest 1% of people in the world owned 48% of global wealth, leaving just 52% to be shared between the other 99% of adults on the planet. Almost all of that 52% is owned by those included in the richest 20%, leaving just 5.5% for the remaining 80% of people in the world." The report goes on to predict: "If this trend continues of an increasing wealth share to the richest, the top 1% will have more wealth than the remaining 99% of people in just two years... with the wealth share of the top 1% exceeding 50% by 2016."

According to the Oxfam report: "The wealth of [the 80 richest individuals] is now the same as that owned by the bottom 50% of the global population, such that 3.5 billion people share between them the same amount of wealth as that of these extremely wealthy 80 people." Figure 4 of the Oxfam report reveals a steady decline in the number of billionaires required to match the accumulated wealth of the poorest 50% of our global population. In 2010, 388 billionaires were required. In 2014, only 80 billionaires could do it. Making the situation even more stark, Oxfam notes in the caption of Figure 3 of their report: "Wealth of the 80 richest people in the world has doubled in nominal terms between 2009 and 2014, while the wealth of the bottom 50% is lower in 2014 than it was in 2009."

The trends noted by Oxfam tend to substantiate December 2014 observations in an article by the Pew Research Center that the wealth gap between the USA's upper-income and middle-income families is also widening. According to the Pew Research Center, that gap is currently the widest on record. Tracking data from 1983 to 2013, the Pew Research Center demonstrates that the median net worth of American upper-income families is currently at least 6.6 times greater than the median net worth of American middle-income families. With the same data from that period, The Pew Research Center goes on to note that only American upper-income families have made wealth gains over the last 30 years. The Pew Research Center speculates: "[This data] could help explain why, by other measures, the majority of Americans are not feeling the impact of the economic recovery, despite an improvement in the unemployment rate, stock market and housing prices."  

Clearly, in wealthy capitalist countries, only the rich are getting richer. But this situation is not inevitable. Human society could ensure that everyone is getting richer, that everyone gets a fair share of our collective pie. However, that cannot be done within a politicoeconomic environment of democracy and capitalism. Those two structures are easily manipulated to increase the wealth gap, and the wealthy elite are expert in that manipulation. As also pointed out in the aforementioned Oxfam report, the wealthy elite know the sectors of the economy where they can maximize their profits (largely finance, healthcare, and pharmaceuticals, all areas of great common concern). To keep open their primary avenues of profit, the wealthy elite pour great sums of money into financing politicians and political lobbying (often on budget and tax issues). From experience, they know that they will reap huge personal profits from such political investments.

So while political leaders are busy posing as saviors of the people, let the humanists of the world remember that the true measure of progress for an economy is the improvement of conditions in the poorest sectors of the economy. Indicators like the Gross Domestic Product (GDP) may tell us something about the condition of the wealthy elite, but they tell us much less about the condition of the impoverished majority and the true state of the union.