The truth about extreme global inequality
Jason Hickel, Pambazuka
The crisis of capital, the rise of the Occupy movement and
the crash of Southern Europe have brought the problem of income inequality into
mainstream consciousness in the West for the first time in many decades. Now
everyone is talking about how the richest 1% have captured such a
disproportionate share of wealth in their respective countries. This point came
crashing home once again when an animated video illustrating wealth disparities
in the United States last month. When an infographic catches the attention of tens of
millions of internet users, you know it’s hitting a nerve.
But the global scale of inequality remains largely absent
from this story. So we at The Rules decided to put together a video that would
give it some attention.
While this information is not new, it is still startling. In
the video we say that the richest 300 people on earth have more wealth than the
poorest 3 billion – almost half the world’s population. We chose those numbers
because it makes for a clear and memorable comparison, but in truth the
situation is even worse: the richest 200 people have about $2.7 trillion, which
is more than the poorest 3.5 billion people, who have only $2.2 trillion
combined. It’s very difficult to wrap one’s mind around such extreme figures.
But we wanted to do more than just illustrate the brutal
extent of inequality; we also wanted to demonstrate that it has been getting
progressively worse. A recent Oxfam report shows that ‘The richest 1% has
increased its income by 60% in the last 20 years, with the financial crisis
accelerating rather than slowing the process,’ while the income of the top
0.01% has seen even greater growth.
The video shows how this widening disparity operates between
countries. During the colonial period, the gap between the richest countries
and the poorest countries widened from 3:1 to 35:1, in part because European
powers extracted so much wealth from the Global South in the form of resources
and labor. Since then, that gap has grown to almost 80:1. How is this possible?
CAPITAL FLOWS FROM POOR TO RICH
The gap is growing in part because of the neoliberal
economic policies that international institutions like the World Bank, the
International Monetary Fund (IMF), and the World Trade Organization (WTO) have
imposed on developing countries over the past few decades. These policies are
designed to forcibly liberalize markets, prying them open in order to give
multinational corporations unprecedented access to cheap land, resources, and
labour. But at a serious cost: poor countries have lost around $500 billion per
year in GDP as a consequence of these policies, according to economist Robert
Pollin of the University of Massachusetts.
As a result we see a clear net flow of wealth from poor
places to rich places. We designed the video to help people visualize this
flow, and to show how it pumps up the Global North at devastating expense to
the Global South.
Few people know about this constant siphoning of wealth. One
reason for this is that the discourse of aid takes up so much space. Consider
the enormous publicity captured by Jeffrey Sachs and the Millennium Development
Goals, or Bono and Bob Geldof, or even big charities such as Save the Children,
Christian Aid and Action Aid. Governments of rich countries constantly celebrate
how much they spend in aid to developing countries, and multinational
corporations splash CSR credentials across annual reports and product lines;
neither confess how much they take out of developing countries.
The video highlights the fact that aid disbursements from
rich to poor pale in comparison to the amount of capital that flows the other
direction. Tax avoidance alone accounts for more than $900 billion each year –
money that corporations steal from developing countries and hide in tax havens
(or thiefdoms, more accurately), of which the City of London is the global hub.
Debt service accounts for about $600 billion each year, much of it paid on the
compound interest of illegitimate loans accumulated by dictators long since
deposed. Both of these flows can be understood as direct transfusions of cash
from poor to rich.
There’s much more that we could have included in the video.
Land grabs, for example: Fred Pearce’s new book, The Land Grabbers, shows that
land exceeding the size of Western Europe has been grabbed from developing
countries by corporations in the past decade alone. If we could quantify the
value of that land, we could have added a huge amount to the $2 trillion stack
of cash that the video depicts flowing from poor to rich. Or consider climate
change. A 2-degree rise in global temperature will cost regions like Africa and
South Asia about 5% of their GDP, much more than rich countries will suffer
despite the fact that they bear most of the responsibility for causing this
disaster. Losses on this level make aid seem insignificant.
These are the ultimate drivers of poverty and inequality.
These are the problems that we need to tackle.
DEMOCRATIC DEFICIT
It bears pointing out that the geographic divide that the
video depicts between the Global North and the Global South doesn’t make as
much sense today as it once did. We tried to show how both China and Russia
embody this divide within their borders. But to be even more accurate we would
have had to depict a small wealthy core of corporations and individuals – a
global elite versus the majority of the world’s people. It’s no longer only
about the West versus the Rest; the class divide is now internationally
dispersed.
It remains true that the institutions that control the
global economy (the World Bank, the IMF, the WTO, and various bilateral Free
Trade Agreements, or FTAs) are monopolized by Western countries. But that does
not mean that they represent the interests of voters in those countries, for
the people that run these institutions – central bankers, trade
representatives, and their corporate lobbyists – are not elected by any
democratic process.
The World Bank and the IMF have the power to impose economic
policies on developing countries even when voters and elected politicians in
those countries unanimously reject them. On top of this, they enjoy “sovereign
immunity” status that protects them from lawsuit when their loans fail and
their policies cause economic crisis and human devastation. In other words, not
only are these institutions undemocratic, they also trump local democracies and
override the will of voters in independent nations. The people affected have no
recourse to justice.
We see the same democratic deficit in corporations. The
majority of the world’s biggest economic entities are now corporations, not
countries. They are run by CEOs who are unelected and unaccountable to any
citizens; they are responsible only to their shareholders, and their mandate is
to turn as much profit as possible at whatever cost to human life or the
planet. These corporations often have more power than the governments of the
countries in which they operate. One reason for this is that the WTO and most
FTAs enforce “investor-state dispute agreements” that allow corporations to sue
local governments for legislation that compromises their profits, like minimum
wage laws or pollution laws.
WE NEED TO CHANGE THE RULES
The point here is that corporate power regularly transcends
national sovereignty. We have to face the fact that the democratic institutions
we worked so hard to shore up during the 20th century are no longer sufficient
to protect us in this brave new world.
We need to change the rules, and we need to do it quickly.
Given that real power is now routinely wielded at the supra-national level, we
need to start building global democratic capacity that can keep rampant greed
and profiteering in check.
This might mean a global corporate minimum tax that will put
an end to trade mispricing and tax havens. It might mean a that will put a floor on the “race to the bottom” for labor.
It will certainly mean wresting control of international trade laws from the
hands of IMF bankers and WTO technocrats and placing it under new institutions
that are transparent and democratic.
If we’re going to have a global economy, we need to have
global democratic oversight. Can we accomplish this? Yes. And anyhow, we have
no choice; the future of humanity, and of the planet, depends on it. They will
say we’re dreamers for demanding these changes. But the dreamers are those who
imagine that we can feasibly carry on with the status quo.
