To say inequality is rampant on a global scale is to say the Sun is a tad warm. Forget pyramids; the global distribution of wealth is better represented by a needle reaching into the stratosphere.
Not simply an anecdote, the common saying that the rich get richer and the poor get poorer has been given fresh evidence from two studies by organizations not known for their sympathies toward the wretched of the Earth.
One, from one of the world’s biggest investment banks, Credit Suisse, reports that the world’s richest one percent possesses nearly half of the world’s wealth while half of humanity holds one percent. The other study, issued by the World Bank, estimates that 1.2 billion* people are in “extreme poverty” — defined as earnings of US$1.25 per day. What is perhaps most remarkable about the World Bank report is the minuscule redistribution that would be required to eradicate “extreme poverty.” The report, “State of the Poor,” says:
“Suppose that the real GDP growth for the developing world as a whole is 5 percent per year. If 10 percent of this GDP growth accrued to the 21 percent of the developing world’s population who are extremely poor, and this 10 percent was distributed in a way that the growth in income of each poor person was exactly his/her distance to the $1.25 line, extreme poverty would end in one year.” [page 6]
In other words, redistributing 10 percent of economic growth in poor countries themselves — before any assistance from the developed world — would be sufficient to lift all the world’s poorest people, at least to a less severe poverty.
Despite that suggestion by the authors of the World Bank report, the number of the world’s extremely poor increased by more than 100 million from 1981 to 2010, and their average income was stagnant. The report adds that more than one-third of the world’s extremely poor individuals are children younger than 13, and half of the children living in low-income countries are in extreme poverty.
Lucky births beget lucky births
On the other side of the scale, the wealth concentrated in the ultra-wealthy — naturally, a vastly smaller cohort — is difficult to comprehend, although it, like the vast numbers of the extremely poor, is an outgrowth of deepening inequality. The Credit Suisse study, “Global Wealth Report 2013,” concludes that not only is wealth stable through multiple generations but that the roster of wealthy countries is remarkably stable. On the first point, the report says:
“[T]en generations or more have to lapse before the wealth of an individual in North America is completely unrelated to the wealth of their ancestors. Our simulations for North America are therefore highly consistent with the relatively immobile outlook that emerges from the intergenerational evidence.” [page 34]
North America is the world region with the least mobility in terms of people moving up or down the ranks of wealth. Europe is the next least mobile region. Concomitantly, those two regions are home to three-quarters of the world’s millionaires. The Credit Suisse report, surprisingly direct in its conclusions considering that the ultra-wealthy are its clients, says:
“[C]hanges in the shares of wealth over time tend to be very modest, both within countries and worldwide. Thus the distribution of wealth is both highly unequal and relatively stable over time.” [page 26]
While austerity programs have flattened or reduced living standards for most of the world’s peoples, the super-wealthy have done just fine (the purpose of austerity). Virtually all of the past year’s increase in the value of the world’s assets are accounted for in North America and Europe, and that concentration is itself highly concentrated: The United States, which has 42 percent of the world’s millionaires, by itself accounted for US$8.1 trillion* of the world’s $11.3 trillion increase in wealth from 2012 to 2013.
What? Trillions of dollars in new wealth in just the past year? Still more incredibly, the aggregate wealth total of the U.S. is estimated to be more than 50 percent higher than it was in 2008, when the total bottomed out in the depths of the economic downturn. Wait a minute — wages have fallen and remain under pressure as unemployment remains high. More of us are struggling just to meet basic needs. Where are these fountains that spray gold high into the air?
The stronger take from the weaker
It’s the magic of the market at work. The tricks that make this magic work are multiple levels of exploitation. Worker productivity has increased, while wages are flat or slowly declining, around the world. Countries at the center of the global capitalist system extract wealth from the rest of the world, as their corporations plunder natural resources in one-sided deals and take advantage of low labor costs and non-existent environmental enforcement. James Petras estimates that the corporations of the United States and Europe extracted $950 billion from Latin America for the period 1975 to 2005.
Although some crumbs have historically fallen to the working peoples of the North from imperialism, corporate globalization has dialectically begun to hurt those working peoples as more production is moved to developing countries with ever lower wages. The upward flow of money has accelerated, and the one-sidedness of this arrangement is illustrated by the fact that the Credit Suisse report lists Greece as one of the countries in the richest tier, those with per capita wealth of more than US$100,000. That is so despite 27.6 percent unemployment and an economy that has shrunk for 20 consecutive quarters and by more than 20 percent during that period.
That means that Greece has hideous inequality. But as skewed as wealth distribution is in Greece, a country in which its most lucrative industry, shipping, pays no taxes, it’s not close to being the most unequal. As measured by the gini coefficient, the standard economic metric of inequality, the United States has the worst inequality of any advanced capitalist country, and among the 34 countries of the Organisation for Economic Co-operation (the club of the world’s advanced capitalist countries and biggest developing countries), only Turkey, Mexico and Chile are worse.
Those at the very top hold truly enormous amounts of wealth — Forbes magazine, in its 2013 report on the world’s wealthiest people, report that Earth’s 1,426 billionaires collectively have a net worth of US$5.4 trillion. To put that figure in some perspective, there are only two countries in the world, the U.S. and China, that have a gross domestic product that is larger. Another comparison is this: Those 1,426 billionaires possess wealth that is more than double that of the bottom half of humanity — 3.6 billion humans.
When “markets” are allowed to dictate ever more social outcomes, this will be the result. Capitalism has evolved to the point where people exist to serve markets, not the other way around — and capitalist markets are the aggregate interests of the most powerful industrialists and financiers.
* One billion is 1,000 million throughout this article. One trillion is 1,000,000 million.