The Davos oligarchs are right to fear
the world they’ve made
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By Seumas Milne
Jan 22, 2015
The billionaires and corporate oligarchs meeting in Davos this week
are getting worried about inequality. It might be hard to stomach that the
overlords of a system that has delivered the widest global economic gulf in
human history should be handwringing about the consequences of their own
actions.
But even the architects of the crisis-ridden international
economic order are starting to see the dangers. It’s not just the maverick
hedge-funder George Soros, who likes to describe himself as a class traitor.
Paul Polman, Unilever chief executive, frets about the “capitalist threat to capitalism”.
Christine Lagarde, the IMF managing director, fears capitalism might indeed
carry Marx’s “seeds of its own destruction” and
warns that something needs to be done.
The scale of the crisis has been laid out for them by the charity Oxfam. Just 80
individuals now have the same net wealth as 3.5 billion people – half the
entire global population. Last year, the best-off 1% owned 48% of the world’s
wealth, up from 44% five years ago. On current trends, the richest 1% will have
pocketed more than the other 99% put together next year. The 0.1% have been
doing even better, quadrupling their share of US income since the 1980s.
This is a wealth grab on a grotesque scale. For 30 years, under
the rule of what Mark Carney, the Bank of England governor, calls “market
fundamentalism”,inequality in income and wealth has
ballooned, both between and within the large majority of countries.
In Africa, the absolute number living on less than $2 a
day has doubled since 1981 as the rollcall of billionaires has
swelled.
In most of the world, labour’s share of national income has
fallen continuously and wages have stagnated under this regime of
privatisation, deregulation and low taxes on the rich. At the same time finance
has sucked wealth from the public realm into the hands of a small minority,
even as it has laid waste the rest of the economy. Now the evidence has piled
up that not only is such appropriation of wealth a moral and social outrage,
but it is fuelling social and climate conflict, wars, mass migration and
political corruption, stunting health and life chances, increasing poverty, and
widening gender and ethnic divides.
Escalating inequality has also been a crucial factor in the
economic crisis of the past seven years, squeezing demand and fuelling the
credit boom. We don’t just know that from the research of the French economist Thomas Piketty or the
British authors of the social study The Spirit Level. After years
of promoting Washington orthodoxy, even the western-dominated OECD and IMF
argue that the widening income and wealth gap has been key to the slow growth
of the past two neoliberal decades. The British economy would have been almost 10%
larger if inequality hadn’t mushroomed. Now the richest are using
austerity to help themselves to an even larger share of the cake.
The big exception to the tide of inequality in recent years has
been Latin America. Progressive governments across the region turned their back
on a disastrous economic model, took back resources from corporate control and slashed
inequality. The numbers living on less than $2 a day have fallen from 108 million to 53 million in
little over a decade. China, which also rejected much of the neoliberal
catechism, has seen sharply rising inequality at home but also lifted more
people out of poverty than the rest of the world combined, offsetting the
growing global income gap.
These two cases underline that increasing inequality and poverty
are very far from inevitable. They’re the result of political and economic
decisions. The thinking person’s Davos oligarch
realises that allowing things to carry on as they are is dangerous. So some
want a more “inclusive capitalism” – including more progressive taxes – to save
the system from itself.
But it certainly won’t come about as a result of Swiss mountain
musings or anxious Guildhall lunches. Whatever the feelings of some corporate
barons, vested corporate and elite interests – including the organisations they
run and the political structures they have colonised – have shown they will
fight even modest reforms tooth and nail. To get the idea, you only have to listen
to the squeals of protest, including from some in his own party, at Ed Miliband’s plans to tax homes worth
over £2m to fund the health service, or the demand from the
one-time reformist Fabian Society that the Labour leader be more pro-business (for
which read pro-corporate), or the wall of congressional resistance to Barack
Obama’s mild redistributive taxation proposals.
Perhaps a section of the worried elite might be prepared to pay
a bit more tax. What they won’t accept is any change in the balance of social
power – which is why, in one country after another, they resist any attempt to
strengthen trade unions, even though weaker unions have been a crucial factor
in the rise of inequality in the industrialised world.
It’s only through a challenge to the entrenched interests that
have dined off a dysfunctional economic order that the tide of inequality
will be reversed. The anti-austerity Syriza party, favourite to win the Greek
elections this weekend, is attempting to do just that – as the
Latin American left has succeeded in doing over the past decade and a half.
Even to get to that point demands stronger social and political movements to
break down or bypass the blockage in a colonised political mainstream.
Crocodile tears about inequality are a symptom of a fearful elite. But change
will only come from unrelenting social pressure and political challenge.
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