By Roberto Savio
May 16 2014 " ICH "
- " IPS "
ROME, May 15 2014 (IPS) - Not a day goes by without
news on the growing inequality that is the telling
indicator of the kind of economic model in which we
have put ourselves, following the neoliberal binge
unleashed by the Washington Consensus. The idea that
economic growth is “a rising tide lifting all
boats”, as the late Margaret Thatcher declared when
she announced war on the welfare state, and its twin
“capital will trickle down to everybody”, are now
totally discredited. Facts, as it has been said, are
And the facts have been demonstrated in an extensive
statistical analysis by French economist, Tomas
Piketty, (author of Capital in the Twenty-First
Century) who, on the basis of the data from the last
two centuries, proves that capital obtains a greater
reward than work. So, in any country, economic
growth is distributed in an unequal way between
salaries for all and what goes to the rich.
Over time, the capital of the rich will grow more
than everything else, and finally the very rich will
see their capital grow continuously, much more than
general wealth; those who inherit capital will
eventually have the largest part of growth: in other
words, they will suck away from the general
population its increase in wealth. And this means
that we are going back to the times of Queen
This is due, in fact, to a new reality: financial
capitalism is doing much better than productive
capitalism. The last issue of U.S. magazine Alpha
lists the 25 best paid hedge fund managers. Last
year, these managers – all male – earned the
staggering amount of over 21 billion dollars. This
beats the combined national incomes in the same year
of the African countries of Burundi, Central African
Republic, Eritrea, Gambia, Guinea, Sao Tomé,
Seychelles, Sierra Leone, Niger and Zimbabwe.
Or, to stay in the United States, Nobel Prize-winner
Paul Krugman writes that the 0.1 percent with the
most income has gone back to the 19th century.
According to the Bloomberg Billionaires Index, a
daily ranking of the world’s 300 wealthiest
individuals, they increased their wealth last year
by 524 billion dollars – more than the combined
revenues of Denmark, Finland, Greece and Portugal.
Just go to Wikipedia, click on National Budgets
around the world, and see how many poor countries
you can add, with their millions of people, to reach
524 billion dollars.
The same goes for Europe. We have similar statistics
from Spain. Last year, 23 bankers received
retirement entitlements of 22.7 million euros and
salary increases of 27 percent, against a backdrop
This is a trend which is happening everywhere in
Europe, even in the Nordic countries, but also in
Brazil, China, South Africa and any other part of
the world. Of course, this has come to be considered
a normal trend in the “new economy”, where work is
now considered just a variable of production, and
permanent unemployment’ is considered inevitable and
Meanwhile, the United Nations claims that extreme
poverty worldwide has been halved. The number of
people living on less than 1.25 dollars a day fell
from 47 percent in 1990 to 22 percent in 2010. There
are still 1.2 billion people living in extreme
poverty, but a new middle-class is emerging
worldwide, even if the success in the numbers is due
basically to Brazil, China and India.
So, the argument from the defenders of the present
economic model is “if there are a few super rich,
why do we ignore the enormous progress that has
created 1 billion new middle-class citizens?
This argument has three obvious problems. The first
is that this kind of economic growth is already
shrinking the middle class in rich countries, and
this contraction is bound to have serious effects in
the long term. The consumption of the super-rich
cannot substitute the consumption of a large number
of middle-class citizens. Production of cars is
already greater than demand, and this is happening
for many products. Global poverty is declining, but
in country after country, inequality is on the
The second problem is that the rich are not paying
taxes as before, because of a large number of fiscal
benefits that were introduced at the time of U.S.
President Ronald Reagan – “wealth produces wealth,
and poverty produces poverty”. French President
Francois Hollande discovered at his own expense that
today you cannot tax capital because it is sacred.
There are at least 300 billion dollars in tax
revenues which are being lost through a combination
of corporate tax incentives and corporate tax
dodging. Today, there are estimates of 4 trillion
dollars in fiscal paradises. And history is not
abundant in examples of voluntary redistribution and
solidarity by the rich and the super-rich.
And the third problem is very serious. It is
redundant to quote here one of the innumerable
examples of how politics has become subservient to
economic interests. An ordinary citizen does not
have the same power as a super-rich citizen.
It is ironic that the U.S. Supreme Court has
eliminated any limits to donations to parties
because all men are equal. Now that elections for a
U.S. president are in the vicinity of 2 billion
dollars, is an ordinary citizen really equal to a
Sheldon Adelson, the U.S. business magnate who has
officially donated 100 million dollars to the
Republican Party? No big effort, his wealth
increased last year by over 14 billion dollars!
So is this trend good for democracy? Are the
super-rich not of concern? Well, this is what we are
told, and this is what we are asked to believe…
ROBERTO SAVIO, founder and president emeritus of
Inter Press Service (IPS)
Copyright © 2014 IPS-Inter Press Service. All rights
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