A most recent study by the World Institute for Development Economics Research at the United Nations University reports that the richest 1% of adult humans alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the total world wealth. The bottom half of the world adult population owned 1% of global wealth. [i] This is, though, but a snapshot of the on-going process… Yet more and more bad and ever worse news for equality of humans, and so also for the quality of life of all of us, are lining up daily.
“Social inequalities would have made the inventors of the modern project blush of shame” – so Michel Rocard, Dominique Bourg and Floran Augagner conclude in the article “Human species, endangered” they co-authored and published in Le Monde of 3rd April 2011. In the era of the Enlightenment, during the lifetimes of Francis Bacon, Descartes or even Hegel, in no place of Earth the standard of living was more than twice as high as in its poorest region. Today, the richest country, Qatar, boasts an income per head 428 times higher than the poorest, Zimbabwe. And these are, let’s never forget, comparisons between averages – and so akin to the facetious recipe for the hare-and-horsemeat paté: take one hare and one horse…
The stubborn persistence of poverty on a planet in the throes of economic-growth fundamentalism is enough to make thoughtful people to pause and reflect on the direct as much as the collateral casualties of that redistribution of wealth. The deepening abyss separating the poor and prospect-less from the well off, sanguine, self-confident and boisterous – an abyss of the depth already exceeding the ability of any but the most muscular and the least scrupulous hikers to climb – is an obvious reason to be gravely concerned. As the authors of the quoted article warn, the prime victim of deepening inequality will be democracy – as increasingly scarce, rare and inaccessible paraphernalia of survival and acceptable life become the object of a cut-throat rivalry (and perhaps wars) between the provided-for and the left-unaided needy.
One of the basic moral justifications for free market economics, namely that the pursuit of individual profit also provides the best mechanism for the pursuit of common good, has been thereby cast in doubt and all but belied. In the two decades preceding the start of the latest financial crisis, across the great bulk of OECD nations the real household incomes for the top 10 per cent grew much faster than for the poorest 10 per cent. In some countries, real incomes of those at the bottom have actually fallen. Income disparities have therefore widened markedly. “In the US, the average income of the top 10 per cent is now 14 times the bottom 10 per cent” – feels obliged to admit Jeremy Warner, assistant editor of The Daily Telegraph, one of the dailies with a long record of enthusiastic affirmation of the dexterity and proficiency of the “invisible hand” of markets trusted by the editors and subscribers alike to resolve as many (if not more) problems as markets create. And he adds: “Growing income inequality, though obviously undesirable from a social perspective, doesn’t necessarily matter if everyone is getting richer together. But when most of the rewards of economic progress are going to a comparatively small number of already high income earners, which is what’s been happening in practice, there’s plainly going to be a problem.” [ii]
That admission, gingerly and half-hearted as it sounds and feeling but no more than half-true as it in fact is, arrives on the crest of a rising tide of research findings and official statistics documenting the fast growing distance that separates those at the top from those at the bottom of the social hierarchy. In jarring opposition to political pronouncements intended to be recycled into a popular belief – no longer reflected upon, questioned and checked – the wealth amassed at the top of society has blatantly failed to “trickle down” and make the rest of us any richer or feel more secure and more optimistic about our and our children’s future, or happier…
In human history, inequality with its all-too-visible propensity for extended and accelerated self-reproduction is hardly news. And yet what have recently brought the perennial issue of inequality as well as its causes and consequences back into the focus of public attention, making it into a topic of passionate debates and eye-opening departures.
The most seminal among the departures is the discovery, or rather the somewhat delayed realisation, that the “big divide” in American, British, and a growing number of other societies “is now less between the top, the middle and the bottom, than between a tiny group at the very top and nearly everyone else.” [iii] For instance, “the number of billionaires in the US multiplied forty times in the 25 years to 2007 – whereas the aggregate wealth of the 400 richest Americans rose from $169 to $1500 billion.” After 2007, during the years of credit collapse followed by economic depression and rising unemployment, the tendency has acquired a truly exponential pace: rather than hitting everyone in equal measure as it had been widely expected and portrayed, the scourge proved to be ruggedly and tenaciously selective in the distribution of its blows: the number of billionaires in the US reached in 2011 its historical record to date of 1210, while their combined wealth has grown from $3,500 in 2007 to $4,500 billion in 2010.
“In 1990, you needed a fortune of £50 million to make it into the list of the 200 richest residents in Britain compiled annually by the Sunday Times. By 2008, that figure had soared to £430 million, a near-nine fold increase.” [iv] All in all, “the combined wealth of the world’s richest 1000 people is almost twice as much as the poorest 2.5 billion.” According to the Helsinki-based World Institute for Development Economics, people in the richest one percent of the world population are now almost 2000 times richer than the bottom 50 per cent. [v] Having recently collated available estimates of global inequality, Danilo Zolo [vi] concluded that “very little data is needed to dramatically confirm that the sun is setting on the “Age of Rights” in the globalisation era. The International Labour Organization estimates that 3 billion people are now living below the poverty line, set at US$2 per day. John Galbraith, in the preface to the Human Development Report of the United Nations in 1998, documented that 20% of the world’s population cornered 86% of all goods and services produced worldwide, while the poorest 20% of them consumed only 1.3%; whereas today, after nearly 15 years, these figures have gone from bad to worse: the richest 20% of the population consumes 90% of the goods produced, while the poorest 20% consumes 1%. It is also estimated that 40% of the world’s wealth is owned by 1% of the world population, while the 20 richest people in the world have resources equal to those of the billion poorest people.
Ten years ago Glenn Firebough [vii] has noted that a longstanding trend in the world-wide inequality showed signs of reversing – from rising inequality across nations and a constant or declining inequality between nations, to declining inequality across nations and rising inequality within them. While the “developing” or “emergent” national economies scored a massive influx of capital-in-search-of new quick-profit promising “virgin lands”, populated by cheap and meek labour as yet uncontaminated by the bacillus of consumerism and ready to work bare-survival wages – work places in the “developed” economies vanished on an accelerated pace leaving the local labour force in a fast deteriorating bargaining position. Ten years later François Bourguignon [viii] found out that while the planetary inequality (between national economies), if measured by the average income per head, continues thus far to shrink, the distance between richest and poorest national economies continues to grow, and internal income differentials inside countries continue to expand.
When interviewed by Monique Atlan and Roger-Pol Droit [ix], the economist and Prix-Goncourt-laureate novelist Erik Orsenna summed up the message all such and many other similar figures convey. He insisted that recent transformations benefit only an infinitely small minority of the world’s population; their genuine scale would elude us were we to confine our analysis, as we used to do still a decade ago, to the average gains of the top 10 per cent. To comprehend the mechanism of the presently on-going mutation (as distinct from a mere “phase in a cycle”), one needs to focus on the top 1 per cent, perhaps even 0.1 per cent. Failing to do so, one would miss the true impact of the change, which consists in the degradation of “middle classes” to the ranks of the “precariat”.
That suggestion is confirmed by every study whether focusing on the researcher’s own country or arriving from far and wide. In addition, however, all studies agree on yet another point: almost everywhere in the world inequality is growing fast and that means that the rich, and particularly the very rich, get richer, whereas the poor, and particularly the very poor, get poorer – most certainly in relative, but in a growing number of cases also in the absolute terms. Moreover: people who are rich are getting richer just because they are rich. People who are poor get poorer just because they are poor. Nowadays, inequality goes on deepening by its own logic and momentum. It needs no more help or kick from outside – no outside stimuli, pressures, nor blows. Social inequality seems nowadays ever closer to turning into the first perpetuum mobile in history – which humans, after innumerable failed attempts, have finally managed to invent and set in motion. This is the second among the departures that obliges us to think about social inequality from a new perspective.
As long ago as in 1979, a Carnegie study [x] vividly demonstrated what an enormous amount of evidence available at that time suggested and common life experience continued daily to confirm: that each child’s future was largely determined by the child’s social circumstances, by the geographical place of its birth and its parents’ place in the society of its birth – and not by its own brains, talents, efforts, dedication. The son of a big company lawyer had then 27 times greater chance than the son of an on-and-off employed minor official (both sons sitting on the same bench in the same class, doing equally well, studying with the same dedication and boasting the same IQ) that by the age of forty he would be paid a salary putting him in the top ten percent of the richest people in the country; his classmate will only have a one in eight chance of earning even a median income. Less than three decades later, in 2007, things got much worse – the gap has widened and deepened, becoming less bridgeable than ever before. A study by the Congressional Office Bureau has found the wealth of the richest 1% of Americans to total $16.8 trillion, two trillion more than the combined wealth of the bottom 90% of the population. According to The Center for American Progress, during those three decades the average income of the bottom 50% of Americans grew by 6% – while income of the top 1% increased by 229%.
In 1960, the average pay after taxes for chief executives at the largest U.S. corporations was 12 times greater than the average wage of factory workers. By 1974, the CEO’s salaries and perks raised to about 35 times that of the company’s average worker. In 1980 the average CEO was making already 42 times as much as the average blue-collar worker, doubling ten years later to 84 times. But then, about 1980, a hyper-acceleration of inequality took off. By the mid-1990s, according to Business Week, the factor was already 135 times as big; in 1999 it had reached the 400-fold level and in 2000 jumped again to 531. And these are but a few of a fast growing numbers of similar “facts of the matter” and figures attempting to grasp them, quantify and measure. One can go on infinitely quoting them, as there is no shortage of new figures which each and every successive research adds to the mass already accumulated.
What are, however, the social realities, which those figures reflect?
This is how Joseph Stiglitz sums up the revelations brought up by the dramatic aftermath of the two or three arguably most prosperous decades-in-a-row in history of capitalism that preceded the 2007 credit collapse, and of the depression that followed: inequality has always been justified on the grounds that those at the top contributed more to the economy, performing the role of “job creators” – but “then came 2008 and 2009, and you saw these guys who brought the economy to the brink of ruin walking off with hundreds of millions of dollars.” Most obviously, you couldn’t this time justify the rewards in terms of their beneficiaries’ contribution to society; what the latter contributed was not new jobs, but the lengthening lines of “redundant people” (as the jobless are now dubbed – not without sound reasons). In his latest book The Price of Inequality (WW Norton & Company 2012), Stiglitz concludes that the US has become a country “in which the rich live in gated communities, send their children to expensive schools and have access to first-rate medical care. Meanwhile, the rest live in a world marked by insecurity, at best mediocre education and in effect rationed health care.” This is a picture of two worlds – with few if any interfaces or meeting points between them, and so also with their inter-communication all but broken (in the US as much as in Britain, families have started to set aside an ever greater part of their income to cover the costs of living geographically as well as socially away, the further away the better, from “other people”, and particularly the poor among them).
In his sharp and brilliant vivisection of the present state of inequality, Daniel Dorling, the Sheffield University Professor of Human Geography [xi], puts flesh around the bones of Stiglitz’ skeleton synthesis – while rising simultaneously the perspective from a one-country to the planetary level: the poorest tenth of the world’s population regularly go hungry. The richest tenth cannot remember a time of hunger in their family’s history. The poorest tenth can only rarely secure the most basic education for their children; the richest tenth are concerned to pay sufficient school fees to ensure that their children need only mix with their so-called “equals” and “betters” and because they have come to fear their children mixing with other children. The poorest tenth almost always live in places where there is no social security, no unemployment benefit. The richest tenth cannot imagine themselves ever having to try to live on those benefits. The poorest tenth can only secure day work in town, or are peasants in rural areas; the richest tenth cannot imagine not having a secure monthly salary. Above them, the top fraction of a percent, the very richest cannot imagine surviving on a salary rather than on the income coming from the interest that their wealth generates.
And he concludes: “as people polarize geographically, they begin to know less and less of each other and imagine more and more”… While in his most recent statement titled “Inequality: the real cause of our economic woes” [xii], Stewart Lansey falls in with Stiglitz’s and Dorling’s verdicts that the power-assisted dogma meriting the rich with rendering society service by getting richer is nothing more than a blend of a purposeful lie with a contrived moral blindness: according to economic orthodoxy, a stiff dose of inequality brings more efficient and faster growing economies. This is because higher rewards and lower taxes at the top – it is claimed – boost entrepreneurialism and deliver a larger economic pie.
So has the 30-year experiment in boosting inequality worked? The evidence suggests no. The wealth gap has soared, but without the promised economic progress. Since 1980, UK growth and productivity rates have been a third lower and unemployment five times higher than in the more egalitarian post-war era. The three post-1980 recessions have been deeper and longer than those of the 1950s and 1960s, culminating in the crisis of the last four years. The main outcome of the post-1980 experiment has been an economy that is more polarised and more prone to crisis.
Having noted that “falling wage shares suck demand out of economies which are heavily dependent on consumer spending” and in effect “consumer societies lose the capacity to consume”, and that “concentrating the proceeds of growth in the hands of a small global financial elite leads to asset bubbles”, Lansey comes to an inevitable conclusion: harsh realities of social inequality are bad for everyone or almost everyone within society. And he suggests a sentence that ought, yet thus far did not, to have followed such a verdict: “the central lesson of the last 30 years is that an economic model that allows the richest members of society to accumulate a larger and larger share of the cake will eventually self-destruct. It is a lesson, it appears, that has yet to be learned”.
To learn that lesson we need and to learn it we must – lest we reach a point of no return: a moment when the current “economic model”, having emitted all the warnings of approaching catastrophe while failing to capture our attention and to prompt us to act, fulfills its “self-destructive” potential. Richard Wilkinson and Kate Pickett, themselves the authors of an eye-opening study The Spirit Level: Why More Equal Societies Almost Always Do Better (Allen Lane 2009), point out in their jointly written “Foreword” to Dorling’s book, that the belief in “paying the rich huge salaries and bonuses” being right because of their “rare talents” “benefitting the rest of society” is a straightforward lie. A lie which we can swallow with equanimity only at our own peril – and, eventually, at the cost of our own self-destruction.
Since the appearance of Wilkinson’s and Pickett’s study the evidence of the detrimental, quite often devastating impact of high and rising levels of inequality on pathologies in human cohabitation and the gravity of social problems has all but accrued and goes on accruing. The correlation between high levels of income inequality and a growing volume of social pathologies has by now been amply confirmed. A growing number of researchers and analysts point out however that in addition to its negative impact on the quality of life inequality has also an adverse, halting effect on economic performance; instead of enhancing, it holds it down. In the already quoted study, Bourguignon picks some of the causes of the latter phenomenon – as depriving the potential entrepreneurs of access to bank credits because of their lack of collateral the creditors require, or rising costs of education that strip the talented youngsters of the chances to acquire the skills needed to develop and apply their abilities. He adds the negative impact of the rise in social tension and the ambiance of insecurity – the fast growing costs of security services eating into the resources that could be turned to better economic uses.
And so, to sum up: is it not true what so many of us believe, and what all of us are pressed and nudged to believe while all-too-often feeling tempted, and inclined, to accept? Is it true that “richness of the few benefits us all”? It is not true, in particular, that all and any tampering with the natural inequality of humans is harmful to the health and vigour, as well as to the creative and productive powers of the society which each and every human member of society has vested interests in magnifying and holding at the highest conceivable level. And it is not true that the differentiation of social positions, capacities, entitlements and rewards reflects the differences in natural endowments and in the contributions of its members to the well-being of society. Lie is the most loyal of allies (or is it a foundation?) of social inequality.
[i] The World Distribution of Household Wealth. James B. Davies, Susanna Sandstrom, Anthony Shorrocks, and Edward N. Wolff. 5 December 2006.
[iii] Stewart Lansey, The Cost of Inequality, Gibson Square 2012, p.7.
[iv] See above, p.16.
[v] See J.B. Davies et al., “The World Distribution of Household Wealth”, United Nations University 2008.
[vii] See Glen Firebough, The New Geography of Global Income inequality, Harvard University Press 2003.
[viii] See François Bourguignon, La mondialisation de l’inégalité, Seuil 2012.
[ix] See Humain: Une enquête philosophique sur ces révolutions qui changent nos vies, Flammarion 2012, p.384.
[xi] Daniel Dorling, Injustice: why social inequality persists, Policy Press 2012, p.132.
A new book by Zygmunt Bauman on the same topic will be published later this year by Polity Press.