When one percent owns half the world

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Ricardo Saludo

Ricardo Saludo

It’s happening in America, China, and Europe. And here at home, too. And it’s getting worse: Inequality.

In the latest Social Weather Stations hunger survey last month, the average percentage of respondents missing one or more meals over the previous three months barely dropped from 2011. This despite two full years of sustained rapid growth of about 7 percent and over P50 billion in monthly stipends to millions of poor families under the government’s Conditional Cash Transfer program.

There’s more. Self-rated poverty averaged 52 percent for 2013, the same as 2012—and markedly worse than 49 percent in 2011, when the economy slowed due to state underspending. And an annual average of 41 percent of respondents said they didn’t even earn enough to buy just the food they needed. Those empty pockets are also unchanged from 2012 and higher than 36 percent in 2010 and 38 percent in 2011.

Clearly, despite the Aquino administration’s inclusive growth thrust, most of the surge in national wealth and economic output isn’t going to the poor. And if misery loves company, then the following Briefing Note by Bill Huang, senior editor of the Center for Strategy, Enterprise & Intelligence (CenSEI), may give the poor some consolation. Let’s hope, though, that the rich give the note more attention and responsive action:


Memo to Davos
As the planet’s rich and powerful prepared to gather in Davos, Switzerland, for the 2014 World Economic Forum last week, a global humanitarian organization sounded the general alarm about a millennia-old concern for the world’s worthies to urgently address: haves and have-nots.

In a summary of its briefing paper “Working for the Few — Political capture and income inequality,” British charity Oxfam provided figures on rising wealth concentration in the hands of a few and its impact on the world. Some of the more telling numbers:

• Just one percent of the planet’s population now own almost half of global wealth

• The assets of the richest one percent totals $110 trillion — 65 times the combined wealth of the bottom half of the world’s population

• The 85 richest individuals own as much as that bottom half

• Seven out of 10 people live in countries where economic inequality has increased since 1980

• In the same period, the richest one percent increased their share of national income in 24 of the 26 countries for which Oxfam has data.

Oxfam warned that this extreme wealth concentration threatens to exclude millions from receiving the bounties of their hard work. Left unchecked, the report added, this trend would lead to “opportunity capture,” where children of the rich enjoy such benefits as the lowest tax rates, the best educational opportunities, and the best health care, perpetuating a cycle of economic inequality.

‘A significant threat’
The Oxfam paper called the massive concentration of economic resources in the hands of fewer people “a significant threat to inclusive political and economic systems.” It explained: “Instead of moving forward together, people are increasingly separated by economic and political power, inevitably heightening social tensions and increasing the risk of societal breakdown.”

Supporting that thesis, Oxfam’s own survey in six countries – Spain, Brazil, India, South Africa, the United Kingdom, and the United States – indicated a majority agreeing with the view that “laws and regulations are now designed to benefit the rich.”

Oxfam’s suggestions for the 2014 World Economic Forum included a pledge among its well-heeled participants to not dodge taxes and to disclose investments in companies and trusts in which they are the ultimate beneficial owners, among other things.

The charity also proposed national policies to strengthen the political representation of the poor and middle classes in order to achieve greater equity. That includes a global goal to end extreme economic inequality in each country, as well as stronger regulation of markets to promote sustainable and equitable growth.

Comparing inequality
For another look at global income inequality, the GlobalPost website’s 2013 special report series titled “The Great Divide — global income inequality and its cost,” tries to bring the message down to earth for Americans by comparing income inequality in their country with the situation in other nations.

The interactive feature matches income-distribution figures of major U.S. metropolitan areas with counterpart cities elsewhere in the world, like Bridgeport, Connecticut, and Bangkok, Thailand (both with over 8% poverty incidence), and Washington, D.C., and Moscow, Russia (18.2% and 13.1%, respectively). Video essays accompany the data.

The series also includes dispatches from correspondents in different cities and countries on how income inequality plays out across different dimensions – education, race, immigration, health care, government, labor and natural resources. Its U.S.-oriented perspective notwithstanding, the report’s scope and breadth make for recommended reading.

From knowing to doing
Of course, the real task is to go from knowing about inequality to doing something about it. And in case the suffering of the poor isn’t enough motivation for more egalitarian policies, a year-old United Nations paper on addressing inequalities as drivers of conflict adds a threat against the rich: social disparities fuel unrest and violence.

Concludes the February 2013 report from the U.N. Peacebuilding Support Office: “There is considerable consensus among different policy communities that not only providing social services, but also and crucially ensuring fair access to them among different groups in society, is a key priority for conflict prevention, violence reduction and sustainable peacebuilding.” Inequity breeds

A further reason for the rich to share and uplift comes from a 2002 paper from Eric Thorbecke and Chutatong Charumilind, then with Cornell University. Published in the World Development journal, “Economic Inequality and Its Socioeconomic Impact” argues that wealth disparities drag down growth, with economic models on page 1481 summing up the theories backing the thesis.

And if a 2002 paper is too dated for some tycoons, then they should google the WEForum fireside chat last week featuring Google chairmen Eric Schmidt for more or less the same argument about unemployment and stagnant middle-class incomes dragging down economic growth.

“The stagnation in middle-class wages is not just a middle-class problem. It’s an economic problem,” Schmidt stressed. “And it’s one of the main reasons that global economic growth is so lousy.” He adds: “Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible.”

And every billionaire knows what scarce jobs and falling incomes do to growth, sales, prices, and asset values. So listen up, Davos: If you want continued global expansion, not to mention peace and harmony, share the wealth.

(Briefing Note on global inequality from The CenSEI Report journal for decision makers in Asia, published this week. For a promotional copy, email report@censeisolutions.com.)

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2 Comments

  1. Most if not all politicians are very very rich so how do they know how most poor Filipinos live. How can they sympathize and create laws that will favor the poor when most of them don’t associate with the poor or they stay only in their armored vehicles surrounded with personal guards or luxurious houses? Look at the minimum wages??? Do they realize how much a minimum wage can buy? Do they even realize how important education and job creation with a decent salary and benefits? Yet most multibillion dollar companies here in Philippines are allowed to literally swindle their employees of their rightful benefits. Look at most public schools especially in provinces. Most of them have not changed. Normally, we would expect public schools to increase in size while population grows. Nothing happens except for the newly painted names of politicians on their roofs. Wake up Filipinos! It’s disgusting but true. With these issues the gap between rich and poor will exponentially widens.

  2. More so in PH, where Inequality is institutionalized and “inclusive growth” and so-called Millneum Development Goals on Poverty Reduction can never happen even as CCT is doubled or trebled as an accompany mechanism in monetary policies is stoked to expand inflation. Accompanying inflation of 4.1 % per BSP has just pushed recipients of remittances to go on their merry ways of spending 58% of all their receipts on food per FIES statistics which is good for the rich that control the flow of basic food necessities. At the same time, the excursion of “hot money” into securities in the PH stock exchange, make the local market very attractive for fishing expeditions. True, the societal class with the “old money” simply transferred the purchasing power to the new recipients of “new money” as the Forex of PhPeso just broke 46.1 per USD in Friday’s close at the Philippine Dealing System. So, in the event that the “tapering” may not work for the rest of First World or developed world like resilient PH with an assured receipt in excess of $1 bn a month, the US Federal Reserve may continue on its merry ways of printing Mickey Mouse money. Forget about “inclusive growth” and “inequality” in the mean time as greed as an uncanny ways of feeding itself with more greed.