How to Spread the World's Wealth Beyond Corrupt Elites
The following is an excerpt from the new book The Political Origins of Inequality by Simon Reid-Henry (University of Chicago Press, 2015):
We have reached a crossroads in our history. For all the achievements and riches of our time, the world has never been so unequal or more unjust. A century ago, at the time of the First World War, the richest 20% of the world’s population earned eleven times more than the poorest 20%. By the end of the twentieth century they earned seventy-four times as much. Today, despite seven decades of international development, three decades of the Washington Consensus, and a decade and a half of Millennium Development Goals, our world is even more divided among the haves, the have-nots, and—as President George W. Bush once quipped in an after-dinner speech—the have-mores.
When it comes to wealth, rather than income, the picture is more extreme. Globally, the richest 1% now own nearly half of all the world’s wealth. The poorest 50% of the world, by contrast—fully 3 billion people—own less than 1% of its wealth. Anyone with assets of more than $10,000 a year is an exception to the global norm and is better off than 70% of everyone else alive. Yet most of us are so preoccupied by the relative few with more that we rarely stop to notice this. There is growing awareness today of the consequences in rich countries of rising income inequality: we know what it means to talk of the 1% there. But when it comes to the much greater gaps between rich and poor the world over, we confine ourselves still to talk of “global poverty”.
How often are we told that, if only we could see what life is like in a cramped slum in Dhaka or on some scrabble of land in rural Chad, we would be moved to help? But the problem is not one of our empathy. We are all familiar with the shape of a human body in hunger. The details, like glass paper, scarcely catch the imagination any more. It is not one of distance, either. A growing number of the wealthiest people in this world live in high-rise apartments that tower up and over the slums below—and they know only too well that before all the “beautiful forevers” will be lived a thousand impossible todays.
The problem, rather, is one of perspective, of what we choose not to see. There is no shortage of books telling us “why nations fail” or what “the bottom billion” on this planet must do to succeed, no shortage of policy papers from the World Bank or the International Monetary Fund saying much the same. But we still have not properly confronted how the poverty and suffering of a great many are connected to the wealth and privilege of a few. We are slow to admit that the problem is one not of poverty traps at the bottom of the pyramid but of a great confinement of wealth at the top. Total global wealth was estimated at $263 trillion in mid-2014, up from $117 trillion in 2000. That was the same year that the world agreed to bind itself to achieving the Millennium Development Goals by 2015 (with the headline ambition of halving the proportion of people living on less than $1.25 a day). Those goals end this year, in 2015, in many cases not having been met. Meanwhile, global wealth keeps on growing: by 8.3% from mid-2013 to mid-2014 alone.
There is a politics to this, but it is all too often ignored in a debate which to date has preferred to focus on the economics of who has what. The [it's time to] paint this wider political context back into the picture, since our problems stem less from market forces than from the failed policies behind them. If this is partly cause for despair, then it is also cause for hope: our present predicaments are more amenable to change than we are often encouraged to believe.
But acting on this requires first grasping the full scale of the problem before us. Few of the world’s richest people intentionally exploit the world’s poor, it is obvious to note, and none of us is personally responsible for the plight of distant strangers. But some of us have not earned the base privilege we enjoy in this life: it is ours by fortune of inheritance and geographical luck, for the most part, and it comes at the cost of others.
Addressing this requires that we have a better sense than at present of the politics of our age of inequality, and that means coming to terms with how the lives of rich and poor the world over are woven together in practice. It means identifying and resolving the manner in which privilege is locked into the world around us while the livelihoods of the poor are excluded in the self-same stroke. In the case of the United States, Canada, France, and Germany, for example, much of the recent growth in personal wealth (more than 20%) is attributable to capital equity growth alone. There was no real value created here, just paper money for the most part. But paper money is power all the same.6 And it quickly cycles into the creation of further inequalities: one reason why, for as long as we have had the MDGs, we have also had the Doha round of World Trade Organisation negotiations, where the influence of these “malefactors of great wealth”, as Roosevelt once called them, pushes poorer countries into ever more unfair terms of trade with our own countries.
Inequalities are such a visible feature of contemporary society. Yet the origins of inequality are so myriad, so diverse, that often the structure itself can be impossibly hard to pin down. These structures are so deeply embedded in the world—they seem so natural—that often we simply do not notice them. It is like the two little fish happily swimming along who meet a bigger fish swimming the other way. The bigger fish says good morning and asks them how the water is. The two little fish swim on for a bit until one of them suddenly turns to the other and asks, “What’s water?” Today we all need to do better at finding out how the water is.
The incentive could hardly be greater. Inequality is the “fount and matrix”, to borrow a phrase from the great economic historian Karl Polanyi, of a great many of our era’s most pressing global problems, be it climate change, food insecurity, economic volatility, or the demographic crises of migration and population growth. These problems will all resist even our best efforts to address them until we have the gap between poverty and privilege the world over more firmly in hand. Poor countries will not join us in ambitious carbon-cutting goals if they have no other means to sustain themselves. The world elite’s anxieties about migration and security will not go away if we cannot reduce the incentives for others to leave their own moribund nations or for economic actors to trade on terms that they may take hope or reason much to care from.
In difficult times we are tempted, if not encouraged, to look inwards, to lower our ambitions and shutter up our hopes. But global inequality is a challenge that we can meet only if we are prepared to do the opposite of that which conventional wisdom supposes: to look upwards and outwards, to think bigger not smaller, and to confront head-on the very heart of a problem which ails us all.
It is precisely here that our political imagination fails us. Our politics remains stuck in the past. Worse, it is stuck in the wrong past. Instead of imagining new ways of meeting the changing needs of society, we take comfort from well-worn clichés. Two centuries after the Enlightenment, when questions about the rise and fall of nations were first raised in earnest, today’s commentators continue to peddle an endless stream of “decline of the West, rise of the rest” narratives, sharing with us their misanthropic visions of a zero-sum world in which winner takes all (and the losses of everyone else are overlooked). We seem unable to devise the necessary paradigms for our own times.
If we could stop approaching the problems of our current political and economic order as if they were a parlour game, we might find it easier to identify and address the real challenges before us. At the very least, we might see that it is not “others” who threaten us in the first place—be they immigrants from whom we are told to protect our jobs (and fear for them), or the threats of an unspecified terrorism that we give up our civil liberties to counter. We are threatened much more directly by the facts of an unequal world and the consequences of those facts left to fester.
Left unaddressed, and inequality cuts into people’s health and education, and into the life chances of us all. It does not simply cleave rich and poor apart so much as it structures the relationship between them. It erodes what is left of our national and local communities and prevents us from exploring more peaceful relations with those with whom we share our planet. We experience the effects of inequality socially in addition to the toll it exacts upon us as individuals. And we pass those effects on more strongly to our children.
As recently as the roaring 1990s, it was common for people to believe that the gap between rich and poor simply didn’t matter any more. Time and again it was said that a rising tide of wealth would float all other boats. Since the onset of the 2007–2008 financial crisis, such confidence in the notion of trickle-down growth—the Kuznetsian belief that inequality now is necessary if we are to get to prosperity later—has rather dried up.† But without it, neither side of the political spectrum seems to have the answers any more.
Internationally speaking, many on the right have responded to the recent economic downturn by retreating once again to the prejudices of the past: insisting that the world’s poor are poor through lack of ambition, lack of skill—the product of “cultures of poverty” and idle dependency still. No to “global welfare” screamed Britain’s Daily Mail in 2012, as the Conservative-led British government dared to maintain the previous Labour government’s commitment to increasing international aid contributions.
But the left is short of answers too. The Occupy movement has drawn attention to the unfair share of wealth held by the top 1% of income earners in rich nations. Yet a good few of those protesting in New York’s Zuccotti Park in 2011 were themselves a part of the global 1% (at the time, so was anyone with an average annual income of $45,000 or more).10 This doesn’t invalidate their argument, but it does reveal a characteristic short-sightedness. The Indignados in Spain, Syriza in Greece, even middle-class student protestors in Chile—all are right to draw attention to the unearned privilege of a domestic superrich in times of national austerity: average wealth in the United States is now 19% more than even its pre-2008 peak, and in 2010, no less than 93% of post–financial crisis recovery in gross domestic product in the United States went to the top 1% of income earners. We are living in the age of Gatsby again.
Yet what all too often goes unremarked in this debate is the fact that rising inequality in the United States and other wealthy countries is not, and has never been, isolated from a larger story about the international economy and international politics, which connect us to people and places we will likely never even hear of. Against this we need to ask ourselves, honestly, where it is we have learned our tolerance for inequality at large; we must ask where the power of banks and moneyed interests comes from and how, in different ways, it is wielded over all of us; we must ask ourselves why the international decisions purportedly taken in our name seem to benefit just the usual few, and we must ask whether this is unrelated to the level of interest we ourselves pay to the ballot box. For all the talk that inequality is driving us apart, the politics of rich and poor the world over are in fact more closely entwined than ever before. And this being the case, the manner in which that politics is to be managed is of the utmost relevance, not just in terms of socioeconomic justice but also in terms of the viability of democracy itself.
There is a geography as much as a politics to inequality, in short, and when it comes to addressing the root of the problem, we need to keep both very much in mind. This poses two particular challenges. The first challenge is implicit in the fact that, while we now have a healthy debate in the United States and Europe about the historical return of inequality to our nations, we are blind still to the issue of inequality at the global scale. And yet, internationally, of course, inequality never went away. That we choose to overlook this is in part because the discussion of national inequality in countries like Britain and America latches firmly onto wealth as the problem (to wit, the somewhat cavalier bashing of bankers) while the discussion of global poverty continues to focus almost exclusively on the poor (insisting that they lack this or that attribute: democracy, property rights, or the necessary “work ethic” most usually).
Changing this requires not only establishing why some people are richer or poorer now than they were in the past—this has been Thomas Piketty’s great contribution—but also recognising exactly how wealth and want are hardwired into the world around us.* We are accustomed now to hearing about the economics of inequality. But wealth and privilege are structurally embedded in political society at large. They are also embedded internationally. Yet our present debate shows almost no interest at all in the plight of those who are daily kept in outright poverty by the incessant chasing of wealth elsewhere. Those who do show an interest, by contrast, are often the very individuals and corporations seeking to play the absolute poverty of one (Bangladeshi sweatshop labourers, for example) against the relative poverty of others (Western workers, usually).
But history suggests that there are more hopeful connections we might draw here: coalitions can be forged and compromises found between people of differing outlooks and needs; people are able to overcome their prejudices of other people and places; and—by changing the scale at which they conceived of intransigent problems—societies in the past did find the tools they needed to address the extent of inequality in their societies. There are good reasons, then, to pay attention to the history of social and political inequality in different places, since it tells us not only about those policy regimes under which inequality grows but also about the impact of policies conceived in opposition to it.
America’s New Deal and Europe’s Golden Age, the first debates over modern democracy in post-Napoleonic France, the Kanslergade and Saltsjöbaden class compromises in Scandinavia, the granting of full suffrage to women and the US civil rights movement—all these and more are object lessons that inequality and the injustices that sustain it need not be an inevitable trajectory anywhere, and that answers to difficult questions can usually, with a modicum of political acumen, be found. It may well have been the widening gulf between rich and poor in the early twentieth century, for example, that first delivered society into the Great Depression, and then in turn gave fascism and Soviet communism grounds for making their historical advances. But it was the fallout from the Second World War that would ensure that most Western countries never again fell prey to the extremism of either side of the political spectrum (until recently, perhaps). And it was that atmosphere of postwar tolerance that led most of the more successful rich nations to oversee a period of state-regulated capitalism, thereby narrowing their levels of domestic inequality and increasing social inclusion. In most countries it was the war itself that kick-started this period: it was war that brought society to its senses after the excesses of the Gilded Age, and war that levelled incomes as much as cities across the West, clearing the way for the Golden Age that would follow.
But surely we can found a more positive politics of change for our own times, one that does not leave everything to war or chance alone? At the very least, the history of those times and places where inequality has been reduced points us to the importance of expanding political agency rather than closing it off. History teaches us that in times like ours, we need more, not less, politics: but we need to learn this history first of all. Yet if we are to avoid the temptations of cynicism in this task, we must equally avoid nostalgia: and here too geography proves a useful guide.
There is certainly an art to recognising how deeply ingrained problems, intractable though they seem to us as individuals, can be solved when we decide to settle our differences collectively. And we would do well, I am suggesting, to rediscover this. But we need to do more than simply look back to the past. For all its achievements, the Golden Age shone brightly for relatively few people on this planet. The historical narrowing of the gap between rich and poor in just a few fortunate countries in the West never carried over to the gap between rich and poor countries at large. And when we look back at the twentieth century, this surely counts among the least remarked of its many catastrophes. It is without doubt into yet another unmarked grave of that century that the achievements of those same more fortunate countries are now themselves being flung at the hands of the market neoliberalism and liberal democratic triumphalism that have monopolised Western politics since the end of the Cold War.
We need a new politics to sustain us into the twenty-first century. We need a new strategy of equality to get us there too. The challenge of equality confronts us today not as a crisis of national community but as a global challenge. Meeting it must begin, as the French political historian Pierre Rosanvallon says, with “rethink[ing] the whole idea of equality itself.”12 But it must also involve, in the twenty-first century, rethinking the scale at which equality needs to be made. As we shall see, this implies a series of rather more practical concerns. First, it serves as a timely reminder for Europe and America, in particular, to practice a little humility, to look outside their own treasured histories for solutions to the problem that they, as much as any other, now face. We rail today at the injustice of paying off the debt incurred by banks that were bailed our during the credit crisis, but this is what the Third World debt burden has always been about—common people paying off debts incurred by corrupt elites.
There are plenty more connections too, if we care to look. The second challenge arises to the extent that we are able to make progress towards the first, and it concerns the fact that the more general crisis of the Western welfare state that we have been experiencing of late is not itself unrelated to the ongoing injustice of uneven global development in the world: an injustice for which the persistence of enduring poverty is a primary cipher. The situation, as it confronts us today, is therefore simple: either we push forward with social protection globally, or we will see it continue to fall apart in the global North as much as in the global South. On one level, it might be said that these connections are trivial. Inequality is natural, we are told time and again. Of course we should expect to see it everywhere we look. But such claims, which are usually made by those with a vested interest in the status quo, confuse non-equality with inequality. It is little wonder, therefore, that they also miss the reasons why the connections between these two historic crises, as they are made and remade in the day-to-day (our day-to-day), are complex: they cannot be narrowed down to a simple cause and effect. The relationship between them is iterative, rather: the one contributes to the other. Intellectually speaking, imaginatively, we will have to map these connections one by one.