(#1) Wealth Inequality in 21st Century Threatens Economy and Democracy
MULTINATIONAL MONITOR, May 2003, Vol. 24, No. 5
Title: "The Wealth Divide" (An interview with Edward Wolff)
Author: Robert Weissman
BUZZFLASH, March 26 and 29, 2004
Title: “A Buzzflash Interview, Parts I & II" (with David Cay Johnston)
Author: Buzzflash Staff
LONDON GUARDIAN, October 4, 2003
Title: "Every third person will be a slum dweller within 30 years, UN agency warns"
Author: John Vidal
MULTINATIONAL MONITOR, July/August, 2003
Title: “Grotesque Inequality”
Author: Robert Weissman
Faculty Evaluators: Greg Storino, Phil Beard Ph.D.
Student Researchers: Caitlyn Pardue, David Sonnenberg, Sita Khalsa
THE DOMESTIC TREND
In the late 1700s, issues of fairness and equality were topics of great debate—
equality under the law, equality of opportunity, etc. Considered by the framers of the Constitution to be one of the most important aspects of a democratic system, the word “equality” is featured prominently throughout the document. In the 200+ years since, most industrialized nations have succeeded in decreasing the gap between rich and poor.
However, since the late 1970s wealth inequality, while stabilizing or increasing slightly in other industrialized nations, has increased sharply and dramatically in the United States. While it is no secret that such a trend is taking place, it is rare to see a TV news program announce that the top 1% of the U.S. population now owns about a third of the wealth in the country. Discussion of this trend takes place, for the most part, behind closed doors.
During the short boom of the late 1990s, conservative analysts asserted that, yes, the gap between rich and poor was growing, but that incomes for the poor were still increasing over previous levels. Today most economists, regardless of their political persuasion, agree that the data over the last 25 to 30 years is unequivocal. The top 5% is capturing an increasingly greater portion of the pie while the bottom 95% is clearly losing ground, and the highly touted American middle class is fast disappearing.
According to economic journalist, David Cay Johnston, author of “Perfectly Legal,” this trend is not the result of some naturally occurring, social Darwinist “survival of the fittest.” It is the product of legislative policies carefully crafted and lobbied for by corporations and the super-rich over the past 25 years.
New tax shelters in the 1980s shifted the tax burden off capital and onto labor. As tax shelters rose, the amount of federal revenue coming from corporations fell (from 35% during the Eisenhower years to 10% in 2002). During the deregulation wave of the ‘80s and the ‘90s, members of Congress passed legislation (often without reading it) that deregulated much of the financial industry. These laws took away, for example, the powerful incentives for accountants to behave with integrity or for companies to put away a reasonable amount in pension plans for their employees—resulting in the well-publicized (too late) scandals involving Enron, Global Crossing, and others.
THE GLOBAL IMPACT
As always, America’s economic trends have a global footprint—and this time, it is a crater. Today the top 400 income earners in the U.S. make as much in a year as the entire population of the 20 poorest countries in Africa (over 300 million people). But in America, national leaders and mainstream media tell us that the only way out of our own economic hole is through increasing and endless growth—fueled by the resources of other countries.
A series of reports released in 2003 by the UN and other global economy analysis groups warn that further increases in the imbalance in wealth throughout the world will have catastrophic effects if left unchecked. UN-habitat reports that unless governments work to control the current unprecedented spread in urban growth, a third of the world's population will be slum dwellers within 30 years. Currently, almost one-sixth of the world's population lives in slum-like conditions. The UN warns that unplanned, unsanitary settlements threaten both political and fiscal stability within third world countries, where urban slums are growing faster than expected. The balance of poverty is shifting quickly from rural to urban areas as the world's population moves from the countryside to the city.
As rich countries, strip poorer countries of their natural resources in an attempt to re-stabilize their own, the people of poor countries become increasingly desperate. This deteriorating situation, besides pressuring rich countries to allow increased immigration, further exacerbates already stretched political tensions and threatens global political and economic security.
UN economists blame "free-trade" practices and the neo-liberal policies of international lending institutions like the IMF and WTO, and the industrialized countries that lead them, for much of the damage caused to Third World countries over the past 20 years. Many of these policies are now being implemented in the U.S., allowing for an acceleration of wealth consolidation. And even the IMF has issued a report warning the U.S. about the consequences for its appetite for excess and overspending.
In developing countries, the concentration of key industries profitable to foreign investors requires that people move to cities while forced privatization of public services strip them of the ability to become stable or move up financially once they arrive. Meanwhile, the strict repayment schedules mandated by the global institutions make it virtually impossible for poor countries to move out from under their burden of debt. "In a form of colonialisation that is probably more stringent than the original, many developing countries have become suppliers of raw commodities to the world, and fall further and further behind," says one UN analyst. World economists conclude that if enough of the world’s nations reach a point of economic failure, such a situation could collapse the entire global economy.
For further information on this story, please check out the following excellent websites:
Dollars and Sense
Politics and Income