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Features, Guest Columnists

Far From Fed: Recent Trends in Inequality

sectitle-featuresnewton-unbalanced-scalesOn a late May morning on my way to work, I noticed this huge armored truck through the bus window. It was one of those grey, heavy-duty vehicles that you sometimes spot in front of super-markets, collecting the daily cash. This truck however, was about five feet longer than the normal ones as it had double read axles. Easily, a truck like that can carry away twenty tons of your money, I thought.  Of course, I have never had any amount worth weighing so it made me wonder whose bags of money were being trucked away in grey anonymity.  Regarding the truck itself, specialty customization companies sell a variety of makes and models of such vehicles. One firm I randomly came across,  ‘The Armored Group’ provides ‘armored trucks, bulletproof trucks, armored security vehicles, inter-bank vehicles and mobile banking vehicles that meet or exceed the Federal Motor Vehicles Safety Standards (FMVSS).’

It is certainly comforting to know for those whom it may concern, that the vehicles meet safety standards. Perhaps interesting for the light-walleted as well to note that ‘Armoured Group’ sales offices exist even in places not commonly known as havens of wealth, such as Kenya, Ethiopia and Nigeria. Which leads me to this update to my January article in Newtopia on social inequality. Summer is in sight yes, but economic inequality is not posed to take a summer break. More and more reports have now been published that provide irritable evidence as to the income disparities that are eroding livelihoods and economic opportunities from Detroit to Dhaka.

Norwegian People’s Aid, a labour movement humanitarian organization published an ‘Inequality Watch report in September 2012.[i] The report offers useful reading to help comprehend trends and conceptual underpinnings of globalized inequality. Two statements to share here:

  • Unequal distribution of power and resources undermine the fundamental values of people’s equal rights. It leads to structural oppression of large population groups. It also makes it much harder for poor and marginalized groups to gain political influence. Even if equal rights to vote and participate are formally granted in a highly unequal society, people’s real possibilities of political influence will remain limited.
  • Resources are available, but extremely unequally distributed. We have also seen that social movements around the world have addressed the issue of inequality and demanded political action for a more just distribution of power, wealth, income, land and access to social services. For years it has been almost impossible to get dominant politicians and development institutions to discuss reduction of inequality or redistribution of resources. Today, we see a slow change, but not yet reflected in consistent new policies.

It is an open secret also the Paris-based Organization for Economic Cooperation and Development (OECD) readily acknowledges: ‘wage gaps widened and household income inequality increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth.”[ii]

The OECD goes on to note:

“In OECD countries today, the average income of the richest 10% of the population is about nine times that of the poorest 10% – a ratio of 9 to 1. However, the ratio varies widely from one country to another. It is much lower than the OECD average in the Nordic and many continental European countries, but reaches 10 to 1 in Italy, Japan, Korea, and the United Kingdom; around 14 to 1 in Israel, Turkey, and the United States; and 27 to 1 in Mexico and Chile.”

In the “Global Wage Report 2012/13: Wages and Equitable Growth” released by the International Labor Organization in Geneva, differences in wages around the globe are captured and analyzed.[iii] Again unsurprising to the growing number of informed anti-capitalist activists and occupiers, ‘real average wage growth has remained far below pre-crisis (2008) levels globally, going into the red in developed economies’.  However more telling than wage growth rates and percentages, are the reports’ illustrations, which reveal just how large the gap, now is between labor productivity and wages.

Without a doubt, such gaps are significant and at the individual household and worker level, they are painful to acknowledge and try to come to terms with:

‘Between 1999 and 2011 average labor productivity in developed economies increased more than twice as much as average wages. In the United States, real hourly labor productivity in the non-farm business sector increased by about 85 per cent since 1980, while real hourly compensation increased by only around 35 per cent.’

In other, plain words:  while the value of what an average worker produced per hour has nearly doubled in just over a decade, only a third of that increase was shared with the worker:  capitalists pocketed two thirds. Add to this that workers bear a growing burden of the general tax burden and that businesses, notably large corporations, (presuming they don’t succeed to totally circumvent taxes by escaping to tax havens), pay a relatively shrinking share, then the drivers behind the dismal state of economic equality around the world today, become easier to understand.

As a result of a prolonged erosion of wage incomes compared to capital gains and speculation income, maintaining living standards has fallen out of reach for many who  used to consider themselves ‘middle class’. Few people would readily like to admit this and may rather refuse to identify themselves as new members of the ‘lower class’ in the capitalist economy. However social circumstances and economic prospects for many who were once considered to be ‘white collar’ workers, correspond with what used to be the ideal of ‘upward mobility. We all know how entire generations of youth in countries such as Spain and Greece, but also in Italy, Portugal and in other countries throughout the European Union, find themselves unemployed for extended periods.

Many have even never been in the workforce at all after high-school, college and university (youth unemployment rates in the 18 of the 27 EU countries hovers above 20%)[iv].

Again, more and more studies are released, including in 2013 ‘Squeezed: Life in a Time of Food Price Volatility’, by the UK-based Institute of Development Studies and Oxfam.[v] The focus here is to demonstrate the failure of wages to keep pace with food price rises and how this is putting a strain on families and communities.

Squeezed Report

Among the key observations from the report, perhaps most discerning are that

  • the poorest are eating too little and missing vital nutrients, and
  • the urgent need for cash is taking priority over collective social life and values; the high price of essentials is contributing to growing individualism and family nucleation.

These issues are obviously global ones. They may not be openly manifest in wealthier economies, but what inequality and poverty mean when it comes down to chances to lead healthy lives, free from hunger and food insecurity, the parallels between poverty in Alabama, Guatemala or Angola may not be fundamentally different at all. Downward globalization has many dimensions, none pleasant:

“Food safety is a growing concern as families are forced to turn to cheaper, poor quality and sometimes contaminated food to stretch the budget.  Increased migration is occurring as people leave rural homes for the city or other countries for more economic opportunities. In Ethiopia, food prices were blamed for people moving to the Middle East.

Heightened family tensions are revealed in increased incidences of domestic violence, alcohol and drug abuse as many men struggle to fulfill their traditional role as the ‘breadwinner’.  Unpredictable profits and higher costs mean a new generation of farmers are turning to riskier occupations, including gold mining in Burkina Faso and jungle fishing in Bangladesh.

Community life is breaking down as families cut back on important community events such as weddings and funerals in an effort to save money. The squeeze on family budgets is causing women to enter the workforce in ever greater numbers, and grandparents and older daughters are being forced to step in to help with childcare.  Families also report skipping meals, foraging or growing their own food. In Bangladesh people are turning to hunger recipes such as ‘pantabhat’, a watery fermented rice dish.”[1]

The myth of social mobility is quickly being replaced by rapidly spreading fear of losing one’s’ current socio-economic status and resulting limitations in partaking in social and cultural activities. It is now almost an unreal, distant memory that our parents and their parents embraced the notion that better education directly translates into better jobs, more income, and upward mobility. While there is still some truth in the notion that ‘better education pays’, it seems to be paying less and less: it is not uncommon today that college and university graduates work in fields which not too long ago only required a solid high school graduation degree.

This point has been well argued in a recent editorial by Jeff Madrick in Harpers’ Magazine.

The link made to the world of the capitalist oligarchy is not unsurprising, “As for the continued success of the One Percent, much of their ongoing gain can be attributed to financialization, as speculation and market making have surpassed manufacturing as the engine of the American economy. Investment bankers continue to rake in huge bonuses, and CEOs are still plied with stock options, which have soared in value along with the stock market.”

To complement the astronomical gains reaped by the few, this current-day ‘landed class’ is closely linked and interwoven with the realm of politics, where corruption has reached new, unsung heights. Our political institutions have long ceased to genuinely be ‘ours’: after all, that money rules has been a popular perception long before free-market economies have metamorphosed into a ‘free-for-the-rich’ system of politically sanctioned corporate immunity.

Under such ‘market economy’ conditions it is hardly far-fetched to speak of the ‘tyranny of the one per cent’ as Serge Halimi does in the May 2013 issue of LeMonde diplomatique. [2]

Halimi of course also has numbers to underpin his position, for example that “The minimum wage has lost 30% of its value since 1968; there has been no law to facilitate setting up a union in a workplace, despite Obama’s campaign promise; work is still taxed twice as heavily as wealth, 39.6% versus 20%”.

Yet more importantly, Halimi provides reassurance to inequality opponents and critiques when he sees emancipatory potentials and avenues for constructive dissent and change.

“Illuminating the real workings of what happens, the mechanisms through which wealth and power have been captured by a minority who control both markets and states, requires a constant effort to educate the public. It would remind people that any government ceases to be legitimate when it allows social inequalities to grow, ratifies the crumbling of political democracy, and accepts the subordination of national sovereignty.”

Next time one of those armored money transporters passes me by, I’ll try to not think about whose fortune it is that is being carted off to some unseen vault. Instead, I will take a moment to think about the driver and guard inside and whether or not they ever think of how their freight could almost immediately be put to inequality reducing uses. For families without health or dental plans, kids who go to school most mornings without lunches packed, homeless people who remain on society’s outer margins, many fading away well before they reach sixty. Thinking for a moment, will of course not make the driver take a wrong turn. However, those with the safe boxes and access to the underground vaults are the ones we should all be thinking about, as they try to stay out of our sight while having their Government allies, keep electronic eyes and ears on us.


[2] John Holloway’s Crack Capitalism (2010) has argued for fostering alternatives by developing autonomous social spaces, within and outside of capitalism. Reviewed here.


[i] When trying to access the report online on 1 June, the link did not open regrettably.

[ii]  Divided We Stand: Why Inequality Keeps Rising, OECD, 2011

Note that the “Why’ presented in the report is surely debatable!

[iii]

ILO, 2012: “Global Wage Report 2012/13: Wages and Equitable Growth”

Also has an informative 2-minute Youtube clip on the report.

[v]

Risky Jobs, Hunger Rations and Domestic Violence: New IDS Research Reveals the Hidden Social Costs of Today’s High Food Prices

Article written by Glenn Brigaldino

Glenn Brigaldino is an independent political analyst living above the 49th parallel. He was a contributor to the 2002-2005 Newtopia Magazine venture and remains loosely affiliated with the new project.

In the early 1980s he was an active member in the German Green party, until it became absorbed in the political mainstream. As a specialist in international cooperation, he has worked for aid and relief organizations in Africa, Europe and elsewhere.

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