The Paradox Of Affluence

The Paradox of Affluence… or the Logic of (Unbridled) Capitalism?

Some Striking Global Statistics • •

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Of 4.4 billion people in developing countries, 3/5 lack basic sanitation; 1/3 have no safe drinking water; 1/5 are undernourished; 1/5 have no access to modern health services $40 Billion: Additional cost to achieve and maintain universal access to basic education, healthcare, food, water, sanitation (slightly more than the combined sum of $36 Billion that Americans spend on cosmetics and pet food and Europeans on ice cream) $40 Billion = 4% of the combined wealth of the 225 richest people in the world $1 Trillion = Combined wealth of world’s 225 richest people $1 Trillion = Annual income of the poorest 47% of Earth’s population, or 2.5 billion people GDP of 48 least developed countries = assets of world’s three richest people One child born in London, Paris, or New York will consume, waste, pollute more in a lifetime than 50 children born in a developing country In 1960, the gap between the world’s richest and poorest 20% was 30 to 1; in 1991, it was 61 to 1; in 1994, it was 74 to 1.

(Figures from 1998 United Nations Human Development Report)

Some Striking National Statistics • • • • • • • •

Top 1/10 of 1% of US income earners (300,000) earn the equivalent of the bottom 50% (150 million); greatest disparity since Great Depression Top 1% owns more wealth than bottom 90% Top 1% garnered 80% of income gains in recent years. (Hence, increases in GDP or per capita income are not accurate barometers of broader economic wellbeing) Top 10% account for all income gains in 2005 2006 Bush Tax Cuts: Bottom 20% of income earners received $23; middle 20% received $448; top 1% received $39,000; top 1/10 of 1% received $200,523 Between 1979 and 2005, income of top 5% increased from 11x as much to 22x as much as bottom 20%, whose real income declined by 1% In 1970s, CEOs earned 30-40x more than average worker; in 1990, they earned 100x more; in 2005, they earned 400x more U.S. Personal Savings Rate declined from 11.2% in 1982 to -1.1% in 2006 (a debtor nation)

(Figures from www.inequality.org, citing U.S. Census Bureau, EPI, and scholarly studies)

A Brief History of a Global “Paradox” • • •

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Bretton Woods (1944): UN Monetary and Financial Conference to rebuild post-war global economy Three institutions established: World Bank, IMF, and GATT (the last was replaced by WTO in 1995) 1948-1971: Period of unprecedented global economic growth which, despite unequal distribution, greatly benefited the developing world (coincides with period of global decolonization: reassertion of national sovereignty) 1973-1974: At summit of non-aligned countries and in UN General Assembly, Group of 77 (organization of less-developed countries) campaigns for a new international economic order designed to achieve a fairer redistribution of wealth, income, and technology 1970s-1980s: Heritage Foundation opposes Group of 77 with call for new economic order based on ascendant neoliberal ideology. Its views are adopted by US Treasury and IMF and packaged into Structural Adjustment Programs for developing economies, with emphasis on export-led growth as condition for IMF and World Bank loans (comes to be known as “Washington Consensus”)

Neoliberalism in a Nutshell (aka “The Washington Consensus” or “Free Market Fundamentalism”) Principal Features 

Deregulation: removal of state control, oversight, intervention in the belief that markets are self-regulating and function most effectively when left alone by government and its regulatory agencies

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Privatization: transfer of ownership and management of public enterprises to private companies in the belief that private business and industry can more efficiently and effectively produce and deliver goods and services

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Free Trade: removal of barriers to trade (e.g. taxes, tariffs, subsidies) and controls on foreign investment in the belief that the free flow of goods, services, and capital across national borders is the best means of economic growth (“A rising tide lifts all boats”)

Some Logical Effects of an Ideology Decline of unions, stagnant wages, shifting tax burden, corporate-led globalization, downsizing, loss of good-paying, secure union jobs with benefits in manufacturing replaced by low-wage jobs in service sector often without benefits, all contributing to upward redistribution and concentration of wealth WTO policies and free trade agreements (e.g. NAFTA) empower transnational corporations at the expense of workers, peasants, indigenous peoples, the environment, and the sovereignty of elected governments; produce domestic and global wealth gap: a “rising tide [may] lift all boats,” but many are pushed overboard IMF SAPs: debtor nations restructure economies to attract foreign investment and to service debt at expense of social investment and economic development Justifies shrinking government and defunding government agencies and social programs, which in turn legitimizes argument for tax cuts; hence, obstacle towards public investment in what enjoys broad popular consensus: good schools, universal healthcare, infrastructure renewal, alternative, clean, renewable energy sources. Deregulating banking and credit industries (e.g. repeal of usury laws and Glass-Steagall Act) makes it easier to borrow at a time when borrowing becomes increasingly necessary to stay afloat, leading to increasing debt for ordinary people (those at the top lend to those below) The focus on quarterly returns on investments in a hyperactive marketplace translates into a short-sighted focus with little regard for long-term investments that might not produce immediate profits or that produce benefits that might not so easily translate into dollars The increasing commodification of all areas of life—everything becomes subject to markets, citizens become consumers in a hyper-individualized marketplace that discourages critical thought and undermines democratic society

Prospects: Whither an Ideology? “When the gap between ideal and real becomes too wide, the system breaks down.” (Barbara Tuchman) 

The death-knell of the neoliberal order?

“Society waits unformed and is for a while between things ended and things begun.” (Walt Whitman) 

What will economic “recovery” mean?