According to the latest report from Oxford International, a U.K.-based confederation of twenty independent charities, the world’s 2,000 or so billionaires saw their collective wealth surge by $762 billion — enough to end abject poverty seven times over. As Time.com reported: Continue reading
It is fitting that following my previous post on the growth in the global millionaire community, I decide to reflect on the moral travesty that is child mortality. I say moral because it is a problem that need not still exist to the degree that it does, and that only persists because our global economic system are not sufficiently guided by ethical principles.
Historically, around 43 percent of children died before the age of five; as fairly recently as the 19th century, every second or third child would perish, even in relatively developed Western countries. Although child mortality has declined rapidly over recent decades — down to 4.3 percent globally, compared to 8 percent in 2000 and 18 percent in 1960 — it is still far higher than it should be.
Nowadays, anywhere from 6 to 9 million children die before their fifth birthday, and nearly half of them die within a month of their birth. (This does not include millions more that die before adulthood.) About 42 countries, mostly in sub-Saharan Africa, account for 90 percent of these deaths. Two-thirds of these children die from causes that are easily preventable, namely diarrhea, pneumonia, malnutrition, and malaria. Continue reading
Yet another massive leak of offshore banking documents has revealed the remarkable extent of the world’s “parallel economy”, in which a large and growing proportion of global wealth is secretly stashed away in a complex and opaque network of tax havens.
In addition to the obvious diversion of literally trillions of dollars of capital that could be better spent alleviating the needless suffering of billions (with plenty left over to spare), this development is arguably a threat to democratic governance the world over, as Matt Phillips at Vice argues. Continue reading
The post recession world has, understandably, been a deeply cynical place, and a major indicator of this is the historically high level of distrust of corporations, if not the U.S. economy in general. As The Economist reported:
The share of Americans who hold “very” or “mostly” favourable opinions of corporations has fallen from 73% in 1999 to 40% today, according to the Pew Research Centre. Surveys by Gallup of views on big business show less extreme swings, but point in the same direction (see chart). Over 70% of America’s population believes that the economy is rigged in favour of vested interests.
Such growing hostility to business is in evidence across the rich world. Britain’s decision in June to leave the European Union was driven in part by popular discontent with big business, which had lobbied heavily to remain. Many continental Europeans are becoming ever more vocal in expressing their long-standing doubts about “Anglo-Saxon capitalism”.
This backlash against big business is already having an impact on policymakers. The antitrust division of America’s Department of Justice says that under President Obama it has won 39 victories in merger cases—deals blocked by courts or abandoned in the face of government opposition—compared with 16 under George W. Bush. Those victories included a string of blockbuster deals such as Comcast’s proposed bid for Time Warner Cable and Halliburton’s planned takeover of Baker Hughes. The European Union has launched a succession of tough measures against Silicon Valley’s tech giants, such as asking Apple to stump up billions of euros in allegedly underpaid taxes in Europe, and allowing European news publishers to charge international platforms such as Google that show snippets of their stories. Britain’s new prime minister, Theresa May, has said that she may cap CEO pay and put workers on boards. Governments worldwide have started co-operating to curb the use of tax havens.
According to a 2015 paper by American political scientist Larry Bartels of Vanderbilt University, the gap between the rich and poor — and the subsequent unresponsiveness of government to the needs of the majority — is not just a feature of United States, as a multitude of studies have revealed. The struggle between the haves and have nots seems inextricably tied to our species, varying only be degree.
For example, in almost every nation Bartels studied, the wealthy were generally and categorically opposed to social spending, even during bad economic times. Continue reading
Over at the Washington Post, columnist Matt O’Brian reveals how inequality has less to do with a small class of super wealthy elites, and more to do with the structure and culture of many big U.S. companies
The easiest way to think about this is to think about the different types of inequality. There isn’t just inequality between everyone, but also between everyone at a single company. Why does this matter? Well, if CEOs really are gobbling up a bigger and bigger slice of the profit pie, then inequality within society at large should have increased because inequality within companies increased. But that’s not what happened. The research team of Jae Song of the Social Security Administration, Fatih Guvenen of the University of Minnesota, and David Price and Nicholas Bloom of Stanford were able to look at what had previously between private earnings data for every company between 1978 and 2012—the best data we have so far—and found that the pay gap between executives and their own workers had barely changed during this time. What had changed, though, was the pay gap between every worker at the highest-paid firms and everyone else. In other words, inequality exploded because the top 1 percent of companies were making more and paying all their employees more. This was true across the country and across industries.
It is not entirely clear why this is the case, but one hypothesis is that technological innovation has made every industry “winner-take-all”, meaning it is easier than ever for the most ruthless and resourceful companies to dominate a particular market. This explains the rise of global behemoths like Google, Amazon, Apple, and Facebook, all of which lack any true competitors in their respective industries. Continue reading
After decades of discussion and support among academic circles, as well as a few small-scale but promising experiments, universal basic income is about to get its biggest and possibly most decisive try yet. Writing for Slate, the co-founders of one of the world’s leading nonprofit charities lay out their plan to give this innovative idea its due:
The organization that we founded, GiveDirectly, has decided to try to permanently end extreme poverty across dozens of villages and thousands of people in Kenya by guaranteeing them an ongoing income high enough to meet their basic needs—a universal basic income, or basic income guarantee. We’ve spent much of the last decade delivering cash transfers to the extremely poor through GiveDirectly, but have never structured the transfers exactly this way: universal, long-term, and sufficient to meet basic needs. And that’s the point—nobody has and we think now is the time to try.
We’re planning to provide at least 6,000 Kenyans with a basic income for 10 to 15 years. These recipients are some of the most vulnerable people in the world, living on the U.S. equivalent of less than a dollar. And we’re going to work with leading academic researchers, including Abhijit Banerjee of MIT, to rigorously test the impacts.
By “rigorous” we mean a few things. First, the test must be experimental, so that we generate unbiased and transparent estimates of impact. Second, the guarantee must be a long-term commitment. We already know quite a bit about the beneficial effects of giving people money for a few years; the key question is how the knowledge that your livelihood is secured for more than a decade affects your behavior now. Do you take more risk? Get more schooling? Look for a better job? Third, the guarantee needs to be universal within well-defined communities, since the goal is as much to understand social dynamics as individual behaviors. While various other basic income pilots have been conducted in the past, none so far have met all three of these criteria.
The group estimates that this evaluation will cost roughly $30 million, 90 percent of which will go directly to the poorest households, and the remainder to the staff, office, payment fees needed to deliver it. Because it is being tried in a developing country, the costs to make people’s needs will be lower, thereby making the project more affordable. It will also complement similar experiments being planned in Finland, Canada, and elsewhere.
And even though it will provide some well needed empirical evidence, on the largest scale thus attempted, the authors point out that there is plenty of data already available from prior attempts:
As it turns out, that assumption was wrong. Across many contexts and continents, experimental tests show that the poor don’t stop trying when they are given money, and they don’t get drunk. Instead, they make productive use of the funds, feeding their families, sending their children to school, and investing in businesses and their own futures. Even a short-term infusion of capital has been shown to significantly improve long-term living standards, improve psychological well-being, and even add one year of life.
On the other hand, well-intentioned social programs have often fallen short. A recent World Bank study concludes that “skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost”. Moreover, this paternalistic approach is often for naught: Jesse Cunha, for example, finds no differences in health and nutritional outcomes between providing basic foods and providing an equally sized cash program. Most importantly, though, the poor prefer the freedom, dignity, and flexibility of cash transfers—more than 80 percent of the poor in a study in Bihar, India, were willing to sell their food vouchers for cash, many at a 25 to 75 percent discount.
Whatever the results might be, I am definitely looking forward to seeing what we can learn from this approach. Favored by economists and political scientists across the political spectrum, UBI promises a streamlined, transparent, and affordable way to alleviate poverty, stimulate economic activity, and adapt to a possible future of mass automation and scarce jobs. Or so we will see in due time, hopefully!
In an opinion piece in the Boston Globe, former U.S. Secretary of State Madeleine K. Albright makes the case for why reducing global wealth inequality is one of the most crucial goals of the 21st century. Whatever you think about her record on the job, I think she makes a reasonable case.
First, reducing poverty and inequality is not only a moral imperative, it is also an economic necessity. I remember a time when some touted the benefits of “trickle-down” economics. Well, it turned out the trickle never reached the bottom. In fact, evidence shows that economies where only the rich do better witness more frequent slowdowns, while countries where the poor do better generally experience higher GDP growth. Income distribution matters for sustainable economic growth.
Second, smart policies focused on the poor and middle class can reduce inequality. We need not accept extreme poverty as inevitable. Improving educational quality, ensuring that the poor have the same legal protections as others, and increasing access to health care can all help promote an economic system that is equitable, efficient, and capable of sustained growth.
These elements are also consistent with the idea that strong economies do not come from the ripples created by the rich, nor from handouts provided by government; a healthy economy is like a house — it must be built from the ground up.
Indeed, what better way to ensure a strong, sustainable economy than to have the majority of the population employed in well paying and stable work, which in turn supports a market of consumers who can continue driving the demand for goods and services.
(Moreover, as even early 20th century entrepreneurs like Henry Ford understood, better pay meant lower turnover and less labor costs, something that should be obvious to anyone that ever takes a moment to see what an unmotivated and unhappy working environment looks like.)
Third, tackling income inequality and tackling gender inequality must go hand in hand. Although significant progress has been made in closing the gender gap over the last 20 years, a new report by the World Economic Forum suggests that the annual pay for women still only equals the amount men were earning 10 years ago. Moreover, the report suggests that if current trends continue, it will take another 118 years before the pay gap between men and women is closed. We simply must apply more urgency to this problem, which is why we should all support the ambitious target set by the U.N. to achieve gender parity by 2030 as part of the new sustainable development goals. The involvement of the U.N. is also a clear sign that the broader challenge of inequality needs both national and international attention.
Note that much of this global pay gap has to do with the sorts of work that are available — or I should say, made unavailable — to women around the world, as well as the lack of flexibility in requiring women to bring in more income to cash-strapped households while still expecting them to handle the bulk of child raising. Women need access to educational and employment opportunities that will offer more prosperity, and be allowed to more easily balance their familial obligations with their economic ones (giving fathers such flexibility would also help mitigate these issues).
A fourth principle is that while technology is a cause of rising inequality, it can also be a part of the solution. Consider that within a decade, more than two-thirds of people living across the Middle East and North Africa will have a smart mobile device with the computer power equivalent to what all of NASA had in 1969 when it put a man on the moon. These devices could open up unprecedented entrepreneurial and educational opportunities, including through virtual exchanges.
Granted, there will only be so many jobs remaining once technology has rendered most of them obsolete or less labor intensive. There will most likely need to be some sort of dramatic restructuring of the economy, up to and including some sort of guaranteed basic income for those unable to find any of the comparatively few jobs that remain. (Technology would certainly help to facilitate such a scheme.)
This leads to the next point: the consequences of globalization and technological innovation, for all their benefits, must be acknowledged and addressed.
Still, we must also recognize that the dislocations caused by globalization have contributed to the problem of inequality, and technology affords new avenues for the venting of this frustration. And while one cannot draw a direct link between poverty and terrorism, it is not hard to see how stark inequality breeds instability and the conditions where extremism takes root. So we must find an antidote to the feelings of selfishness and social helplessness that risk defining this era.
One important way leaders can help is by encouraging public service. That’s because service is transformative, making people more aware of needs around them. It bridges races and classes, diminishing differences in the pursuit of common goals. And it demonstrates that difficult national and international problems can be addressed and overcome by citizen action.
With infrastructure to maintain, a growing elderly population to care for, and other socially necessary projects, there is no shortage of valuable services to be done both at home and abroad. What is needed are more programs and companies, both public and private, that can train, mobilize, inspire, and support citizens in these ventures. As we reach the point in which constant growth is unattainable or even unnecessary, we must shift to an economic arrangement that focuses on the maintenance of civilization.
In recent years, the world has grown more and more aware of the fact that it cannot prosper if it is too sharply divided between rich and poor. We have learned that it is not enough to raise national income or increase national rates of economic growth, for even then, the majority of the population is often excluded. The key instead is to look for inclusive ways to promote growth so that even those who have very little will be able to climb the ladder of opportunity.
None of this will be easy, and the problem of inequality cannot be solved overnight. But it is important to try — not only because it is right, but because a more inclusive world will also be more peaceful than one where many people starve, while others buy diet books.
Never before has humanity had access to so much capital and technology — to the means of eliminating suffering on a mass scale — yet fallen well short of its potential. While poverty and deprivation has always been the condition for the vast majority of humans that ever lived, only over the last few decades have we developed the logistical capacity and resources to address these problems.
There is no reason why less than a hundred individuals should have more wealth than literally half the world, the vast majority of whom are mired in poverty. There is no reason why tens of millions of people who are working hard and meeting the market demand for laborers are nonetheless poor despite all that. It is harder and harder to justify these gaps and inequities, and at the very least, we need to start re-thinking the way we structure our economies and allocate our resources. Otherwise, the world is going to be harder and more miserable place for all its denizens.
What are your thoughts?