In this summary, Walden Bello distills the key ideas and data contained in Thomas Piketty’s monumental work Capital and Ideology.
by Max Lawson, Head of Inequality Policy, Oxfam International
This week saw the launch of the first ‘World Inequality Report’ written by the team at the Paris School of Economics and based on the data collected by over 100 researchers behind the World Incomes Database. The summary is very short and full of fantastic charts, well worth taking a look at. They have pioneered the use of tax data and other sources to recalculate the incomes of those at the top, which are hugely underestimated. They have now done this for enough large countries to make some conclusions about global trends, which is the basis of the report.
Between 2007 and 2016, the average wealth of the bottom 99% decreased by $4,500. This decline was particularly
concentrated among the housing wealth of AfricanAmericans. Outside of home equity, black wealth recovered its 2007 level by 2016. But average black home equity was still $16,700 less. Meanwhile, over the same period, the average wealth of the top 1% increased by $4.9 million. Much of this decline in wealth, we argue, was the direct result of policies enacted by President Obama. His housing policies, particularly regarding foreclosures, were a disastrous failure that led to millions of families losing their homes, with black families suffering especially harsh losses. What’s more, Obama had power—money, legislative tools, and legal leverage—that could have very sharply ameliorated the foreclosure crisis, if not largely prevented it. He chose not to use them.
In the following essay, we shall examine the circumstances that led to the housing bubble, and its eventual collapse in Part I. In Part II, we shall take a close statistical look at the decline in black housing wealth. And in Part III, we shall outline an approach that would have halted the foreclosure crisis, had President Obama chosen to pursue it.
In the United States, the 400 richest individuals now own more wealth than the bottom 64 percent of the population and the three richest own more wealth than the bottom 50 percent, while pervasive poverty means one in five households have zero or negative net worth.
Those are just several of the striking findings of Billionaire Bonanza 2017, a new report (pdf) published Wednesday by the Institute for Policy Studies (IPS) that explores in detail the speed with which the U.S. is becoming “a hereditary aristocracy of wealth and power.” …
“The wealthiest 25 individuals in the United States today own $1 trillion in combined assets,” the report notes. “These 25, a group equivalent to the active roster of a major league baseball team, hold more wealth than the bottom 56 percent of the U.S. population combined, 178 million people.”
At the heart of Guilluy’s inquiry is globalization. Internationalizing the division of labor has brought significant economic efficiencies. But it has also brought inequalities unseen for a century, demographic upheaval, and cultural disruption. Now we face the question of what—if anything—we should do about it.
A process that Guilluy calls métropolisation has cut French society in two. In 16 dynamic urban areas (Paris, Lyon, Marseille, Aix-en-Provence, Toulouse, Lille, Bordeaux, Nice, Nantes, Strasbourg, Grenoble, Rennes, Rouen, Toulon, Douai-Lens, and Montpellier), the world’s resources have proved a profitable complement to those found in France. These urban areas are home to all the country’s educational and financial institutions, as well as almost all its corporations and the many well-paying jobs that go with them. Here, too, are the individuals—the entrepreneurs and engineers and CEOs, the fashion designers and models, the film directors and chefs and other “symbolic analysts,” as Robert Reich once called them—who shape the country’s tastes, form its opinions, and renew its prestige. Cheap labor, tariff-free consumer goods, and new markets of billions of people have made globalization a windfall for such prosperous places. But globalization has had no such galvanizing effect on the rest of France. Cities that were lively for hundreds of years—Tarbes, Agen, Albi, Béziers—are now, to use Guilluy’s word, “desertified,” haunted by the empty storefronts and blighted downtowns that Rust Belt Americans know well. Continue reading
Meritocracy, Franks argues, is the ideology that allowed Democrats to self-consciously claim the mantle of social justice and egalitarianism while subverting both. In this framework, one’s race, creed, color, gender, or sexual orientation shouldn’t matter when it comes to achieving success in America; what does matter is having the talent and ability to graduate from a place like Harvard Law. But at the same time, meritocracy demands inequality—not everyone, after all, can go to Harvard Law or become a doctor or a high-tech executive. In fetishizing meritocracy, therefore, the Democratic Party has embraced an ideology based on inequality.
Frank contrasts this ideology with the GOP’s more traditional plutocratic one. In the United States, as elsewhere, having a lot of money gives you power. But this “hierarchy of money,” as he puts it, is rivaled by another: a “hierarchy of merit, learning, and status.” The lawyers, doctors, and academics who compose “the liberal class” (to use the journalist Chris Hedges’s term) have erected their own edifice of power—one that has also come to ignore the interests of working-class people and reproduced structures of extreme racism, particularly in the prison system.
By “liberalism” I mean what is considered under this term in the US. By “to blame” I mean “for the rise of Trump and similar nationalist-populists”.
What are the arguments for seeing liberal triumphalism which began with the collapse of Communism in the 1990s as having produced the backlash we are witnessing today? I think they can be divided into three parts: economics, personal integrity, and ideology.
The Resolution Foundation’s study found that the current parliament would be the worst for living standards for the poorest half of households since comparable records began in the mid-1960s and the worst since the early years of Thatcher’s 1979-90 premiership for inequality.
Deep Place is a holistic approach to sustainable place-making. It is grounded in an empirical concern with how to achieve more economically, socially, environmentally and culturally sustainable places and communities. It seeks to overcome what it identifies as the harmful consequences of the current dominant Neoliberal economic paradigm. Although it is not anti-capitalist, it recognises the weaknesses and failings of Neoliberalism, which is exploitative of human and natural resources as factors of production. There has been a significant drive toward Neoliberalism since the 1980s, and the costs in terms of increased inequality are all too clear (Ostry et. al., 2016). The UK is now one of the least equitable countries in the world. Income inequality has been well above the OECD average for the last 30 years. The average income of the richest 10% is 10 times that of the poorest 10%. Between 2005 and 2011 the average income of the poorest 10% in the UK fell by a further 2%, and the share of the top 1% of income earners has grown from 6.1% in 1981 to 12.9% in 2011. (OECD, 2015)
Deep Place is based on the premise that the economy is socially constructed, and it therefore argues that it can be socially reconstructed. Even some of those who have been so closely linked to Neoliberalism, such as the IMF, are now appearing to accept the significant economic and social damage that arises from the inequality it causes. Key people within the IMF have now argued that policy makers should be more open to redistribution (Ostry et. al., 2016). At the same time, the Capital Institute has argued for a form of ‘regenerative capitalism’. They suggest that ‘…today’s greatest challenge is to address the root cause of our systemic crises – today’s dominant (Neoliberal) economic paradigm and the financial system that fuels it and rules it – by transitioning to a more effective form of capitalism that is regenerative and therefore sustainable over the long term’ (Fullerton, 2015, p. 12). Deep Place does not deny the complexity of global economic interrelationships; indeed, it fully recognises the difficulties and implications of managing and controlling these hugely complex circumstances. The impact of the 2007/8 Global Financial Crisis and the as yet not fully understood consequences of the decision of the UK in a referendum to leave the European Union, clearly illustrate the limitations of national governments to control such forces. That is why Deep Place is place-based. It argues that more localised action can often have a significant impact on strengthening community resilience against these external forces. In order to be most effective however, it contends that local action needs to be coordinated and fully integrated: it needs to be whole-place. Continue reading
That’s the displacement story, but suppose that robots are extremely cheap. There is no obvious reason they shouldn’t be cheap. After all, we probably won’t need any rare materials to make robots. And presumably robots could be mostly manufactured by other robots, so the labor involved wouldn’t be expensive. In this case, we should be able to buy a robot at our local hardware store or from our favorite internet retailer for a few hundred dollars.
Once we buy the robot, we can have it clean our house, cook our food, mow our lawn and do all sorts of other tasks that we may not want to do ourselves. We can probably even save on our food budget by having the robot plant and tend a vegetable garden. If robots are doing all this work for us and we no longer need to buy and maintain a car to meet our transportation needs, we should have all have a high standard of living.
But suppose that patents and related protections keep the price of robots high. And instead of technology driving down the cost of transportation with self-driving cars to almost nothing, patent monopolies allow the top executives and shareholders of Uber or its equivalent to get very rich at the expense of the rest of the population. In that scenario, most people may not benefit to any great extent from technology. In that case, robots may take our jobs, but instead of the benefits from productivity growth being passed along in higher wages and lower prices, as was true in past decades, the benefits go to minority of well-situated individuals. Continue reading
Everyone knows that wealth is unequally distributed. The work of Thomas Piketty has made this a mainstream concern. But the magnitude of the gap between white and black Americans is on a different scale. According to a recent report from two progressive think tanks, CFED and the Institute for Policy Studies, white households own, on average, seven times as much wealth as African-American households (and six times as much as Latino ones). The Forbes 100 billionaires are collectively as rich as all black Americans combined. At current growth rates, it would take black Americans two hundred and twenty-eight years to have as much wealth as white Americans have today.
Some of the reasons are clear: the unemployment rate among black Americans is roughly twice that of whites, and black people earn, on average, between twelve and twenty-two per cent less than white people with similar education and experience. But the wealth gap between black and white Americans is much bigger than the income gap, thanks to a toxic combination of institutionalized discrimination, persistent racism, and policies that amplify inequality. As Thomas Shapiro, a sociologist at Brandeis and the co-author of the seminal book “Black Wealth/White Wealth,” told me, “History and legacy created the racial gap. Policies have maintained it.” Together, they contribute to what he’s called “the hidden cost of being African-American.” Continue reading
Of the features of modern society that exacerbate that fear and threaten that hope, the distribution of wealth may not be the most important. Money matters to people, but status matters more, and precisely because status is something you cannot buy. Status is related to identity as much as it is to income. It is also, unfortunately, a zero-sum game. The struggles over status are socially divisive, and they can resemble class warfare.
The richest 1% of the UK population owns more than 20 times the wealth of the poorest fifth, according to Oxfam.
That made Britain one of the most unequal countries in the developed world and contributed to the vote for Brexit, the charity said.
Its analysis found that about 634,000 Britons were worth 20 times as much as the poorest 13 million people. Continue reading
Note two things here. First, there are a lot of dots with very low income growth, low enough to deserve the label “stagnant”. Second, wherever similar-coloured dots are on an upward slope, higher-income groups left their lower-income compatriots behind. Aside from the very lowest deciles (who are often cared for with welfare benefits), that very often seems the case. Again, Lakner and Milanovic looked into this, and wrote: “Some examples with particularly low real growth rates among rich economies include almost the entire lower halves of the income distributions in Austria, Germany, Denmark, Greece and the United States. They all had overall 20-year growth rates of less than 20 per cent which translates, in the best case, as 0.9 per cent per capita annually.”
We’d probably expect to see a pretty tenuous relationship between companies’ share price performances and the rewards of those at the top of them. We’d also probably expect to see a one-way ratchet, where pay goes up in good times for a company, but rarely falls in bad times. We probably expect to see executives quite often rewarded for luck, rather than skill.
And guess what? Those things are precisely what the latest data does suggest. The financial data firm MSCI has taken a sample of 428 large listed American companies and examined their performance between 2006 and 2015. And MSCI has found that shareholder returns at those firms whose boss earned below the median of their sector outperformed those firms whose boss earned above the median.
There are six key takeaways.
First, living standards matter. Reflecting on the results three weeks ago, we noted that recent changes in living standards hadn’t played much of a role – despite the contention that people were angry about the post-financial crisis squeeze on living standards – but that deeper rooted economic differences did. That finding is confirmed in our more detailed investigation, with employment levels proving the indicator with the strongest link to tendency for an area to vote Leave. A 10 percentage point (ppt) rise in the employment rate within a local authority is associated with a 1.7ppt fall in the leave vote. Areas where high numbers of people are out of work voted to leave.