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The widening wealth gap

Jan 27,2019 - Last updated at Jan 27,2019

There are moments in everybody’s life that are so impactful that they colour one’s perception of a subject permanently. 

One such moment occurred during my graduate studies in the US. The university had arranged a visit to the UN, which some students could not afford. Therefore, some of us on the students’ council suggested raising funds to assist those who would have liked to go but could not. Our American colleagues on the council objected to the suggestion and one of them exclaimed with indignation: “This is America. If you cannot afford it, you do not get it!”

I confess being shocked because what my colleague effectively said was that wealth is a virtue and poverty a sin or at least a failure, those guilty of which deserve to be punished, not helped. From that moment 30 years ago, I cannot think of the US without this experience affecting my thoughts, even though I realise that this may be unscientific and unfair.

Then again, is it? This outlook describes accurately neo-liberal dogma, which has guided virtually all economic policy and activity, including the International Monetary Fund’s economic reforms. 

According to Nick Hanauer, the first non-family-member investor in Amazon, “neo-liberal orthodoxy teaches us that if everyone maximises their selfishness, the world will somehow be a better place; inclusion and justice are luxuries and health and education should be left to the mercy of the free market, available only to those who have the money to pay for them”. The result has been to concentrate wealth and opportunities in very few hands. 

Oxfam, the international charity, focused on this in its report: “Are 26 billionaires worth more than half the planet?” whose release coincided with the World Economic Forum meetings at Davos.

The report shows that the richest 26 people own as much wealth as the poor half the world combined, around 3.8 billion people. It also states that the cumulative wealth of the world’s billionaires, roughly numbering 2,200 people, increased by 12 per cent in 2018, while the wealth of the poorest half of the world fell by 11 per cent. 

And this trend has coincided with reductions of tax rates for wealthy individuals and corporations around the world over the past decades. This generosity continues not only despite protests, such as in Jordan every week, but also against the advice of billionaires, like Nick Hanauer and Warren Buffet. 

Giving tax breaks to the rich made sense in the past when they needed to invest in expanding their enterprises and employing more workers and managers who in turn bought more goods and services, all of which enhanced the economic cycle.

But today, this trickle down became an upward flow because production is largely automated, there is greater focus on services and fortunes tend to consist of digits flickering on computer screens. 

The problem is that rising disparities of wealth and opportunities obstruct efforts to fight poverty or improve living standards, and they pauperise the middle class. In other words, they destroy the mainstays of stability in any society.

 

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