3167. Income Inequality: Why Social Class Matters

By Kamran Nayeri, January 22, 2019

July 29, 2015 interview with Vox about international income inequality. 

As the race for the 2020 presidential elections in the United States is beginning with a line up of Democratic Party hopefuls, jockeying for influence by policy wonks has also begun.  Income inequality and taxing the super-rich that was the focus of Senator Bernie Sanders in his unsuccessful bid for nomination for the Democratic Party presidential candidate in 2016 has been brought back to focus by the Democratic Congresswoman Alexandria Ocasio-Cortez’s floating the idea of a 70 percent tax rate for incomes above $10 million.  

While four years ago Sanders’ campaign against high income inequality in the United States did not get much support from the Democratic Party policy wonks, that is not so this time.  In today’s New York Times, Emmanuel Saez and Gabriel Zucman (January 22, 2019), both economists at the University of California, Berkeley, argue that taxing the very high incomes is needed to prevent “an oligarchic drift that, if left unaddressed, will continue undermining the social compact and risk killing democracy.” Saez is considered a leading economist on income inequality. Earlier, Paul Krugman (January 5, 2019) wrote a column in the Times in support of Ocasio-Cortez’s idea. He cited research by Peter Diamond, Nobel laureate in economics and “arguably the world’s leading expert on public finance” and Saez who “estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, a top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent." 

There is a side debate here between Krugman who sees high taxes on the super-rich as "soaking the rich” and Saez and Zucman who see it primarily as a way to stop the “oligarchic drift” in American politics: "Just as the point of taxing carbon is not to raise revenue but to reduce carbon emissions, high tax rates for sky-high incomes do not aim at funding Medicare for All. They aim at preventing an oligarchic drift that, if left unaddressed, will continue undermining the social compact and risk killing democracy."  

However, the key question for the working people is this: What is the source of income inequality in capitalist societies? Neither of these notable economists nor the “left-wing” politicians who popularize their views such as Bernie Sanders or Ocasio-Cortez takes up this question. The answer is capitalism itself.  As long as the social means of production are the private property of a small section of society, the capitalist class, and the vast majority of the population has to sell our labor power for a wage or salary, national income would be distributed unequally between the “haves” and “have nots,” between those whose income comes from wages and those whose income comes from profit (and financial capitalists who collect interest and capitalist landlords who collect rent).  Income inequality is built into the capitalist mode of production, just as unemployment and poverty and other ecosocial ills are built into it.  The reformers of capitalism, those who work to ensure it is maintained and efficiently run as a system, constantly work to address alleviate these systemic problems. 

Thus, the presumption that a high tax on the super-rich will either cure income inequality or stop “oligarchic drift” in American politics is flawed.  Capitalist economies rest upon class power relations.  The “economic machine,” that is, the matrix of ecosocial relations then capitalist class controls, is used to extract wealth from nature by exploiting the working people through subjugating nature and society to the capitalist rule.  Still, the anthropocentric industrial capitalist economy creates its own systemic crises. One of these has been the rapid rise in income inequality in the U.S. and across the world.  This has been partly due to the neoliberal response to the 1970s the crisis of the anthropocentric industrial capitalist civilization which has intensified the ecosocial modes of exploitation and public policies that ensure distribution of ever more portion of the extracted wealth into the hands of a fewer and ever richer tiny group of super-rich across the world.  

According to the Credit Suisse report (2016), the richest 3.5 million people worldwide (o.7% of world population) control $116 trillion or 45.6% of the world’s wealth (Of course, even in this tiny group wealth is highly concentrated in an even tinier subgroup).  The share of the poorest 3.5 billion people (73% of the world population) is only $6.1 trillion of wealth or on average less than $10,000 in wealth each (Of course, a majority in this group have no wealth or even have negative wealth, debt).  

The combined ecological, social and political crises in the periphery of world capitalist system have led to the migration out of sections of Asia and Africa, and from Central America to the capitalist centers in Australia, Europe, and United States.  They have become a scapegoat for the rightist politics of a section of the capitalist ruling elite and fanned the flames of even more rightist public policy and wider acceptance of the neo-fascist groups in the West even as the entire capitalist political system has been moving to the right for almost four decades.  Saez and Zucman outline this rightist shift in taxation and public finance in their Times article and in detail elsewhere. Still, it is crucial to remember that they are dealing with the symptom, not the cause, which remains the capitalism itself. 

The bourgeois liberal response to these is as inadequate as it was in the 1920s and 1930s when a similar crisis engulfed the world.  The only way to eliminate income inequality and evermore concentration of wealth and power in the hands of the superrich is to empower the U.S. and world working people.  Class matters not only for understanding the sources of problems currently discussed in public policy but even more importantly, if we are to build the only resistance capable of defeating the dangers of the far-right and fascist rise in the West: the power of hundreds of millions of working people and their mass organizations.  Alas, both theory and history tell us that the liberal bourgeois policymakers would rather see the rise of fascism than the undisputed power of the working class. Let's remember that their proposed policies to tax the super-rich or moderate income inequality is, to use Saez's and Zucman's words, to avoid "undermining the social compact." Like the word "Deal" in New Deal or Green New Deal, "social compact" is the bourgeois reformers goal of keeping class peace to ensure a well-functioning capitalist economy.  The fascist movement offers a forceful solution to the class conflict to save "the system." Because the liberal bourgeois policymakers' focus is on serving the capitalist system they would rather not see a powerful and militant labor movement that may go beyond fighting fascism and bring down the anthropocentric industrial capitalist civilization itself. 

References:

Credit Suisse. The Global World Report 2016. 2016.
Krugman, Paul. “The Economics of Soaking the Rich.” The New York Times, January 5, 2019.
Saez, Emmanuel and Gabriel Zucman. “Alexandria Ocasio-Cortez’s Tax Hike Idea Is Not About Soaking the Rich.” The New York Times, January 22, 2019) 

2803. Cape Town Water Wars: A Literal Shitstorm

By Sharmini Periers and Patrick Bond, The Real News, January 18, 2018

SHARMINI PERIES: It's The Real News Network. I'm Sharmini Peries, coming to you from Baltimore.

Cape Town, South Africa. It is on the brink of running out of water. Historically, Cape Town a port city situated in a natural bowl to catch the fresh rainwater, was recognized for its lush, green vegetation. But for a few decades now it has been suffering from water shortages, and now it is gripped by the worst drought in a century.

Residents will have to queue for emergency rations, come April. Dam levels fell below 30 percent in the first week of this year. If it hits 13.5 percent, then residents will have to queue for their water collection at many points. Some 200 sites may have to be set up across the city.

Mainstream media has picked up this story, as Cape Town is the world's first major city to run out of water; but what they are not talking about is the drought's link to climate change. With us to discuss all of this from Johannesburg, South Africa, is Patrick Bond. He is professor of Political Economy at Wits University in South Africa, and author of Politics of Climate Justice: Paralysis from Above, Movement from Below, and co-editor of BRICS: An Anti-Capitalist Critique.

Welcome, Patrick.

PATRICK BOND: Great to be with you again, Sharmini. Thanks.

SHARMINI PERIES: Patrick, the water shortages in Cape Town appears to be a slow moving environmental disaster that Cape Town has been unable to prevent. What is causing this crisis?

PATRICK BOND: It's certainly the amplification of all of these weather vectors that have brought the whole country into a drought situation. Most of the country did recover about a year ago, but we had a two-year drought that left rural areas devastated and then there were major storm events. As you say, Cape Town's been suffering a creeping drought, but we've had unbelievable storms that have wrecked huge swaths of the infrastructure in Johannesburg here, as well as in the port city of Durban.

All three of the major cities between about three and a half million people in Durban, four million in Cape Town, a little over four million here in Johannesburg ... What they've really shown, these storm events and the drought, is how unprepared major cities in a fairly sophisticated economy, which is a major greenhouse gas emitter, not only therefore is a villain, but also a victim. The inability of the city of Cape Town --and they're run by a center-right government, not the African National Congress but the Democratic Alliance -- their inability to manage this and to run a mitigation and adaptation program that would work may well cost the mayor her job. Patricia De Lille is on the verge of being kicked out of the mayorship by her own party, and the water crisis and its mismanagement is the central reason.

As you say, Sharmini, it does mean for "Day Zero" as it's called -- April 20 is now the predicted date at which there won't be water in the residents' taps -- they'll have to start queuing up in just 200 water collection points, for those four million people. It may well be quite a disastrous situation, particularly given the water apartheid that Cape Town has inherited from centuries ... Since 1652 when Dutch settlers arrived with the Dutch East India Company. This is really a city in which white people have taken vast amounts of water for the English gardens or swimming pools, leaving the Africans and colored people without sufficient water, and now the chickens are coming home to roost for everyone.

SHARMINI PERIES: Patrick, this is not only a war and a crisis, but a slow-moving economic crisis and also a pending food shortage crisis. Elaborate on this for us.

PATRICK BOND: Well, there's quite an interesting debate and it's, as in California, an awareness raising, at which where is this sort of bulk water going, and it turns out that 60% of the incoming bulk supply to Cape Town has already been reserved for the commercial agriculture. Now, that's not necessarily the kind of staple foods, the maize meal, the corn that is the basic staple for most of the residents, but instead it's actually used for irrigation, and that's often in this wealthy agricultural area, for the finest wines in Africa and some of the finest in the world, as well as the famous tea, the Rooibos Tea.

The stress agriculturally, on these two products - the vineyards that create these beautiful wines and the Rooibos Tea. This red bush Rooibos Tea, may well put them out of business entirely in coming decades. That's one of these adaptation questions. Can there be different agricultural systems or better irrigation systems, or should we begin to think about these cities as really having to undergo ... That this changes everything. A revolution that Naomi Klein and her major book on the topic, on sort of taking advantage of these crises and using them to re-jig the local economy. The production system, the agricultural system, the urban form, to make it more compact and water efficient. The consumption norms and disposal systems. All of these now must come up for debate.

What's interesting in Cape Town, is that there's a long tradition of environmental justice, and yet, because I think true across the world, many of our local environmental justice movements have been oriented to stopping pollution or addressing very localistic systems. Food systems, for example is a very important part of the Cape Town progressive community, but it's not yet been the ability to connect the dots and to put climate justice onto the national agenda and to ask the questions, should this new government that's about to take power nationally, as we have a new incoming president of the African National Congress. He may well take over the presidency of the country in coming months.

Cyril Ramaphosa, but he comes from the coal industry, and Shanduka is his company, and that as well as Lonmin, the Marikana massacre thing, and that may mean we'll see a revitalization of carbon-intensive economic activity. Notwithstanding this huge wake-up call that Cape Town's drought and probable desperation water-rationing now represents for this country.

SHARMINI PERIES: Patrick, you mentioned this earlier. The people that are going to be most affected by this crisis. So, describe the class nature of the crisis and what we can expect as the problem deepens.

PATRICK BOND: Along with Johannesburg, which is the widely acknowledged by UN-Habitat and researchers, the most unequal city in the world here. Cape Town's in the top five, Durban as well in the top 10. These three cities, these South African cities, have had exceptional urban resistance from shack settlements and townships and low-income suburbs, from women, from environmentalists, and from labor. The South African working class, according to the World Economic Forum is considered the most militant in the world, and we have the most corrupt capitalist class in the world, according to PricewaterhouseCoopers and the World Bank regularly acknowledges it's the most unequal country in the world. This is an explosive situation. The question is: Will there be a possibility to bring environmental justice into a sort of maybe even eco-socialist approach to addressing this?

We've seen just one indication in Cape Town that's been quite explosive, and that's the use of shit. I know shitstorms and shit houses and shitholes are regularly discussed in the United States, but in Cape Town, shit has been used by people in the townships, Khayelitsha specifically, as a weapon of the weak, because there aren't flush toilets in these sites. There are chemical toilets and various kinds of pit latrines, and that gives the poor people the ability to take their buckets, their large plastic containers, and use those as weapons. We've begun to see a class struggle take place over water, or specifically the lack of water.

The most famous moment was two years ago, three years ago, 2015. When shit was used to ... Thrown on Cecil Rhodes' statue at the University of Cape Town, and lead to that statue being removed in a huge movement. #FeesMustFall, #RhodesMustFall -- an emerging of radical students. So there's something quite evocative, a sort of nuclear weapon, if you will, of poor people, their last resort is the sanitation system breaking down. That's all they've got at hand and that would be, I would suspect, something we'll see much more of as the water wars break out.

Johannesburg had, along with Cochabamba, Bolivia, about 18 years ago in the famous 2000 battles ... Johannesburg, Cochabama, were the water wars of the 21st century, and in those cases it was privatized water. Johannesburg, it was a big French company, Suez, and they were tossed out by activists after about six years of a contract with the city they wanted to extend for 30. What I suspect might now happen with these water shortages, is we begin to see a different kind of water politics. Not really necessarily about privatization, but about the physical scarcity of water when we have a water apartheid, poor people in these vast townships just not given enough historically, and they'll see the big English gardens, the swimming pools ... Mostly now these swimming pools, they're not allowed to be filled.

I should add that there may be a break in this drought. It might come in June when the winter rains start again, but in the meantime what I think many people are asking: Will -- in a context of lots of political turmoil in South Africa -- will water become one of the sites of struggle that helps to fracture an existing system in which the center-right, the centerist politics of the African National Congress, the neoliberalism, and in Cape Town, the Democratic Alliance can be challenged from below in a way that might teach the rest of the world the first major city running out of water, what will the activists do to take advantage of that? We'll soon see.

SHARMINI PERIES: Finally Patrick, as I mentioned in the introduction, a lot of the world's mainstream media is talking about the water crisis in Cape Town, but they're not linking it to climate change. Is South African media doing so, and if not, what are the ways in which this link can be made for people to get a better understanding of the changing climate and this crisis?

PATRICK BOND: I think that's the right question because as Naomi Klein put it, you really need to connect the dots. This changes everything, and looking at political economy and in politics in a cultural and a gendered and a highly racialized inequality in Cape Town through the climate lens should add quite a bit to us. One would be the tourism industry in Cape Town. Vast industry, lots of low-income people working in the hotels, working in the various aspects of the tourist trade; food and services. That will be under pressure, and yet the attempt by the tourist industry is to pretend it's not happening, and to tell people, "No, no it's fine. You can come here. We're gonna have some water for you." There's a sort of fakery going on in tourism, because that's a lifeblood of this city.

The second is that there's been a purchase, it's actually being confirmed this week, it's by Sinopec, the big Chinese company of Chevron's refinery and retail shops. So Chevron, a huge oil company from the U.S., dastardly company, one of the worst, very implicated in climate politics of denialism and massive emissions and no mitigation and terrible pollution in all of its sites. That would be one of the sites where if Sinopec, the Chinese company with a terrible record on its own takes over, I would suspect we're gonna see some politics of resistance amongst climate justice activists who know the oil industry, and Sinopec has this potential huge refinery in Cape Town. They've committed over $500 million to expending that. That's a very serious climate crime that's about to be committed, and I don't think the activists in South Africa are going to stand for that. So, these are the sorts of struggle sites; water, tourism, a new owner of the major refinery system in Cape Town.

Like we've seen in Durban, South Durban, one of the sites of the biggest refineries in Africa, amazing struggles there. Here in Johannesburg, major struggles over the extent to which urban social movements can access energy and electricity, whether that comes from coal or huge solar potential. This is a country that has some of the worst extremes of abuse, but some very talented people at the grass roots, so I learn a great deal from them. I'm sure we all will.

SHARMINI PERIES: Alright.

Now, I did say that was the last question, but I cannot let you go without asking you this. This drought condition that South Africa faces is really a much bigger sub-Saharan African issue if we look at the current map that Princeton University African Flood and Drought Monitor has provided us. That there are droughts going on all over the sub-Saharan African part of the world. Tell us a little bit more about that link.

PATRICK BOND: I would also add North Africa, which is going to certainly experience the sort of 40 degree Celsius conditions regularly, and maybe the Qatar World Cup in the least, won't even happen in 2022, because the climate will have advanced rapidly. So, North Africa's the most threatened, but yes. The East African zones, particular in the horn of Kenya, running up through Somalia, have had terrible ongoing droughts. Water wars on the Nile with new dams that Ethiopia and Egypt are contesting, and in West Africa and Central Africa where we were seeing terrible civil wars ... Your viewers will know about the DRC in Sierra Leone and Northern Uganda, South Sudan, and these war sites are also the sites that are -- Darfur maybe most spectacularly -- where climate change has had an impact on the way in which desperation of herders and farmers lead to these conflicts.

Yes, there are studies going on and I certainly resort occasionally to the U.S. Pentagon-funded Minerva Program, which works with University of Texas in Sussex, to identify the correlations between social protests and anger and frustration, fury really on the one hand, and the climate crisis. As we've seen in many African sites and you could look at Syria, you could look at many other places, these are the sites where we're beginning to find massive rebellions emerging.

If we were talking, Sharmini, five years ago, people would have said, "Well, Africa's rising." It was a sort of hope that the commodity boom that sort of petered out by around 2011 and ended with a crash in 2015, that that commodity boom would allow African sort of trickle-down to work and keep this continent moving forward. In reality, Africans are uprising against this Africa Rising expert-oriented, commodity driven, highly unequal system of accumulation, and I think climate will amplify that, and the question is whether networks like the Pan-African Climate Justice Alliance with over 1,000 groups and members, this group, and begin to generate a really serious political economy that demands a new system locally, as well as globally, and now with Donald Trump having walked out of Paris, one of the big questions many would ask is well, since Paris provided the liability protection so you don't have a climate debt if you sign onto Paris, you don't have to worry about your historic debt, that's part of the deal that the U.S. State Department cut in Paris in 2015.

Now it's time, not only for Africans, for all affected people by climate change, by the youth in the United States or a couple of dozen kids ... Jim Hansen's grandchild as well ... Suing Donald Trump for climate damage, and I think that whether you like the courts or not, the idea is very important. We should now be talking about those vulnerable parts of the world, the vulnerable generations who have to live through a future of extreme weather events and global warming, and in this part of the world, we're already seeing in Cape Town some of the worst micro-impacts of that if we see a major city, the second largest in South Africa, four million people, literally run out of water.

SHARMINI PERIES: Patrick, I thank you so much for joining us and always very informative. Thank you.

PATRICK BOND: Thank you. Good to be with you.

SHARMINI PERIES: Thank you for joining us here on The Real News Network.

2163. A World Economy for the 1%

By Oxfam, January 18, 2016 (for a PDF version with graphics click here)

The gap between rich and poor is reaching new extremes. Credit Suisse recently revealed that the richest 1% have now accumulated more wealth than the rest of the world put together.1 This occurred a year earlier than Oxfam’s much publicized prediction ahead of last year’s World Economic Forum. Meanwhile, the wealth owned by the bottom half of humanity has fallen by a trillion dollars in the past five years. This is just the latest evidence that today we live in a world with levels of inequality we may not have seen for over a century.

‘An Economy for the 1%’ looks at how this has happened, and why, as well as setting out shocking new evidence of an inequality crisis that is out of control.

Oxfam has calculated that:

• In 2015, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as 2010.
• The wealth of the richest 62 people has risen by 44% in the five years since 2010 – that's an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
• Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.
• Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%.
• The average annual income of the poorest 10% of people in the world has risen by less than $3 each year in almost a quarter of a century. Their daily income has risen by less than a single cent every year.

Growing economic inequality is bad for us all – it undermines growth and social cohesion. Yet the consequences for the world’s poorest people are particularly severe.

Apologists for the status quo claim that concern about inequality is driven by ‘politics of envy’. They often cite the reduction in the number of people living in extreme poverty as proof that inequality is not a major problem. But this is to miss the point. As an organization that exists to tackle poverty, Oxfam is unequivocal in welcoming the fantastic progress that has helped to halve the number of people living below the extreme poverty line between 1990 and 2010. Yet had inequality within countries not grown during that period, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.

There is no getting away from the fact that the big winners in our global economy are those at the top. Our economic system is heavily skewed in their favour, and arguably increasingly so. Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate. Once there, an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments. One recent estimate3 is that $7.6 trillion of individual wealth – more than the combined gross domestic product (GDP) of the UK and Germany – is currently held offshore.

Rising economic inequality also compounds existing inequalities. The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.5 The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.

Oxfam has also recently demonstrated that while the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions.6 The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.

Instead of an economy that works for the prosperity of all, for future generations, and for the planet, we have instead created an economy for the 1%. So how has this happened, and why?

One of the key trends underlying this huge concentration of wealth and incomes is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing. Tax avoidance by the owners of capital, and governments reducing taxes on capital gains have further added to these returns. As Warren Buffett famously said, he pays a lower rate of tax than anyone in his office – including his cleaner and his secretary.

Within the world of work, the gap between the average worker and those at the top has been rapidly widening. While many workers have seen their wages stagnate, there has been a huge increase in salaries for those at the top. Oxfam’s experience with women workers around the world, from Myanmar to Morocco, is that they are barely scraping by on poverty wages. Women make up the majority of the world’s low-paid workers and are concentrated in the most precarious jobs. Meanwhile, chief executive salaries have rocketed. CEOs at the top US firms have seen their salaries increase by more than half (by 54.3%) since 2009, while ordinary wages have barely moved. The CEO of India’s top information technology firm makes 416 times the salary of a typical employee there. Women hold just 24 of the CEO positions at Fortune 500 companies.

Across the global economy, in different sectors, firms and individuals often use their power and position to capture economic gain for themselves. Economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization, especially of finance – have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth. This policy agenda has been driven essentially by what George Soros called ‘market fundamentalism’. It is this that lies at the heart of much of today’s inequality crisis. As a result, the rewards enjoyed by the few are very often not representative of efficient or fair returns.

A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. It has been given intellectual legitimacy by the dominant market fundamentalist world view that low taxes for rich individuals and companies are necessary to spur economic growth and are somehow good news for us all. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries.

It is the wealthiest individuals and companies – those who should be paying the most tax – who can afford to use these services and this global architecture to avoid paying what they owe. It also indirectly leads to governments outside tax havens lowering taxes on businesses and on the rich themselves in a relentless ‘race to the bottom’.

As taxes go unpaid due to widespread avoidance, government budgets feel the pinch, which in turn leads to cuts in vital public services. It also means governments increasingly rely on indirect taxation, like VAT, which falls disproportionately on the poorest people. Tax avoidance is a problem that is rapidly getting worse.

• Oxfam analysed 200 companies, including the world’s biggest and the World Economic Forum’s strategic partners, and has found that 9 out of 10 companies analysed have a presence in at least one tax haven.
• In 2014, corporate investment in these tax havens was almost four times bigger than it was in 2001.

This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases.

Almost a third (30%) of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.

Tax avoidance has rightly been described by the International Bar Association as an abuse of human rights7 and by the President of the World Bank as ‘a form of corruption that hurts the poor’. There will be no end to the inequality crisis until world leaders end the era of tax havens once and for all.

Companies working in oil, gas and other extractive industries are using their economic power in many different ways to secure their dominant position. This has a huge cost to the economy, and secures them profits far higher than the value they add to the economy. They lobby to secure government subsidies – tax breaks – to prevent the emergence of green alternatives. In Brazil and Mexico, indigenous peoples are disproportionately affected by the destruction of their traditional lands when forests are eroded for mining or intensive large-scale farming. When privatized – as happened in Russia after the fall of communism for example – huge fortunes are generated overnight for a small group of individuals.

The financial sector has grown most rapidly in recent decades, and now accounts for one in five billionaires. In this sector, the gap between salaries and rewards, and actual value added to the economy is larger than in any other. A recent study by the OECD8 showed that countries with oversized financial sectors suffer from greater economic instability and higher inequality. Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hurt the poorest people the most. The banking sector remains at the heart of the tax haven system; the majority of offshore wealth is managed by just 50 big banks.

In the garment sector, firms are consistently using their dominant position to insist on poverty wages. Between 2001 and 2011, wages for garment workers in most of the world’s 15 leading apparel-exporting countries fell in real terms. The acceptability of paying women lower wages has been cited as a key factor in increasing profitability. The world turned its attention to the plight of workers in garment factories in Bangladesh in April 2013, when 1,134 workers were killed when the Rana Plaza factory collapsed. People are losing their lives as companies seek to maximize profits by avoiding necessary safety practices. Despite all the attention and rhetoric, buyers’ short-term financial interests still dominate activities in this sector, as reports of inadequate fire and safety standards persist.

Inequality is also compounded by the power of companies to use monopoly and intellectual property to skew the market in their favour, forcing out competitors and driving up prices for ordinary people. Pharmaceutical companies spent more than $228m in 2014 on lobbying in Washington. When Thailand decided to issue a compulsory licence on a number of key medicines – a provision that gives governments the flexibility to produce drugs locally at a far lower price without the permission of the international patent holder – pharma successfully lobbied the US government to put Thailand on a list of countries that could be subject to trade sanctions.

All these are examples of how and why our current economic system – the economy for the 1% – is broken. It is failing the majority of people, and failing the planet. There is no dispute that today we are living through an inequality crisis – on that, the IMF, the OECD, the Pope and many others are all agreed. But the time has come to do something about it. Inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model.

Our world is not short of wealth. It simply makes no economic sense – or indeed moral sense – to have so much in the hands of so few. Oxfam believes that humanity can do better than this, that we have the talent, the technology and the imagination to build a much better world. We have the chance to build a more human economy, where the interests of the majority are put first. A world where there is decent work for all, where women and men are equal, where tax havens are something people read about in history books, and where the richest pay their fair share to support a society that benefits everyone.

Oxfam is calling on leaders to take action to show they are on the side of the majority, and to bring a halt to the inequality crisis. From living wages to better regulation of the activities of the financial sector, there is plenty that policy makers can do to end the economy for the 1% and start building a human economy that benefits everyone:

• Pay workers a living wage and close the gap with executive rewards: by increasing minimum wages towards living wages; with transparency on pay ratios; and protecting workers’ rights to unionize and strike.

• Promote women’s economic equality and women’s rights: by providing compensation for unpaid care; ending the gender pay gap; promoting equal inheritance and land rights for women; and improving data collection to assess how women and girls are affected by economic policy.

• Keep the influence of powerful elites in check: by building mandatory public lobby registries and stronger rules on conflict of interest; ensuring that good-quality information on administrative and budget processes is made public and is free and easily accessible; reforming the regulatory environment, particularly around transparency in government; separating business from campaign financing; and introducing measures to close revolving doors between big business and government.

• Change the global system for R&D and the pricing of medicines so that everyone has access to appropriate and affordable medicines: by negotiating a new global R&D treaty; increasing investment in medicines, including in affordable generics; and excluding intellectual property rules from trade agreements. Financing R&D must be delinked from the pricing of medicines in order to break companies’ monopolies, ensuring proper financing of R&D for needed therapy and affordability of resulting products.

• Share the tax burden fairly to level the playing field: by shifting the tax burden away from labour and consumption and towards wealth, capital and income from these assets; increasing transparency on tax incentives; and introducing national wealth taxes.Use progressive public spending to tackle inequality: by prioritizing policies, practice and spending that increase financing for free public health and education to fight poverty and inequality at a national level. Refrain from implementing unproven and unworkable market reforms to public health and education systems, and expand public sector rather than private sector delivery of essential services.

As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens.

World leaders need to commit to a more effective approach to ending tax havens and harmful tax regimes, including non-preferential regimes. It is time to put an end to the race to the bottom in general corporate taxation. Ultimately, all governments – including developing countries on an equal footing – must agree to create a global tax body that includes all governments with the objective of ensuring that national tax systems do not have negative global implications.

2135. A Case of Bourgeois Socialism: A Moral Index for Capitalism?

By Alessandra Stanley, The New York Times, December 20, 2015

Activists outside Paul Tudor Jone II estate protesting the influence of hedge-fund managers. Photo: Andrew Sullivan for the New York Times. 

Paul Tudor Jones II, the hedge-fund billionaire, has a plan to reduce income inequality. He wants to rate companies on their probity, not their profits.

“The wealth gap, that’s the single most important issue in this country,” he said in September while unveiling Just Capital, a nonprofit organization that he created with Deepak Chopra, the spiritual self-help author and wellness entrepreneur who taught Mr. Jones how to meditate.

Just Capital will rank corporations on how well, or “justly,” they treat employees, society and the environment. The idea is to laud companies that offer better pay, happier workplaces and greater transparency — and perhaps shame others to follow suit.

This kind of moral index, Mr. Jones said, “could not only impact investors, it could impact consumers, it might impact the way companies hire, the way people go and work with companies; it will impact boardrooms, everything.”

The project began, improbably enough, in 2011 in the chic Manhattan design store ABC Carpet and Home when Mr. Chopra was whisked away from his salon in a friend’s chauffeured car to an Occupy Wall Street rally.

Today, with a presidential election looming and calls for the wealthy to pay more in taxes coming not only from populist politicians but also from billionaires like Warren E. Buffett, even members of the top 1 percent of the 1 percent are passionately inveighing against the wealth gap.

“The middle-class guy who’s making the $50,000 a year realizes, ‘I’m being taken advantage of,’ ” warned Carl Icahn, a corporate raider turned activist investor, in a video titled “Danger Ahead” that he released in late September.

While there has not exactly been a groundswell among the wealthy to significantly raise their own taxes, Mr. Icahn and Mr. Buffett are among several of America’s prominent top earners who have endorsed changing the tax loophole that treats a large portion of private-equity and hedge-fund managers’ income — known as carried interest — as more lightly taxed capital gains and require it to be taxed as regular salary. In a statement responding to questions for this article, Mr. Jones said his “strong opinion” was that carried interest should be taxed as ordinary income.

“Billionaires see a backlash coming,” said Sam Wilkin, an economist and author of “Wealth Secrets of the One Percent.” Mr. Jones has experienced it firsthand. In March, the Hedge Clippers, a coalition of labor groups and community activists, marched on his Greenwich, Conn., estate to protest the influence of hedge-fund managers.

At the same time, some of America’s wealthiest are responding with an unprecedented flood of money into politics, largely supporting Republican candidates who have pledged to cut taxes. A New York Times investigation documented in October how 158 families were responsible for almost half the money raised in the current presidential race. People from the finance industry lead the list.

This year Mr. Jones said in a TED talk that traditionally there are three ways to change income inequality: “By revolution, higher taxes or wars.” His alternative is Just Capital.

Mr. Jones argues that income inequality is being driven by what he calls “shareholder hegemony,” the principle that companies first and foremost should satisfy investors. The solution is for companies to make social responsibility as important as profits and share price.

Mr. Jones, who declined to be interviewed, has a net worth Forbes estimates at $4.7 billion and was one of the few hedge-fund managers who foresaw the 1987 market crash. He is known for founding the Robin Hood Foundation, a charitable organization started in 1988 that raised $101 million last year for anti-poverty programs in New York.

Just Capital’s mission fits into an existing trend. Socially responsible investing, the favoring of companies that demonstrate environmental and social awareness, is a growing movement, driven in large part by the economic ascendance of millennials and women. As of this month, Morningstar said about 2 percent of the mutual funds it tracked were tagged “socially conscious.” Such funds “typically perform on par or a little better than conventional funds,” said Jon Hale, director of manager research at Morningstar.

Not all economists agree with Mr. Jones’s notion that monitoring corporate behavior would narrow the distance between the very rich and the rest. Mr. Wilkin, the economist, argued that inequity was driven not just by bloated executive compensation or the single-minded pursuit of profit, but also by what he called a two-tier economy in which some industries, like technology, finance and health care, soared ahead and left the rest behind. Just Capital, he said, was “wishful thinking that there is a market solution to income inequality that doesn’t involve increasing taxes.”

There are many nonprofits that seek to address income inequality. Mr. Jones and Mr. Chopra bring a waft of New Age spirituality to theirs. The Just Capital board includes Arianna Huffington, a founder of The Huffington Post, and several wealthy business leaders who also are directors of the Chopra Foundation.

Mr. Chopra, in an interview, described his friend as being on a path of self-discovery. “This is an evolution for him.”

It all started with meditation. In early October 2011, Dylan Ratigan, an MSNBC anchor who later left to become what he described as a “sustainability entrepreneur,” was on his way to a private meditation session at Mr. Chopra’s salon in ABC Carpet and Home just as the Occupy Wall Street protests were getting started in Zuccotti Park. On an impulse, Mr. Ratigan told his teacher that he had a car waiting downstairs and asked Mr. Chopra to go with him to the park.

When they arrived, Mr. Ratigan asked the protesters to let Mr. Chopra speak. Some of them fiercely objected to letting a celebrity jump the line, but Mr. Ratigan prevailed, and Mr. Chopra led the crowd in a meditative prayer that, as he put it, “quieted the angry rhetoric.” That fall, he became a featured guest at several Occupy events and was so struck by the “perceived injustice” fueling the protests that he told a friend: “We need to do something about this.”

The idea for Just Capital emerged from a seminar Mr. Chopra held at Columbia Business School called “Just Capital and Cause-Driven Marketing.” A student suggested creating an index of companies based on their value to society, not quarterly profits. Mr. Chopra took the idea to Mr. Jones, whom he had met through Mr. Jones’s wife, Sonia, a yoga and wellness enthusiast.

Mr. Chopra, who wears crystal-studded eyeglass frames, blends spiritual and commercial success with celebrity hobnobbing — he does workshops with Oprah Winfrey and made a recording of love poetry with Madonna. “He’s very good at the diplomacy of wealth and power,” Mr. Ratigan said.

Mr. Chopra said that, so far, he had not received skeptical responses to the Just Capital idea, but he conceded that the jury had been small and “self-selected.”

Mr. Jones set up the foundation in 2013, hired a staff and underwrote a survey of 43,000 Americans to determine what people most valued in a company. The No. 1 factor was pay and benefits. (At No. 10 was creating jobs in the United States.) Next year Just Capital plans to publish a ranking of the top 1,000 publicly traded companies based on a scale derived from the survey. “Americans want a seat at the table,” Mr. Jones said at the September presentation.

There are many research firms, including MSCI and Sustainalytics, that examine companies for social responsibility, although their data is mostly reserved for clients and subscribers. Just Capital plans to make its ratings public at no charge.

Because Just Capital will examine only publicly traded corporations, Mr. Jones’s hedge fund and thousands of others like it will be exempt from scrutiny. At the Just Capital presentation, Mr. Jones said he checked to make sure his own company, Tudor Investment Corporation, was in line with Just Capital’s principles.

Tudor Investment employs about 400 people, according to a spokesman, Patrick Clifford. Its traders, of course, make well above a living wage.

At first, the wages of gardeners, dishwashers and janitors at Tudor were not included in the review because they are employed by subcontractors, not Tudor directly. When managers examined the salaries, however, they found that the firm had 16 subcontracted workers who were paid $10.50 an hour.

“It was literally eye-opening and embarrassing at the same time,” Mr. Jones said. He said he raised their hourly rate to $15.

For comparison, in Fairfield County, where Tudor is based, janitors who belong to Local 32BJ of the Service Employees International Union make $14.10 an hour, not including benefits, and $20.49 an hour with benefits factored in. According to the M.I.T. living wage calculator, the living wage for a single worker in the county is $12.78 an hour and for an adult with one child it is $27.72.

Last spring, Mr. Jones leased an office and bought a $71 million house in Palm Beach, Fla., in a state with no income tax. He also said he increased the percentage of profit the company donates to charity to 4 percent a year from 1 percent. According to CECP, an organization that monitors corporate giving trends, the industry median last year was 1 percent.

At the conference this year announcing Just Capital, a guest asked him if he was the best messenger to preach corporate altruism, given that “shareholder hegemony” helped make him wealthy. Mr. Jones had a ready reply. He had been rethinking the capitalist dream, he said, ever since hearing about the “giving pledge,” a promise made by Bill Gates, Mr. Buffett and others to give away much of their wealth.

“What’s the purpose of accumulating all this money when I’m just going to give it back to the people I conceivably took it from?” Mr. Jones said.

1923. More than Half the World Population Lives on Less Than $10 a Day, Study Finds

By Somini Sengupta, The New York Times, July 8, 2015

UNITED NATIONS — Poverty may be down worldwide, yet that does not mean that yesterday’s poor are today’s middle class. Data analyzed by the Pew Research Center concluded that more than half the world’s population remains “low-income,” while another 15 percent are still what a report issued by the center on Wednesday called “poor.”

The share of the global poor, defined as those who lived on $2 a day or less, fell from 29 percent in 2001. Most of the people in that category, though, took “only a moderate step up the income ladder,” the report concluded: 56 percent were “low-income,” in 2011, living on $2 to $10 a day.

The report defined as “middle” or “upper-middle” income those who lived on $10 to $50 a day. Fewer than one-fourth of the world’s population met that criteria. “Even those newly minted as middle class enjoy a standard of living that is modest by Western norms,” the report said, with barely 16 percent of the world’s population living above the official United States poverty line — $23,021 for a family of four in 2011.

The report echoed some of the findings of the final report of the Millennium Development Goals, issued by the United Nations earlier this week. It said the share of people living in dire poverty — less than $1.25 a day — had fallen by more than half in the quarter century between 1990 and 2015. But the Pew study struck a more sober tone, signaling that those who had escaped poverty are still teetering on the edge of being poor, which is particularly striking in populous countries like India or Bangladesh that have virtually no safety net for those who suddenly fall ill or lose their jobs.

The report asserts that the $10–a-day threshold to define a middle-class person reflects a growing consensus that only at that threshold is a person “on a firm enough footing to not worry about mere subsistence.”

The report is likely to contribute to the policy debates over income inequality, tempering as it does previous estimates, including in the McKinsey Quarterly, on the rapid rise of the global middle class.

The Pew report noted, too, that “the gap in living standards between the world’s economically advanced countries and emerging and developing nations barely narrowed in the first decade of this century.”

In 2011, 87 percent of the world’s high-income people — defined as those who live on more than $50 a day — lived in North America and Europe, down slightly from 91 percent in 2001. Poor and low-income people are concentrated in South Asia and sub-Saharan Africa.

In terms of volume, the absolute number of middle-class people — those making between $10 and $20 a day — swelled significantly, to 784 million people in 2011, nearly twice the number from 2001.

The most visible change was in China. Its share of the global middle class quadrupled over the course of 20 years, becoming 30 percent of all middle-income people in the world in 2011, from barely 8 percent in 2001. People in South America also moved up the ladder. The middle-income population in Western Europe dipped, “as people moved into higher income brackets.”

The report studied 111 countries, using a combination of income and consumption data. It adjusted for purchasing power parity.