The current world is one in which lenders are actually paying large amounts of people to borrow money from them. On first glance this use of negative interest rates sounds like a terrific thing — debt caused by high interest rates remains a crushing force and notable source of human suffering. Upon closer look, however, the reason that lenders are actually paying people to borrow their money for a return is due to economic weakness and some pessimistic expectations that it’ll continue into the future. It is in some sense a major anticipation of a bleak future, and it’s related to what’s known as an inverted yield curve, a term that’s being used much more frequently in the news these days.
An inverted yield curve basically means that a long-term return (yield) on a bond is less than the short-term return. (This turns the supposed logic of the system on its head since we’d naturally expect someone who puts their money away for a longer period of time to be rewarded more.) It has long been a signal that a recession is coming, although the annual revision to the monthly jobs data by the Bureau of Labor Statistics has historically tended to be a more reliable indicator of recession or economic weakness, and many news outlets don’t mention that historically an inverted yield curve has preceded a recession by about 22 months.
A recession is what many people rightfully understand as bad or at least not so good economic times, but the more technical definition is at least two consecutive quarters where the economy contracts rather than grows. More sensibly, a recession is a lack of demand (where demand is people’s ability to purchase goods and services), and the sensible governmental officials among us have for decades understood this and how to escape or mitigate recessions. It’s simple enough — if a recession is a lack of demand, demand must be boosted, such as through increasing government spending and/or cutting taxes. This creates more ability for people to make purchases, which has a positive effect on important economic indicators such as employment.
Accompanying the inverted yield curves of today is negative interest rates, something that has gone from — in the words of one commentator — a curiosity to a market mainstay. As even university business professors are admitting, this is a sign of something seriously wrong with the economies of the world. They are basically dysfunctional in some sense and seriously flawed to create such a structure. To keep economies moving along decently, interest rates now often have to be negative to keep enough money flowing in the system (in people’s pockets) and demand at somewhat acceptable levels. High interest rates are of course a problem for the burden they tend to cause the vast majority of people, but negative interest rates are an indication that the economies of the world have very fundamental problems.
The market structures of many world economies has been deliberately structured in ways that benefit the upper class at the expense of everyone else. The propaganda is regularly that inequality was caused by a natural outcome of the market, but that is the opposite of the truth. Policies such as rules on copyrights and patents aren’t the free market at work — they’re government intervention, aka structuring of the market. It is simple enough to prove in example after example how the markets were rigged to redistribute income upward and create unjust outcomes. Patents on goods such as prescription drugs increase their prices significantly, which takes too much money from the pockets of many people and redistributes it to the the upper class people who own stock in pharmaceutical companies. There is an immense barrier to entry for foreign doctors in the U.S. (one has to complete a U.S. residency program to practice medicine there), which pushes the wages of U.S. doctors to twice what doctors make in other countries and adds up to over $500 per family annually (while there is a shortage of doctors). Public pension funds in the U.S. have been structured to provide too many fees to high class managers. The list goes on — there are lots of ways that markets were deliberately structured against the benefit of the majority of the population.
What happens when too much money flows to the top is that the upper class — the now famous 1 percent — tend to spend much less of it as a percentage than the average person would. Saving money is to a significant extent a virtue, but what happens when the 1 percent (who spend less as a percentage of their income than working-class people) don’t spend all that money is that much of the money then sits idly, not purchasing goods or services and therefore not creating jobs. There is less demand in the economy this way, and the 1 percent benefiting from a market rigged in their favor means less money for everyone else to spend, and it of course creates the curious to mainstay phenomena such as negative interest rates.
It’s becoming more well-known all the time that the system isn’t right, and there are those that argue to reform it and those who argue that fundamental change is needed. The lack of real democracy in the economic system is an interesting note for countries such as the United States that supposedly value democracy so much. The economy is valuable to discuss in politics because it is fundamental and covers much of life, and its current indicators are revealing that it needs change that’s truly fundamental.
The federal minimum wage hasn’t been raised since 2009, and wages for most American workers have been largely stagnant for decades. There’s been a significant upwards redistribution of income from most workers to the wealthiest people in society, which was caused by deliberate policy.
If the minimum wage had kept pace with productivity growth (gains in worker output and technological advancement) since the early 1970s, it actually would be at about $20 an hour today. The Sanders legislation on raising the minimum wage (which would not necessarily increase unemployment, as seen by some of the highest minimum wage states having some of the lowest unemployment) would thus provide a substantial standard of living increase for many.
By increasing the federal minimum wage over the next five years, the Raise the Wage Act of 2019 would boost the incomes and improve the lives of an estimated 40 million Americans, according to an analysis out Tuesday from the Economic Policy Institute (EPI).
Introduced last month by Sen. Bernie Sanders (I-Vt.) and Rep. Bobby Scott (D-Va.), the bill would raise the federal hourly minimum wage from $7.25—which Sanders calls “a starvation wage”—to a living wage of $15 by 2024. It would also require employees to pay the new minimum to tipped workers, who currently can make as little as $2.31 an hour.
In addition to helping millions of Americans escape poverty, the bill would also benefit the economy more broadly. “Because lower-paid workers spend much of their extra earnings,” the report outlines, “this injection of wages would help stimulate the economy and spur greater business activity and job growth.”
Who the economies of the world were rigged to benefit most. The latest data confirms the trend of the upwards redistribution of income often seen over the last several decades.
The world’s largest economies have grown at a steady pace and unemployment has consistently fallen in the years following the greed-driven global financial crisis of 2008, but income gains during the so-called recovery have been enjoyed almost exclusively by the top one percent while most workers experience “unprecedented wage stagnation.”
That’s according to the OECD’s 2018 Employment Outlook (pdf) published Wednesday, which examines recent economic trends and finds that wage growth for most citizens in the 35 industrialized nations studied is “missing in action” due to a number of factors, including the the rapid rise of temporary low-wage jobs and the relentless corporate assault on unions.
In a statement on Tuesday, OECD Secretary General Angel Gurría said “[t]his trend of wageless growth in the face of a rise in employment highlights the structural changes in our economies that the global crisis has deepened, and it underlines the urgent need for countries to help workers.”
CEO compensation has become absurdly high over the last few decades, and part of the reason why is a broken corporate governance structure where (interestingly enough) shareholders lack enough legal authority to rein in CEO pay. The ridiculous CEO pay also puts upward pressure on the wages of other executives worldwide, meaning they also are paid too much more, thus typically leading to less money for most other workers.
I definitely don’t agree with all of the analysis in this NYT article, but there are some interesting takeaways from it. The article only mentions political democracy and completely avoids any mention of economic democracy. This is an important point, as a strong political democracy requires a strong economic democracy. I know how counter that truth runs to the standard doctrine of the corporate propaganda system, but it needs to be said.
It’s also particularly jarring that the article assumes the U.S. is a democracy — in reality the country has dysfunctional democratic structures (see gerrymandering, the typical top-down structure of corporations, and voter suppression) and is better described as a plutocracy.
Most recently, Thomas Piketty, a French economist who is the author of “Capital in the Twenty-First Century,” has come up with a straightforward answer: Traditional parties of the left no longer represent the working and lower middle classes.
There are those who would like to accept inequality and focus exclusively on issues like gender equality and anti-racism. I would never minimize the importance of combating gender inequality or racism/nativism, but if that means ignoring the policies that have led to the enormous inequality we now see, that is not a serious progressive agenda.
The story of U.S. wage disparity: “In 2007, average annual incomes of the top 1 percent of households were 42 times greater than incomes of the bottom 90 percent (up from 14 times greater in 1979), and incomes of the top 0.1 percent were 220 times greater (up from 47 times greater in 1979).”
The income share of the top 1 percent in the U.S. has doubled from its share during most of the 1950s to 1980. This is an amount high enough to increase the income of people in the lowest 90 percent of the country’s income distribution by over 20 percent, and it’s nearly enough to double the income share of the bottom 40 percent. That basically represents massive amounts of money being wrongly transferred upwards.
Today’s article that’s linked to here reports on the movement of employees fighting for a $15 an hour wage. This is hardly radical when it’s considered that the minimum wage would be about $20 an hour today if wage gains had kept pace with productivity rates since the late 1960s. That’s yet another absurdity about inequality in the United States though.
According to the compensation research company PayScale, fast food workers make an average of $8.28 per hour. Those wages, depending on hours, leaves those workers making about $15,000 to $21,000 per year.
According to the National Low Income Housing Coalition, the current minimum wage of $7.25 per hour leaves workers unable to afford a two-bedroom rental apartment in any U.S. state.
The Poor People’s Campaign and Fight for $15 are also planning six weeks of “direct action and nonviolent civil disobedience” starting on Mother’s Day.
Class is a suppressed concept in America, although the loathsome big business community there has lots of class consciousness. The understanding of class struggle is a surprisingly useful insight into current affairs though, as used correctly it often identifies the core conflict at the root of political disputes.
This article in The Guardian identifies individual stories of upward class mobility, noting the differences in the livelihoods of those who advanced up the socioeconomic ladder. Karl Marx’s theory of alienation can perhaps be applied differently to wealthy professionals that have advanced up, since (as the article relates) those with much higher incomes can lose — become alienated from — the friends they once had with lower socioeconomic status. Such is another consequence of the dysfunctional economic system currently operating.
What a horrifying report this is on the status of global inequality. It’s easily one of the most disturbing reports on economic inequality ever released, as it shows that the world economic system has overall been structured to benefit the top 1 percent to an extreme degree.
In 2017, a new billionaire was created every two days and while 82 percent of all wealth created went to the top 1 percent of the world’s richest while zero percent—absolutely nothing—went to the poorest half of the global population.
That troubling information is included in Oxfam’s latest report on global inequality—titled Reward Work, Not Wealth (pdf)—released Monday. In addition to the above, the report details how skyrocketing wealth growth among the already rich coupled with stagnant wages and persistent poverty among the lowest economic rungs of society means that just 42 individuals now hold as much wealth as the 3.7 billion poorest people on the planet.
“The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system,” Winnie Byanyima, Oxfam’s executive director of Oxfam International. “The people who make our clothes, assemble our phones and grow our food are being exploited to ensure a steady supply of cheap goods, and swell the profits of corporations and billionaire investors.”
Among the report’s key findings:
The report comes just as the world’s economic and political elite are set to open the World Economic Forum, held annually in Davos, Switzerland. And why the global elite argue the summit’s focus is addressing the world’s most pressing problems, Oxfam found that the amount of new wealth which went to the world’s top one percent in 2017 was roughly $762 billion—a figure large enough, the group points out, to end extreme global poverty seven times over.
What the report ultimately exposes, Mark Goldring, Oxfam GB chief executive, told the Guardian, is a “system that is failing the millions of hardworking people on poverty wages who make our clothes and grow our food.”
“For work to be a genuine route out of poverty we need to ensure that ordinary workers receive a living wage and can insist on decent conditions, and that women are not discriminated against,” he added. “If that means less for the already wealthy then that is a price that we—and they—should be willing to pay.”
Not just cataloging and lamenting the metrics of inequality, the new report also puts forth a number of policy solutions that should be embraced by people and governments worldwide to reduce levels of inequality and lift billions of people out of extreme poverty. They include:
Though Oxfam has been calculating global inequality on an annueal basis for more than a decade, the anti-poverty group notes that this year’s report used new data from Credit Suisse and a separate kind of model. Specifically, Oxfam noted, the fact that the world’s 42 richest billionaires have as much wealth as the poorest bottom half “cannot be compared to figures from previous years – including the 2016/17 statistic that eight men owned the same wealth as half the world – because it is based on an updated and expanded data set published by Credit Suisse in November 2017. When Oxfam recalculated last year’s figures using the latest data we found that 61 people owned the same wealth as half the world in 2016 – and not eight.”
A strikingly profound op-ed for the new year. Also, a basic point of economics that most economists don’t like to talk about is that reducing the rents high-income individuals receive is typically a gain for lower socioeconomic groups.
Here is where we are as a planet in 2018: after all of the wars, revolutions and international summits of the past 100 years, we live in a world where a tiny handful of incredibly wealthy individuals exercise disproportionate levels of control over the economic and political life of the global community.
Difficult as it is to comprehend, the fact is that the six richest people on Earth now own more wealth than the bottom half of the world’s population – 3.7 billion people. Further, the top 1% now have more money than the bottom 99%. Meanwhile, as the billionaires flaunt their opulence, nearly one in seven people struggle to survive on less than $1.25 (90p) a day and – horrifyingly – some 29,000 children die daily from entirely preventable causes such as diarrhoea, malaria and pneumonia.
At the same time, all over the world corrupt elites, oligarchs and anachronistic monarchies spend billions on the most absurd extravagances. The Sultan of Brunei owns some 500 Rolls-Royces and lives in one of the world’s largest palaces, a building with 1,788 rooms once valued at $350m. In the Middle East, which boasts five of the world’s 10 richest monarchs, young royals jet-set around the globe while the region suffers from the highest youth unemployment rate in the world, and at least 29 million children are living in poverty without access to decent housing, safe water or nutritious food. Moreover, while hundreds of millions of people live in abysmal conditions, the arms merchants of the world grow increasingly rich as governments spend trillions of dollars on weapons.
In the United States, Jeff Bezos – founder of Amazon, and currently the world’s wealthiest person – has a net worth of more than $100bn. He owns at least four mansions, together worth many tens of millions of dollars. As if that weren’t enough, he is spending $42m on the construction of a clock inside a mountain in Texas that will supposedly run for 10,000 years. But, in Amazon warehouses across the country, his employees often work long, gruelling hours and earn wages so low they rely on Medicaid, food stamps and public housing paid for by US taxpayers.
Not only that, but at a time of massive wealth and income inequality, people all over the world are losing their faith in democracy – government by the people, for the people and of the people. They increasingly recognise that the global economy has been rigged to reward those at the top at the expense of everyone else, and they are angry.
Millions of people are working longer hours for lower wages than they did 40 years ago, in both the United States and many other countries. They look on, feeling helpless in the face of a powerful few who buy elections, and a political and economic elite that grows wealthier, even as their own children’s future grows dimmer.
In the midst of all of this economic disparity, the world is witnessing an alarming rise in authoritarianism and rightwing extremism – which feeds off, exploits and amplifies the resentments of those left behind, and fans the flames of ethnic and racial hatred.
Now, more than ever, those of us who believe in democracy and progressive government must bring low-income and working people all over the world together behind an agenda that reflects their needs. Instead of hate and divisiveness, we must offer a message of hope and solidarity. We must develop an international movement that takes on the greed and ideology of the billionaire class and leads us to a world of economic, social and environmental justice. Will this be an easy struggle? Certainly not. But it is a fight that we cannot avoid. The stakes are just too high.
As Pope Francis correctly noted in a speech at the Vatican in 2013: “We have created new idols. The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking any truly humane goal.” He continued: “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalised: without work, without possibilities, without any means of escape.”
A new and international progressive movement must commit itself to tackling structural inequality both between and within nations. Such a movement must overcome “the cult of money” and “survival of the fittest” mentalities that the pope warned against. It must support national and international policies aimed at raising standards of living for poor and working-class people – from full employment and a living wage to universal higher education, healthcare and fair trade agreements. In addition, we must rein in corporate power and prevent the environmental destruction of our planet as a result of climate change.
Here is just one example of what we have to do. Just a few years ago, the Tax Justice Network estimated that the wealthiest people and largest corporations throughout the world have been stashing at least $21tn-$32tn in offshore tax havens in order to avoid paying their fair share of taxes. If we work together to eliminate offshore tax abuse, the new revenue that would be generated could put an end to global hunger, create hundreds of millions of new jobs, and substantially reduce extreme income and wealth inequality. It could be used to move us aggressively toward sustainable agriculture and to accelerate the transformation of our energy system away from fossil fuels and towards renewable sources of power.
Taking on the greed of Wall Street, the power of gigantic multinational corporations and the influence of the global billionaire class is not only the moral thing to do – it is a strategic geopolitical imperative. Research by the United Nations development programme has shown that citizens’ perceptions of inequality, corruption and exclusion are among the most consistent predictors of whether communities will support rightwing extremism and violent groups. When people feel that the cards are stacked against them and see no way forward for legitimate recourse, they are more likely to turn to damaging solutions that only exacerbate the problem.
This is a pivotal moment in world history. With the explosion in advanced technology and the breakthroughs this has brought, we now have the capability to substantially increase global wealth fairly. The means are at our disposal to eliminate poverty, increase life expectancy and create an inexpensive and non-polluting global energy system.
This is what we can do if we have the courage to stand together and take on the powerful special interests who simply want more and more for themselves. This is what we must do for the sake of our children, grandchildren and the future of our planet.
When the massive upwards redistribution of income to the top 1% over the last four decades is mentioned, CEO pay should be noted as one of the prime causes of it. Essentially, CEOs have been taking an exorbitant amount of the income share of many workers and shifting it into their own pockets.
As corporations and wealthy individuals across the United States are slated to benefit from massive tax breaks thanks to the GOP’s latest tax legislation, a Bloomberg analysis published Thursday found that chief executives of American companies already make 265 times the amount of money an average worker is paid—the largest CEO-worker income gap in the world.
“CEOs of the biggest publicly traded U.S. companies averaged $14.3 million in annual pay, more than double that of their Canadian counterparts and 10 times greater than those in India,” according to Bloomberg. While India ranked second on Bloomberg‘s CEO pay-to-average income ratio, Indian chief executives made about a tenth of their American counterparts’ incomes, averaging $1.46 million annually.
Last year’s CEO-to-worker compensation ratio, calculated by the Economic Policy Institute (EPI), was 271-to-1, with the chief executives of American companies seeing an average of $15.6 million in annual compensation. The EPI report, which was published in July, notes that “regardless of how it’s measured, CEO pay continues to be very, very high and has grown far faster in recent decades than typical worker pay,” and “exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers.”
EPI president Lawrence Mischel and research assistant Jessica Schieder found that CEO compensation rose “by 807 or 937 percent (depending on how it is measured—using stock options granted or stock options realized, respectively) from 1978 to 2016.” They argue that “exorbitant CEO compensation…has fueled the growth of the top 1 percent incomes” at the expense of “the vast majority of workers.”
“Simply put, money that goes to the executive class is money that does not go to other people. Rising executive pay is not connected to overall growth in the economic pie,” Mishel explained, as Common Dreams previously reported. “We could curtail the explosive growth in CEO pay without doing any harm to the economy.”
In response to their findings in July, Mishel and Schieder proposed the following policy solutions:
The richest 500 people would still have enormous amounts of money if they together hadn’t gained $1 trillion, of course. There’s plenty that could be done to improve the lives of many millions of people with that $1 trillion too, and it’s disappointing how much of it continues to sit idle when it could be invested productively instead.
The richest people on earth became $1 trillion richer in 2017, more than four times last year’s gain, as stock markets shrugged off economic, social and political divisions to reach record highs.