The richest 10th of people in the United States control
three-quarters of all the wealth. So if you imagine the United States as a room
with 10 people in it and $10 worth of stuff, you’d find eight of those dollars
in one person’s pocket. Six people would have no money at all.
For over three decades now, the rich have been thriving
while the poor and middle class have struggled to inch ahead. In advanced
countries, poverty has risen since the 1990s, with the ratio of the earnings of
the 90th percentile to those of the 10th percentile growing in most advanced
counties, but especially in the U.S. and the U.K., the report noted. As the
economic gap has widened, the costs have become increasingly clear: Not only do
the have-nots earn less, but they have more health problems, die younger (A
rich American male who makes it to 55 has a life expectancy of nearly 90. Poor
men who reach 55 generally die 10 years sooner) and exert less influence over
political decisions.
The International Monetary Fund has warned that the gap
between rich and poor in advanced economies is now at its highest level in
decades. The IMF says if the income share increases for the top 20 per cent of
households benefits do not “trickle down". The new IMF report also says
that a weakening of labour unions, and a resultant relaxation of labour market
regulations, is associated with a higher income share for the top 10 per cent
of households in some advanced economies. Its finding are that labour market
flexibility benefits the rich and reduces the bargaining power of lower-income
workers. Unions helped ensure that workers received a reasonable share of
economic profits. Without that pressure, those profits have gone to CEOs,
executives, and investors.
The new research paper is based on data from 159 advanced
and developing economies for the period 1980 to 2012. Nicolas Mombrial, Head of
Oxfam International’s office in Washington DC, said: “By releasing this report,
the IMF has shown that ‘trickle down’ economics is dead; you cannot rely on the
spoils of the extremely wealthy to benefit the rest of us.”
Trickle-down economics not only doesn't work, but it ends up
backfiring by actually shrinking a country's GDP and economic growth. The study
refutes the idea holds that the economy will flourish if the coffers of
corporations and top earners are fattened through capital gains tax cuts and
other strategies that benefit the top 1 percent. Those "job creators"
will then hire more workers at their factories, provide raises, spend more in
stores, and generally share their wealth. In reality, however, that doesn't
quite happen, the IMF said. In some countries with extreme inequality,
"individuals have an incentive to divert their efforts toward securing
favored treatment and protection, resulting in resource misallocation,
corruption, and nepotism, with attendant adverse social and economic
consequences," the report noted. "In particular, citizens can lose
confidence in institutions, eroding social cohesion and confidence in the
future."
Last November Thomas Piketty’s Capital in the Twenty-First
Century was named the Financial Times and McKinsey’s 2014 Business Book of the
Year. The FT described it as “an epic analysis of the roots and consequences of
inequality.” It was a controversial book largely because it basically argues
that the modern capitalist system is causing rising inequality. But from theconclusions
of the IMF report, Piketty gets all the
support he needs.
No comments:
Post a Comment