Inequality of wealth

The novels I write form a “future history”, not of course intended to be predictive, but rather to occasionally slip in a comment on previous times, i.e. our “now”. Predicting the future is not entirely practical because when the future turns up, it usually refuses to comply. But one surprise I have had is that sometimes when it does turn out that I was wrong, it was because I underestimated the problem. Even though it was recently published, my first effort at Miranda’s Demons was written in the late 1980s, and one of scenes has some characters looking back at our time and scoffing at what we call democracy. Thus the first draft had them pointing out the uneven accumulation of wealth, and too much drifting into too few hands, and then too much of that was wasted on lobbying and boosting favoured politicians, i.e. politicians who would protect their wealth. The characters scoffed at tens of millions of dollars being so wasted. Look what could have been done with it.

Well, talk about an underestimate. In the following link:
http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland
it is claimed that half the world’s wealth is held by 1% of the population, while the 80% least well-off currently own just 5.5% of the world’s wealth. We have to be a little careful with such comparisons, because the ownership of a house, say, in a central western city, will have an enormously greater number of dollars attached to it than a quite liveable house in many of the poorer countries of the world, but no matter how you look at it, the wealth distribution is just plain gross. Then, according to the article, the wealth sector spent $550 million lobbying policymakers in Washington and Brussels alone during 2013, and $571 million in campaign contributions during the US 2012 elections. So much for my “tens of millions”! And think what could have been done with a spare billion dollars.

An interesting question is, how did all this come about? Part of the answer would seem to be, the removal of high taxes on the wealthy. The very wealthy and the giant corporations pay very little tax because they somehow manage to file in tax havens, or conduct enough business in tax havens where somehow they manage to export very large tax losses to their home country while making extremely high profits where there is no tax. This is not so difficult when they set the prices in each place. So, why are they allowed to do this? One reason is the politicians let them. First, they do not want to lose that valuable electoral cash support, for the primary objective of any politician is to get re-elected.

Another contributing reason would seem to involve a widespread economic theory that says such wealth “trickles down”. Well, for the current inequality to be possible, anything coming down really is a trickle, while that going up approaches a flood. All of this happened at the same time that there was a burst of computer technology that has allowed a number of jobs that used to require quite large labour forces to be done by machines. This has led to a hollowing out of the middle classes, and too much control has rested in the hands of those moving money. Huge payments to corporate executives in the form of stock options have also contributed, because for the executives to make money from the option, they need the stock prices to rise. That has led to executive decisions being made for short-term profit for those executives, the classic conflict of interest. The problem is, short-term profits are frequently at the expense of long-term development. A classic example was Hewlett Packard where Fiorina cut research and development to invest in shorter-term boost to the stocks. The overall result was 30,000 people, mainly middle class, lost their jobs and the company nose-dived.

My guess is that my discussion in the book is valid, and that in a couple of hundred years, people will look back at this period and shake their heads in despair. How, they will ask, could someone like Fiorina make so much money by doing so much damage to the company she controlled? And she was far from being alone. The corporate world is littered with fairly mediocre performers who take home incredible rewards, and the tragedy here is, they go to all those extremes to get such rewards, and receive a relatively minute benefit from them.

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