Is growing income inequality the logical end in the relentless quest for the highest return on capital? What are the implications of our current model of economic development?
In the United States, the top 1 per cent of Americans earn one quarter of the national income every year. And the top 1 per cent control 40 per cent of wealth.
This gulf has important implications, among which is the loss of community solidarity as individual self-interest trumps all. As Joseph Stiglitz observes in Vanity Fair:
The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security — they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government — one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
Yes, the top one per cent want lower taxes, which contribute to the inequality. They like it that way – because a large part of their income is derived from a reduction in tax rates on capital gains (which incidentally also contributes to speculation especially in property).
Lower taxes lead to a loss in government revenue. No wonder government fiscal deficits are growing, and many governments are now cutting expenditure on essential services and subsidies.
Let’s face it, the top one per cent don’t really care much for the rest, especially the workers:
The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.
What about elected politicians? Surely they can do something to redress the situation. Don’t count on it.
Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office.
Is the situation much different in Malaysia? What do you think?