#78 Super Wealth, Poverty and Inequality
Poverty and Inequality are two qualities of life that continue to stalk our world. Wherever you look, poverty and inequality remain characteristics of our time in all the continents even though the production of food, goods, and services have never been so plentiful. Even in the great cities of Europe and the USA, poverty in the form of homelessness is overtly in front of us, as people live in the streets in some of the richest cities in the world.
Over the last few blogs, I have outlined the basic framework of the world’s economies and policies from 1945 to the present day. Let’s take a step back for a moment and consider what we have created over the last 75 years and try and make a comparison to the world since 1815.
Throughout the entire period of just over 200 years technology has been developing at an ever-faster pace. The number of people alive today compared to 200 years ago across the entire world and in every region is immeasurably larger. The volume of wealth in the world could not have been conceived off 200 years ago. Over these short 200 years, all the ancient regimes have gone, having been destroyed by war and revolution.
Have we produced a better world? I am not going to answer that question here. The world is certainly hugely, almost inconceivably different. The first phase of capitalism ended with two wars, and we finished them with an atomic bomb. The struggle for world power of the period from 1815 to 1945 ended with the old powers of Spain and Portugal, together with Britain, France, and the Netherlands being mere vassals to the new master of the universe – the USA. This is of course not how these old Imperial powers who had considered themselves as a ‘superior race’ saw themselves. But vassals they became and have remained.
So we must ask: has the USA done any better than the major European powers before them? For the first 25 years after 1945, it certainly appeared to the wider populace that the world was ours to be shaped as we desired. How wrong we were. The USA, despite all its carefully thought out rhetoric, was the new imperial power in disguise.
From 1944 at Bretton Woods, the core economic policies of the world have been and remain determined by the USA. Neoliberal policies, the world’s dollar exchange system, the basic rules of world trade, and the resulting monopoly/oligopoly of the leading world's companies have all been determined by USA’s policies. If you read the world’s media, none of this is apparent. I am not suggesting it is hidden, rather the dominance of the USA on the world’s economic systems is not regularly reported on.
From 1973, 70 to 80% of the USA working peoples income has remained static. The US has remained at war for the entire period. Over the last 20 years, she laid waste most of the modern Middle East. Her attempt to control the world economies have become ever more extreme. The wealth of the wealthiest has shown no boundaries. And now with the unsuspected arrival of a crisis in the forms of climate change and covid infections, the world is a more uncertain place than at almost any time since 1945. Just as Britain squared up to Germany at the turn of the 19th century, so now the US is squaring up to China. Again we must ask if the world is a better place?
Super Wealth
The simplest way of introducing ‘super wealth’ as a constant pattern is to list the small number of individuals who have achieved these heights over the last 120 years. The best account of this tiny number of people is a scholarly paper titled ‘Silver Spoon Oligarchs: How America’s 50 Largest Inherited Wealth Dynasties Accelerate Inequality’ by the Institute for Policy Studies (2020).
This is a detailed study that names the families and the companies they owned; it illustrates who they are, how they made their fortunes and how much they managed to own down the generations.
Before 1900, it was the Rockefellers from Standard Oil and the Du Ponts who created dynasties as their wealth spiralled down the generations. By 1918, these two families each controlled over $1.2 billion each, which was over 1% of the entire wealth of the USA.
In the 1980s, the Walton’s (Walmart), Koch (no specific industry) and Mars (from Mars bars and other candy or sweets) were the new oligarchs.
By the 2020s the new wealthiest family fortunes went to Jeff Bezos and Elon Musk and a handful of others, from the new technologies of Microsoft, Netflix, Google Facebook and Amazon.
Not all Oligarchs left their investments to their families – a number gave it away. But the majority accumulated their wealth through the stock exchange and offshore banks. As a result, an ever-increasing proportion of the total wealth of all our society is now owned by a tiny proportion of the population.
Poverty and Inequality
Does all this matter in the wider assessment of the growth of the global economy? It matters because the top oligarchs are American, Russian Chinese and others; they are all are annually taking more and more of the total wealth as a whole, as well as more of the “increase” of the wealth of our societies over time.
It matters because the wealth of the bottom 90% of the population has been static for the last 30 to 40 years. The top 1% of the population proportion of the wealth owned has increased hugely. The USA has 125,000,000 households, and only 12,500 now control 10% of the wealth of the USA.
However we express these statistics about wealth inequality, what matters is not some philosophical or ethical issue. Who benefits and who does not determines the dynamics of capitalist society more than wellbeing alone.
The dynamics of a Capitalist society since 1971/2
The dynamics of world capitalism are created by the economic policy of the dominant government, as this currently stands this is neoliberalism. Neoliberalism provides the cover for the growth of monopoly and oligopoly. And monopoly provides the conditions for the tiny minority to be grossly well paid, for owners to own the stocks and shares and for the shareholding companies to benefit from the monopoly.
Simultaneously very large companies provide the same structures to envelop poverty at many different levels. In later blogs, I deal briefly with the impoverishment of most of the peoples of Nigeria and the Congo: two countries with huge mineral wealth. In both cases, large Western-owned companies own the minerals in the ground and used their technology to export the goods to processing plants elsewhere. Local rulers were enriched, while the surpluses (which ought to remain in the country of origin) were distributed to shareholders and managers in western countries. Surplus extraction of resources goes hand in hand with local poverty.
It is in these conditions over the last 50 years that the pattern of massive inequality can be found to be growing and equally large amounts of people left impoverished. This newly created poverty is now found within and between countries.
As an example, we can consider all over Africa wherever foreign-owned companies own the processing and extraction of mineral resources, such as in South Africa, Zimbabwe, Angola, Nigeria (among many others) with all the oil-rich countries along with Western northern Africa. In all such cases, the people have been left in poverty. Gold, diamonds, oil, copper iron and many specialized minerals are extracted from the earth and then exported in their raw state. Very little if any additional process is undertaken. Prices are determined by market forces usually in European or American exchanges. The country concerned takes a 'royalty', which is determined largely by the extracting company.
De Kaap Gold Fields, South Africa: miners of the Republic Gold Mining Company. Woodburytype, 1888. Wellcome Library, London, CC BY 4.0.
The principles of this process can be seen in something as simple as coffee production. Coffee is grown by small farmers in tropical climates. Processing of coffee seeds is necessary so that dried seeds are packed and shipped in containers. Large European and American companies buy by the container load of 20 to 40 tons largely free of import taxes. The real added value to the coffee occurs when it is roasted and packed in small consumer packages. This is something that could easily be done in the country of origin. But packed coffee ready to sell is heavily taxed by the European Union and the USA. Small African producers receive the smallest proportion of the value of the result. It is difficult to avoid concluding that the system is designed to impoverish producers.
This process has been supported by the western dominated international banks, especially the International Monetary Fund, for 70 years. The enrichment of the major western owned companies extracting minerals logically follows but has done little for the host country to raise standards of living
Monopoly and Oligopoly: Neoliberalism, Inequality, Poverty and the Super-rich
I now want to bring together all the issues of the last few blogs. At various times the media addresses any one of these items, but they are often discussed separately. Here I want to bring them together as I argue they are all interconnected. Together they work as the dynamic of the global system of capitalism; it is important to understand the whole as well as the parts.
Put simply, and a little crudely: governments pursuing neoliberal policies lead to the rise of monopoly global companies. This creates the conditions for the ‘super rich’ as a class to emerge, alongside growing inequality and increasing poverty. The dynamic is the neoliberal policies.
Neoliberal policies are often forced on governments through the IMF (International Monetary Fund). This creates a ‘light touch government’ with minimal intervention, allowing privately-owned companies to do more or less as they wish. For instance, to move the company to any destination they wish. These policies were put in place after 1971, many companies moved to low-cost labour countries, especially China, which had a well-educated labour force. This suited China as well as the companies.
It is important to understand that neoliberal policies are pursued by choice by the rich and powerful. Neoliberal policies are then enforced on the weaker nations through the World Bank and the IMF. Neoliberalism is the policy issue, there is also the question of where global decisions are made. The move into monopoly companies; the creation of a super wealthily elite and the growth of income inequality are processes that stem from the operation of the global policy of neoliberal political economy.
We need to ask why has neoliberalism been so successful on its own terms. This is a very similar policy that went under the name of ‘free trade’ in the 19th century, from 1815 to 1914. At the end of the 19th century, detailed studies of poverty were undertaken by Charles Booth and published in 17 volumes. As a result, we have a pretty good idea of the standard of living of the people of London after nearly the first 100 years of capitalist development. Between 25 to 33% of the population at this time were persistently hungry. Then, as of now, the system creates massive levels of poverty. Now, of course, capitalism is a “system” that has spread all over the world.
At the end of the 19th century, the movement towards a hugely unequal world was stopped by the 1914-1918 and then the 1939-1945 wars. I don’t mean to suggest that these wars stopped the growth of poverty, of course not, as many experienced significant poverty in the interwar years and after. But the processes whereby poverty was created by the system of capitalism led by free trade policies was stopped in its tracks by these wars. During both wars, the state took over the direction of the economy and production from food to armaments. As the wars also led to the first socialist revolution in Russia in 1917 and then in China in 1949, the capitalist system also had to be protected from these possibilities happening in the USA or Europe.
So, for a time, the system was altered following the end of the 1939-1945 war and populations benefited from increased production. For 25 years, Keynesian economic principles ensured that the threat of Bolshevism was subdued.
For a short 25 years, the system that led to the super-rich and degrading poverty was held in check and reversed. But over the last 50 years, we have returned to the basics of 19th-century global policies.
There are a few important books on this broadest of subjects Inequality on a global scale:
Branko Milanović, Capitalism, Alone, Harvard University Press, 2019.
Thomas Piketty, Capital in the 21st Century, Harvard University Press, 2017 and Capital and Ideology, Harvard University Press, 2020.
James Galbraith, Inequality: What Everyone Needs to Know, Oxford University Press, 2016.
Seth Donnelly The Lie of Global Prosperity: How Neoliberals Distort Data to Mask Poverty and Exploitation.
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The peoples of Western Europe had risen from one world of relative poverty and had learnt how to take the wealth from the Americas and transfer it to their own countries. This was slavery and latterly until 1920, indentureship. A whole set up of banks, shipping companies, and insurance companies had arisen to make these transfers possible. From the 1750s the European invaders turned their attention to Asia and systematically began the colonisation process anew. At the same time, as they attempted to colonise and extract the wealth of Asia, the colonising countries began the process we now recognise as industrialisation alongside the rapid growth of cities. The surplus resources extracted through colonisation were used to finance the growth of new industries.