Wealth, inequality and revolt ­— A warning

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Wealth, inequality and revolt ­— A warning

PAUL GOLDING

Sunday, December 08, 2019

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Over the course of human history mankind has progressed through three stages of industrial revolution. The First Industrial Revolution (1IR) spanned 1760 to 1840 and was characterised by the steam engine. The second (2IR) started in the late 19th century, historians say about 1870, and was ushered in by the emergence of new sources of energy, particularly electricity, gas and oil. The third (3IR) began in the 1960s with the emergence of mainframe computers, transistors, microprocessors, and the rise of telecommunications.

The predominant political philosophy that underpinned 2IR and 3IR was liberalism with capitalism as the economic system. This international order placed emphasis on trade, foreign direct investment, and globalisation. For 3IR, which we are currently in, we have witnessed tremendous increases in wealth. According to the 2018 Credit Suisse Global Wealth Report, wealth rose by US$14 trillion (4.6 per cent) to a combined total of US$317 trillion, outpacing population growth. Wealth per adult grew by 3.2 per cent, raising global mean wealth to a record high of US$631,000 per adult. These are very positive results, especially using mean figures, but this approach conceals huge and real inequities.

The 2018 World Inequality Report (WIR) tacitly acknowledges the growth in world wealth, but also highlights the huge global income inequality. According to the WIR, while there has been tremendous growth on a global scale, the top one per cent of earners has pocketed twice as much of the economic growth as the 50 per cent poorest individuals. The report continued that, since 1980, very large transfers of public to private wealth occurred in nearly all countries, whether rich or emerging. While national wealth has substantially increased, public wealth is now negative or close to zero in rich countries. This is a very troubling development which could have serious consequences for social welfare assistance as inequity increases.

The rise of inequality should not be surprising or unexpected. British economist John Maynard Keynes published The General Theory of Employment, Interest and Money in 1936, explaining that capitalism was not only unable to guarantee sufficiently low rates of unemployment, but had also caused “an unequal distribution of arbitrary wealth”. This consideration is even more true 80 years later and is exacerbated by the deployment of information and communications technologies.

The WIR had an ominous prognosis: “It is our belief, however, that if rising inequality is not properly monitored and addressed it can lead to various sorts of political, economic, and social catastrophes.”

There is already evidence of political and economic upheavals. The 2018 World Migration Report indicates that there were an estimated 244 million international migrants globally (3.3 per cent of the world's population) in 2015 — an increase from an estimated 155 million people in 2000 (2.8 per cent of the world's population). The International Organization for Migration indicates that factors underpinning migration are numerous, relating to economic prosperity, inequality, demography, violence and conflict, and environmental change. I am submitting that inequality within and between countries is also a major pull and push factor in current migration trends.

In 2011, Jim Clifton, the former chairman of American management consulting company Gallop, wrote a book titled The Coming Job Wars. He argued that having a good job is now the great global dream; it's the number one social value for everyone. “A good job” is more important than having a family, more compelling than democracy and freedom, religion, peace, and so on. Those are all very important, but they are now subordinate to the almighty good job. Our views on the relative importance of a good job will vary; however, we can all agree on its importance, and that it is a compelling factor in international migration.

There has been a recent spate of global protests associated with bread-and-butter issues which, in my view, is a consequence of inequality, if not poverty. In Ecuador, mass demonstration started when the Government announced the scrapping of decades-old fuel subsidies as part of spending cuts agreed with the International Monetary Fund (IMF). In Chile, one of the richest countries in Latin America, but among the most unequal, protest erupted when the Government announced increased subway fares. In Lebanon, one of the most indebted countries in the world, the catalyst was an imposition of a tax on WhatsApp calls. In all of these cases, the governments have had to reverse their positions after mass protests. And, in Lebanon, Prime Minister Saad Hariri has resigned. The New York Times of October 23, 2019 indicated that there have been other mass demonstrations in Bolivia, Spain, Iraq, and Russia, and before that the Czech Republic, Algeria, Sudan, and Kazakhstan. The common threads of these demonstrations are inequality, poverty, and corruption.

The chaos is compounded by a rise in nationalism as a direct challenge to globalisation, if not to capitalism. Donald Trump's election as president of the United States is the epitome, but certainly not the only example. Narendra Modi of India, Recep Tayyip Erdoğan of Turkey, and Shinzō Abe of Japan are all quintessential nationalists. Britain's Boris Johnson's push for Brexit is further evidence of the rise in nationalism, along with the mainstreaming of formerly fringe far-right nationalist parties led by Geert Wilders in the Netherlands and Marine Le Pen in France. These parties and leaders use inflammatory rhetoric to stroke the flames of intolerance. The variant of nationalism that is emerging appears to be exclusionary and virulent. Donald Trump, for example, uses rhetoric such as sh**hole countries, invasions of immigrants, and has stated that Congresswomen who criticise him should return to their countries. His speech to the United Nations in September underscores the global nationalist agenda: “The future does not belong to globalists; the future belongs to patriots, the future belongs to sovereign and independent nations. Today I have a message to those open-border activists who cloak themselves in the rhetoric of social justice, your policies are not just, your policies are cruel and evil.”

The world is also transitioning from 3IR and is on the cusp of the Fourth Industrial Revolution (4IR). This new revolution is being characterised by a suite of integrating technologies, including the Internet of Things (IoT), blockchain, artificial intelligence (AI), 3D printing, autonomous vehicles, 5G wireless, cloud computing, big data analytics, and renewable energy. This revolution offers exciting opportunities for developing countries like Jamaica.

According to a 2018 Deloitte report, 4IR will be characterised by the marriage of physical assets and digital technologies which will transform society, economies, jobs, and people's personal lives. It is also expected that 4IR will exacerbate existing inequalities between and within countries as mentioned earlier in the WIR.

Focusing on Jamaica, the WIR indicated that in Latin America and the Caribbean (LAC), Jamaica ranks 22nd of 25 countries, and 96th out of 157 in the world. The report also indicates that LAC is the most unequal region in the world, with a history of colonial exploitation and land concentration favouring small elites and disenfranchisement of the poorest people, especially indigenous peoples and women. The levels of inequality in Jamaica, as indicated in the WIR, should be read in conjunction with the recent publication of the 2017 Jamaica Survey of Living Conditions, which indicated a 2.2 percentage increase in the rate of poverty. It must be noted that inequality and poverty are two different constructs; however, they are directly and indirectly linked.

Reading the global tea leaves, the Jamaican Government should be very cognisant of the internal levels of inequality and the rising poverty rates that can erupt in a spring of frustration and protest. In addition, the Government must ensure that the huge investments in infrastructure do not result in massive corruption and the abuse of public funds, which will manifest itself in greater inequality. The levels of corruption emanating from this Government and the frequency and size of black box public-private partnership (PPP) infrastructural projects do not inspire confidence in good governance.

Finally, with the advent of 4IR, Jamaica's future growth and development will require investment in infrastructure; not just in roads, but also in a stable and affordable electricity supply system beyond the current grid and universal high-speed, low-cost Internet connectivity.

 

 Professor Paul Golding is the former dean of the College of Business and Management at the University of Technology, Jamaica. Send comments to the
Jamaica Observer or pgolding@utech.edu.jm.

 

 


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