Trends in Global Wealth Inequality and Poverty

Global wealth inequality is increasing, but how can we explain this, is this is a problem, and what could we do to make the world a more equal place?

Trends in Global Wealth Inequality and Poverty

world wealth 2016.png

According to the 2016 Global Wealth Report produced by Credit Suisse, wealth inequality in 2016, measured by the share of the wealthiest 1 percent and wealthiest 10 percent of adults, as compared to the rest of the world’s adult population, continues to rise.

While the bottom half collectively own less than 1 percent of total wealth, the wealthiest top 10 percent own 89 percent of all global assets.

NB – You need to look at the pyramid below carefully, what it shows (to compare the very top and bottom) is as follows:

  • The richest 33 million people (0.7% of the world’s population ) control $116 trillion, or 45.6% of the world’s wealth, or more than $1 million each
  • The poorest 3.5 billion people (73% of the world’s population) control only $6.1 trillion of wealth, or less than $10, 000 in wealth each.

global-wealth-pyramid

NB – Inequality is no longer simply a matter of poor people living in less developed countries and rich people living in more developed countries -there are plenty of millionaires in low and middle income countries – the report notes that ‘today, emerging nations are home to 18 percent of the world’s ultra-high net worth population. China alone accounts for 9 percent of the top decile of global wealth holders, which is well above France, Germany, Italy, and the United Kingdom.’

However, this is hardly cause for celebrations, it simply means that not only is global inequality increasing across the world as a whole, but also within most countries in the world – there are billions of poor people living right alongside those millionaires in low income countries!

The infographic below, taken from the World Economic Forum Website (published 2015), displays global wealth inequality more simply, and it’s also easier to remember:the richest 1% control 50% of the world’s wealth, while the poorest 50% control less than 1%.

global-inequalities

Finally, to turn to trends in inequality over time, the chart below, also taken from the World Economic Forum website, shows how the global share of wealth controlled by the wealthiest 1% has increased from 45% to 50%, while the share of the ‘other 99%’ has decreased from 55% to 50%. (The chart below is derived from Oxfam’s 2016 Report: An Economy for the 1%?)

global-wealth-inequalities

Oxfam further notes that:

  • The wealth of the richest 62 people has risen by 45% in the five years since 2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
  • Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 38%.
  • Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%

Some Potential Problems with Statistics on Global Wealth Inequalities

  • Firstly, there are issues with reliability when tracking global inequality – different nations tally income and wealth in different ways, and some nations barely tally reliable stats at all
  • Secondly, you may have noticed that you get different figures depending on what groups your comparing – things look very different if you compare the top 1% to the rest, rather than comparing the top ten percent to the the bottom ten percent, or the top 50% to the bottom 50%. You might like to think about which is the most ‘valid’ comparison to give you a fair idea of global wealth inequalities (tough question!?)

Why has Wealth Inequality Increased?

What we are asking here, in short form is – how have the rich got so rich, and why have the poor lagged behind? In this section I summarise for changes which are correlated with increasing wealth inequality, all taken from the the Oxfam Report referred to above: Neoliberal economic policy; the global tax haven system, the growth of the financial sector and increasing returns to capital versus labour:

Neoliberal Economic Policy 

Neoliberal Economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization – have supercharged the ability of the rich and powerful to to further concentrate their wealth.

For example, companies working in oil, gas and other extractive industries are using their economic power in many different ways to secure their dominant position. They lobby to secure government subsidies – tax breaks – to prevent the emergence of green alternatives. In Brazil and Mexico, indigenous peoples are disproportionately affected by the destruction of their traditional lands when forests are eroded for mining or intensive large-scale farming. When privatized – as happened in Russia after the fall of communism for example – huge fortunes are generated overnight for a small group of individuals.

The Global Network of Tax Havens

A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries.

U S Companies tax havens.jpg

As taxes go unpaid due to widespread avoidance, this leads to cuts in vital public services and that governments increasingly rely on indirect taxation, like VAT, which falls disproportionately on the poorest people.

This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases.

Almost a third (30%) of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.

Tax avoidance is a problem that is rapidly getting worse and has rightly been described by the International Bar Association as an abuse of human rights and by the President of the World Bank as ‘a form of corruption that hurts the poor’.

Increasing Returns to Capital Versus Labour

One of the key trends underlying increasing wealth inequality is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing.

capital-and-labor

NB This article in The Economist challenges the idea that there are increasing returns to capital versus labour!

The Growth of the Financial Sector

The financial sector has grown most rapidly in recent decades, and a recent study by the OECD10 showed that countries with oversized financial sectors suffer from greater economic instability and higher inequality. Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hurt the poorest people the most.

NB 1 -if you want more theoretical explanations of increasing inequality – look at Dependency Theory and World Systems Theory – much of this is applicable here. You might also like to look at ‘Why Nations Fail‘. 

NB2 – given that measuring inequality involves measuring relative wealth – that is what percentage share to the richest 10% control compared to other 90%, for example, then we’re necessarily looking at a zero sum game – If the richest 10% go from controlling 40% of the world’s wealth to 60% of the worlds wealth, then the amount of wealth controlled by the other 90% of the population must fall from a 60% share to a 40% share. 

Is Increasing Global Inequality a Problem for Humanity?

Neoliberals argue that increasing inequality isn’t necessarily a bad thing, the important thing is that even though the rich have got richer compared to the poor, the poor have also got richer, just not as rapidly as the rich and the middle.

poverty

However, Oxfam argues that growing economic inequality is bad for us all for the following reasons:

  • It undermines growth and social cohesion and the consequences for the world’s poorest people are particularly severe.
  • Had inequality within countries not grown since 2010, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.
  • The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.
  • The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
  • From and ecological point of view, there’s even more injustice: the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions.  The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.

What can we do to make the world a more equal place?

Oxfam notes that inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model.

As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens

end-tax-havens

World leaders need to commit to a more effective approach to ending tax havens and harmful tax regimes, including non-preferential regimes. It is time to put an end to the race to the bottom in general corporate taxation. Ultimately, all governments – including developing countries on an equal footing – must agree to create a global tax body that includes all governments with the objective of ensuring that national tax systems do not have negative global implications.

In addition Oxfam is calling on leaders to take action to show they are on the side of the majority through doing the following:

  • Keep the influence of powerful elites in check: for example by reforming the regulatory environment, particularly around transparency in government; separating business from campaign financing; and introducing measures to close revolving doors between big business and government.
  • Share the tax burden fairly to level the playing field: by shifting the tax burden away from labour and consumption and towards wealth, capital and income from these assets; increasing transparency on tax incentives; and introducing national wealth taxes.
  • Pay workers a living wage and close the gap with executive rewards: by increasing minimum wages towards living wages; with transparency on pay ratios; and protecting workers’ rights to unionize and strikes.
  • Use progressive public spending to tackle inequality: by prioritizing policies, practice and spending that increase financing for free public health and education to fight poverty and inequality at a national level. Refrain from implementing unproven and unworkable market reforms to public health and education systems, and expand public sector rather than private sector delivery of essential services.

Selected Sources

Credit Suisse – The World Wealth Report (November 2016)

Oxfam – An Economy for the 1% (Jan 2016)

Inequality on the Rise? (2012)

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Noam Chomsky – The Decline of the U.S Superpower?

In this talk Noam Chomsky emphasises that Trump’s election and his climate change denial threaten the very existence of the planet and the human species; and he also reminds us that despite America’s increasing political isolationism, U.S. Corporations still reign supreme.

Chomsky starts by saying that he was in Spain when he heard the results of the U.S. election, and the various commotion and commentary which surrounded it, but in fact the first very real negative consequence of Trump’s victory happened on the very same day and yet went largely unnoticed by the world’s media.

At the very same time as the U.S. presidential election results were being announced and analysed, COP 22 was taking place in Morocco, which was the first meeting of the signatories to the Paris Climate Change agreement (COP21) at which most countries agreed in principle to take concrete action to reduce dependence on fossil fuels and try to slow down global warming.

paris-climate-change-agreement

The Paris Climate Change Agreement – Ruined by the Election of Donald Trump?

Because the specifics of the actions to be taken had been left vague after the Paris meeting, the point of COP 22 in Morocco was to start to add in the specific details of the agreement, however, following Trump’s election, and his commitment to scrapping current environmental regulation and monitoring in the U.S., COP 22 ended with no further progress having been made.

In fact, the agenda of the global climate change framework has now changed to one of ‘how can we combat global warming without the U.S. on board’, and nations have now started to look to authoritarian, anti-democratic China for leadership if any progress is to be made in this area.

Chomsky is very clear that environmental catastrophe is now one of the biggest threats facing the survival of the species (the other is nuclear war), and he focuses on Asia to highlight the coming global problems.

In the next few years, 10s of millions of people will be fleeing from Bangladesh because of the severe level of global warming resulting in sea levels rising, which would be a real refugee crisis, unlike the present one which he casts as a ‘moral crisis’ of the European Union.

(According to one climate change scientists, these climate change migrants should have the right to move to the United States and other rich countries that are causing global warming.)

Again in Asia, a second environmental crisis looms in India and Pakistan, in the form of potential conflict over scarce water resources – two states with nuclear weapons, which potentially trigger a survival crisis for the human species.

Chomsky’s next point is that U.S. isolation in the world is increasing in remarkable ways: the U.S. had been heavily involved in South and Latin America in the decades following World War Two, but the IMF has been completely kicked out of some countries in this region and has no military basis in the region at all; elsewhere in the world the TTIP has all but collapsed and other trading blocks are growing in scope, mainly centring around China, which are drawing in some of America’s historical allies such as Peru and New Zealand; finally with Brexit America has lost it’s main ally in Europe, the U.K., which could reduce its influence in Nato.

By looking at national wealth, it seems that U.S. influence is in decline, as its share has shrunk from 50% in 1945 to 25% today,

However, these measurements fail to take into account the crucial factor of the ownership of the world economy – which is virtually never discussed – CORPORATE ownership of wealth.

U.S. Companies Power.jpg

U.S. Companies still own 50% of the world’s wealth

If we look at Corporate wealth, U.S. Companies are well in the lead in terms of ownership of the the global economy, and they are own over 50% of the world’s wealth in nearly every sector of the global economy – manufacturing, finance, services etc… of course although this wealth is held in the U.S. and supported by public money, it is not shared by all the citizens of the U.S.

If you look at the military dimension, the U.S. is of course still supreme.

Chomsky finishes by reminding us that the threats we now face are matters of human survival and they cannot be ignored, they need to be faced directly and soon if the human experiment is not to be a disastrous failure!

How to use this in the Global Development Module?

Basically it fits into the ‘how important are nation states’ aspect of the course.

Firstly, Chomsky seems to be suggesting that the United States still has enormous influence in the world – in that its lack of action on climate change means that it is able to disrupt the ability of other nation states to take coordinated action on climate change (whether this actually happens remains to be seen).

Secondly, it seems that other countries are becoming more powerful than the United States, and the U.S. is losing its political influence in certain ways.

However, if we look at the real ‘power indicators’ – wealth and military expenditure – the U.S. is still by far the dominant superpower.

Related Posts 

Sustainable Development – explores some of the environmental challenges facing the world

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The Long History of the ‘Underclass’ Thesis

Charles Murray’s Underclass Theory – the idea that there is a ‘hardcore’ of a few hundred thousand families and individuals who are welfare-dependent and responsible a disproportionate amount of crime in society has a long history:

  • In Victorian times there was a concern about a ‘social residuum’, and shortly afterwards it was ‘unemployables’ who were the target of social reformers and politicians.
  • The Eugenics Society was influential in promoting the ‘social problem group’ in the 1930s and the idea of ‘problem families’ in the years following the Second World War.
  • In the 1960s, Oscar Lewis, the cultural anthropologist, popularised the heavily racialised ‘culture of poverty’ theory in the USA.
  • Sir Keith Joseph, former Conservative MP, raised the issue of a ‘cycle of deprivation’ in the 1970s.
  • In the 1980s and 1990s, American academic Charles Murray suggested that a ‘plague’ had crossed the Atlantic in the form of an ‘underclass’.
  • New Labour expressed concern about 2.5% of people who were ‘socially excluded’ in the late 1990s and early 2000s.
  • The development of the Respect agenda in the 2000s raised the issue of ‘problem families’ once again.

However, these ideas have flourished, despite no robust evidence which supports the idea of an ‘underclass’, whatever it is called. Professor David Gordon, who led the recent Poverty and Social Exclusion in the United Kingdom study, the largest ever research project of its kind, has offered the following view of such concepts:

These ideas are unsupported by any substantial body of evidence. Despite almost 150 years of scientific investigation, often by extremely partisan investigators, not a single study has ever found any large group of people/households with any behaviours that could be ascribed to a culture or genetics of poverty … any policy based on the idea that there are a group of ‘Problem Families’ who ‘transmit’ their ‘poverty/deprivation’ to their children will inevitably fail, as this idea is a prejudice, unsupported by scientific evidence. (Gordon, 2011)

Source: Stephen Crossley, The Troubled Families Programme: the perfect social policy? – Briefing Paper – November 2015

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Hints for A Level Sociology Paper 3 (Crime and Deviance)

A few hints for how I recommend answering the Crime and Deviance section of AQA’s paper 3 (which also contains theory and methods, more of that later). NB – What’s below isn’t endorsed by the AQA, but it’s my best interpretation based on what I’ve been told works.

Questions 1 and 2 (4 and 6 mark short answer questions) –‘Outline two ways/ Outline three reasons’

  • Point (1 mark) + Explanation (1 mark)
  • Do this (two times over for question 1, three times over for question 2)
  • Bullet point each point and explanation.

Question 3 – The Outline and Analyse Question (10 marks) – ‘Using material from Item A, outline and Analyse two ways in which…’

  • Read the item – this will give you your two ways (it will effectively limit you to two points)
  • For each of the two points, make two further analytical points to develop that point, and ideally evaluate it.
  • Do this twice.

Question 4 – The essay question (30 marks) Applying material from Item B evaluate something

  • Read the question – if it asks you to do two things, make sure you do both
  • Read the item – at least two of your points should stem from the item
  • Make 3-6 total points depending on the essay – deeper or broader
  • Use the Point –Explain – Expand (analyse) – Evaluate structure
  • If it’s a perspectives essay, evaluate using other perspectives towards the end of the essay as you build up to your conclusion.

 

 

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Chas and Dave on Modern Relationships

Chas and Dave may not realise it, but I think many of their songs demonstrate how their (working class male) experience of the shift in gender-relations and the emergence of the pure relationship hasn’t been a comfortable one…

‘London Girls’ seems to be a a clear indication of what they want in a woman….a simple, traditional ‘girl’ who does your washing, mends your clothes and doesn’t complain when you leave your tat lying around the house…

Sorry to say lads, but that kind of traditional ‘gal is a rare find these days, especially among working class couples, where it’s more likely that both partners will have to work to survive, so they’re pretty much setting themselves up for frustration wishing for the past.

 

In another song, ‘Ain’t No Pleasing You’, Anthony Giddens might point out that this is an inevitable consequence of the ‘Pure Relationship’ now being the typical type of relationship in late-modern society.

From this analytical point of view, the lads might lament a little less – it’s not that one of them in-particular was never good enough, it’s that in the age of individualised relationships, where we both expect more but don’t have the time to make sufficient compromises, most (yes – MOST) relationships are doomed to failure.

 

The Song ‘Rabbit’ seems to further indicate a negative experience of their partners’ constant chatter – despite having ‘wonderful arms, and…. charms’ (I kid you not, it’s an actual line in the song), they can’t stand her constant talking.

Ulrich Beck might point out that this is something which is much more likely to be expected in the age of the negotiated family, where the expectations of relationships constantly shift, and so require more discussion to keep them on track.

 

You could also interpret Chas and Dave’s music as something of a reaction against cosmopolitanism – they’ve been around the world, yet all they want is Jellied Eels and a Pint, thank you very much. I guess if they wan’t cheering up, they could always go down to Margate… I’ve heard it’s pretty reactionary down that way….

 

P.S. When it comes to the Heathrow Christmas advert – I’m with Charlie Brooker – This is just too weird, they should never have gone there!

 

Blame Relative Deprivation and YouTube for this Post!

So there I was on Zoopla having a new years gawp at how I could buy a three bedroom end of terrace house in Margate for £50K less than my two bed flat in Surrey – and that ‘Down to Margate’ song popped into my head. A few clicks and a few songs later the idea for this post just sort of emerged… Sorry!

 

 

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The Increase in Smoking in Poorer Countries

Smoking is on the increase in several low income and middle income countries according to this World Health Organisation data, published in the World Bank’s recent review of 2016

smoking

According to the World Health Organisation up to 80% of the world’s tobacco users now live in low and middle income countries, with younger people especially taking up smoking in increasing numbers.

Why is Smoking Increasing in Poorer Countries?

In Short, it seems that since governments in developed countries have made it more difficult for tobacco companies to kill people in rich countries, they’ve now moved on to trying to kill people in poor countries instead.

tobacco-advertising-poor-countries

A recent Guardian article summarising this World Health Organisation report, notes that:

The latest evidence shows that tobacco industry marketing remains a significant global problem, particularly for people in the poorest countries who are the most exposed to it. Our study examined tobacco marketing in 16 countries.

  • In communities in low-income countries, 81 times more tobacco adverts were observed than in high-income countries.
  • People in lower-income countries were 46 times more likely to hear radio adverts, 11 times more likely to see poster adverts and nine times more likely to see television adverts than those living in high-income countries.
  • Access to tobacco was also higher in poorer countries. In low-income countries, we observed two and a half times more stores selling tobacco in the communities in the low-income and lower-middle-income countries than in the high-income countries. Worryingly, 64% of stores visited sold single cigarettes compared with just 2.8% in high-income countries.

This high level of marketing in poorer countries is consistent with the tobacco industry’s targeting of these countries. They are key to the industry’s future. In the west, the tobacco industry’s profits continue to increase despite the decline in smoking rates , but it is unclear how long this pricing power will hold out in the face of growing regulations.

How to Reduce Smoking in the Developing World?

The World Health Organisation notes that there are several things that effectively reduce the use of tobacco consumption:

  • Banning positive advertising for cigarettes, although there are only total bans in 29 countries worldwide.
  • Promoting negative advertising – those horrible picture adds about how smoking causes disease apparently work
  • Taxation – a 10% increase in the price reduces smoking by 5% in low income countries.
  • NB – A further challenge here is tackling Organised Crime – and their role in smuggling tax-free cigarettes, which can subvert national taxation policies.

This is a useful little data-case-study for lots of reasons

  • It’s a good example of the negative role TNCs play in development
  • It’s a good example of a critique of neoliberalism – it seems that regulation by the government – of advertising and through taxes for example – can really help reduce smoking.
  • This kind of reminds me of ‘Runaway World’ – we know what works to reduce smoking, but what with both TNCs and Organised crime having so much to gain financially from cigarettes, it seems unlikely that governments are going to get a handle on this problem any time soon!
  • Finally this is also a slap in the face to ethnocentrism – You (I did until today!) were probably under the impression that smoking’s on the decline – well it may be in the UK – but looked at globally it’s not.

 

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Ethnic inequalities in social mobility

Black and Asian Muslim children are less likely to get professional jobs, despite doing better at school, according to an official government report carried out by the Social Mobility Commission

This blog post summarizes this recent news article (December 2016) which can be used to highlight the extent of ethnic inequalities in social mobility – it obviously relates to education and ethnicity, but also research methods – showing a nice application of quantitative, positivist comparative methods.

In recent months, the low educational attainment of White British boys has gained significant attention. However, when it comes to the transition from education to employment, this group is less likely to be unemployed and to face social immobility than their female counterparts, black students and young Asian Muslims.”

White boys from poorer backgrounds perform badly throughout the education system and are the worst performers at primary and secondary school, the report said, and disadvantaged young people from white British backgrounds are the least likely to go to University.

Only one in 10 of the poorest go to university, compared to three in 10 for black Caribbean children, five in 10 for Bangladeshis and nearly seven in 10 for Chinese students on the lowest incomes.

Black children, despite starting school with the same level of maths and literacy as other ethnic groups, young black people also have the lowest outcomes in science, maths are the least likely ethnic group to achieve a good degree at university.

But after school, it is young women from Pakistani and Bangladeshi backgrounds that are particularly affected. Despite succeeding throughout education and going to university, they are less likely to find top jobs and are paid less than women from other ethnic minorities, the report concluded.

Alan Milburn, the chair of the commission said: “The British social mobility promise is that hard work will be rewarded. This research suggests that promise is being broken for too many people in our society. Britain is a long way from having a level playing field of opportunity for all, regardless of gender, ethnicity or background.”

The report also showed the role of parents plays a large part in performance at school, as the more they engage, the better their children do, according to the research

Two of the more specific recommendations made by the commission are

  • Schools should avoid setting, particularly at primary level, and government should discourage schools from doing so.
  • Universities should implement widening participation initiatives that are tailored to the issues faced by poor white British students and address worrying drop-out and low achievement rates among black students

Related Posts 

Ethnic minorities face barriers to job opportunities and social mobility (Guardian article from 2014) – so nothing’s changes in the last two years!

Ethnicity and Educational Achievement – The role of Cultural Factors – you might like to consider the extent to which it’s cultural factors which explain these post-education differences?

The C.V. and Racism Experiment (scroll down to 2009) – alternatively – racism in society may have something to do with these differences – this experiment demonstrated how people with ‘ethnic’ sounding names are less likely to get a response from prospective employers when they send them their C.V.s

 

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Company Bosses really don’t deserve their high incomes

The link between what bosses are paid and a company’s financial performance is “negligible”, according to new research summarized by this BBC news item (December 2016)

The median pay for chief executives at Britain’s 350 biggest companies was £1.9m in 2014 – a rise of 82% in 11 years – the study by Lancaster University Management School found.

However, performance as measured by return on capital invested was less than 1% during that period.

The study, commissioned by the investment association CFA UK  suggested that the metrics typically used to gauge company performance, such as total shareholder return and earnings per share growth were too short termist. Will Goodhart, head of CFA UK, said: “Too few of today’s popular approaches … genuinely align senior executives’ pay with the economic value that they create.”

Social Policy Responses .

Among the measures under consideration are requiring companies to publish pay ratios, which would show the gap in earnings between the chief executive and an average employee.

Shareholders could also be handed more powers to vote against bosses’ pay – although an earlier proposal to force companies to put workers on boards has been dropped by the government.

Commentary 

This 82% increase in CEO PAY (the top 0.01%) stands in contrast to an average 10% decline in real income since 2008 for the rest of us and so this is further evidence of increasing inequality in the U.K. So if the findings of the Spirit Level are true, this has done enormous harm to Britain over the past decade.

It is also evidence against the view that we live in a meritocratic society (against the basic Functionalist and New Right views of education)- if you can get yourself into that super-elite, it seems that you have the power to set your own bonus, irrespective of what you actually contribute.

This appears to be yet more evidence of the continued relevance of Marxist theory!

 

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The Myth of Meritocracy and the Structure of Luck

This recent Thinking Allowed podcast summarises a recently published book –Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank

success-and-luck-frankThe key message of the book is that almost everyone who succeeds (in education, or business for example) does so on merit – they are both hardworking and talented, but they are also lucky, and in recent years, social scientists have discovered that chance plays a much larger role in important life outcomes than most people imagine.

The book is thus a challenge to the rhetoric of meritocracy, and subverts the idea that people who succeed do so purely on their own hard work and effort, purely on their merit.

Frank provides his own personal example to illustrate the huge role that luck played in his own life – He had a heart attack while playing tennis, and had it not been for the lucky fact that an ambulance which had been called out for another nearby accident which had proved less serious than initially thought was could be diverted to him, he would have died.

Laurie Taylor, the presenter of Thinking Allowed, offers his example of a chance phone-call from a Radio 4 executive decades ago which kick-started his radio 4 career – they needed a talk show guest on a particular topi, and he just happened to be the person who was contacted at that time.

Frank says that if you remind people they’ve been lucky, they get angry, but if you ask them to recall situations in which they’ve been lucky in their lives.

The commentators agree that the rhetoric surrounding, or myth of meritocracy, is not as pronounced in the

The podcast then goes on to explore the idea that might be a ‘structure to luck’ – for example, it was much easier for those born in the 1970s to go to university because of the increased opportunities, while many of that (my!) generation’s parents and parents wouldn’t have been able to go even if they had the ability, because there were simply fewer universities, and so no where near as much opportunity.

Another example given is that working class kids are disadvantaged by the structure of luck where their schools are under-resourced compared to middle class kids have their paths smoothed by their access to cosmpolitan cultural and social capital.

Most people recognise that there is a structure to luck if you give them the example of being born of good parents in a country you can succeed if you are hard working; compared to being born in a country such as Somalia, for example.

Frank also points out that if you ask successful people to tell the story of how they became successful, and ask them to point to any examples where they were lucky, they can all point out several of these (however, if you just remind them that they are wealthy just because they are lucky, they resist the idea, so the info you get out of them depends on the tone in which you ask the questions!).

Despite all of the evidence that luck is crucial to success, in the U.S. at least there is a very persistent myth of the self-made man, the idea that those who have succeeded have made it entirely on their own efforts. (This is less common in Britain, where we are (apparently?) painfully aware of how social class limits some and empowers others).

The problem with this myth of the self-made man is that it gives the successful a sense of entitlement to keeping the fruits of their labour, and this is especially problematic given the recent emergence of what Frank calls the new ‘winner-takes all markets’ – we don’t have local markets anymore, what we increasingly have global markets where a few people can monopolise and perfect a good or service and then flog it to the masses.

Frank describes how, in a world increasingly dominated by winner-take-all markets, chance opportunities and trivial initial advantages often translate into much larger ones–and enormous income differences, thus over time the level of inequality increases.

Ultimately where these (neoliberal) myths come to shape political and economic policy, everyone suffers – tax policy has changed over the last 40 years in the US and UK which allows the wealthy to keep more of the returns on their wealth (part of the rationale being that they’ve earned it on their merits) – this means that less money gets re-invested in the public infrastructure, which ultimately harms everyone – rich and poor alike.

Frank uses the useful analogy of a Ferrari owner driving on a road with potholes compared to a Porsche owner driving on well-surfaced roads – the idea here is that if we forced the the super rich to pay higher taxes, they wouldn’t be as rich, but they’d be happier, just like the rest of us.

The book is in part a plea to the successful to remember and acknowledge the role which luck has played in their success, and to further recognise that they don’t deserve to keep such a high proportion of the fruits of their labour.

 

 

Frank argues, we could decrease the inequality driven by sheer luck by adopting simple, unintrusive policies that would free up trillions of dollars each year–more than enough to fix our crumbling infrastructure, expand healthcare coverage, fight global warming, and reduce poverty, all without requiring painful sacrifices from anyone.

NB – I haven’t actually read the book, so if you want more on possible policy solutions, I suggest you buy it –  I did pop out to Waterstones having listened to the podcast to buy it, but they didn’t have it in stock, I ended up spending an hour browsing and then buying two other books to add to the unread pile.

Commentary – Application to this year’s Apprentice 

It’s worth reflecting on just how applicable the above is to the latest winner of The Apprentice – Alana, yes she’s hard-working, yes she’s talented enough to perfect five cake recipes, but then again so are literally thousands of other people in the United Kingdom. Dare I suggest that if Alana wasn’t lucky enough to tick all of the following boxes, she would have been stuck on an average income for the rest of her life like all of the other hard working and talented professional bakers in the country:

Alana’s luck:

  1. She’s a rare combination of sexy and mumsy all rolled into one – just what a premium cakes business requires, and let’s face it, for £250k Sugar’s got a sweet deal on that image.
  2. The success of Bake-Off (and maybe it’s fragmentation) suggests there’s a huge market in baking to be tapped into. Sugar wouldn’t invest in something without a huge market potential.
  3. Her main brand-competition is clearly on the decline given her coke habit and her domestic violence victim status (unfortunate because of the physical and emotional scars, and more so because her public really don’t wanna have to think about that do they!)
  4. One of Alan’s side-kicks clearly identified with her throughout the process.
  5. Her parents were able to afford to build her her own personal kitchen in which to perfect her cake-recipes.
  6. Her uncle owns a restaurant which kick started her cake-sales business.

I mean come on, this is hardly success based on merit alone! In fairness to Alana, she probably knows it! 

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What is Postmodernism?

So what is this postmodernism of which many now speak?

No one agrees as to what is meant by the term except that ‘postmodernism’ represents some kind of reaction to or departure from ‘modernism’. Since the meaning of modernism is also very confused, the reaction or departure known as postmodernism is doubly so.

Terry Eagleton (a literary critic) defined postmodernism thus in 1987:

The typical postmodernist artefact is playful, self-ironizing and even schizoid; and that it reacts to the austere autonomy of high modernism by impudently embracing the language of commerce and the commodity. Its stance towards cultural tradition is one of irreverent pastiche, and its contrived depthlessness undermines all metaphysical solemnities, sometimes by a brutal aesthetics of squalor and shock.’

The editors of the architectural journal PRECIS (1987) see postmodernism as a legitimate reaction to the monotony of universal modernism’s vision of the world.

‘Generally perceived as positivistic, technocentric, and rationalistic, being about linear progress, absolute truths, rational planning of ideal social orders and the standardisation of knowledge and production. Postmodernism by way of contrast privileges heterogeneity and differences as liberative force in the redefinition of cultural discourse. Fragmentation, indeterminacy and intense distrust of all universal or totalising discourses are the hallmark of postmodernist thought.’

Examples of postmodernism include:

– The rediscovery of pragmatism in philosophy – Rorty (1979)

– New ideas about the philosophy of science – Kuhn (1962) and Feyerbrand (1975)

– Foucault’s focus on polymporhous correlations in place of simple or complex causality in history.

– New developments in maths emphasising indeterminacy – chaos theory a fractal geometry.

– the conercn for ‘the other’ in anthropology and politics.

What all of the above have in common is the a rejection of metanarratives (large scale theoretical interpretations purportedly of universal application.

Eagleton’s full description of postmodernism…

‘Post-modernism signals the death of such ‘metanarratives’ whose secretly terroristic function was to ground and legitimate the illusion of a ‘universal’ human history. We are now in the process of wakening from the nightmare of modernity, with it manipulative reason and fetish of the totality, into the laid-back pluralism of the post-modern, that heterogeneous rnage of life-styles and language games which has renounced the nostalgic urge to totalise and legitimate itself… Science and philosophy must jettison their grandiose metaphysical claims and view themselves more modestly as just another set of narratives’.

Source – David Harvey – The Condition of Postmodernity

NB – The above is simply paraphrased from David Harvey’s excellent book ‘The Condition of Postmodernity’.

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