Dr.Arun Korath
The number of dollar millionaires rose from 10 million in 2009 to 13.7 million in 2013. Since the financial crisis, the ranks of the world’s billionaires has more than doubled, swelling to 1,645 people. At the start of 2014 the richest 85 people on the planet owned as much as the poorest half of humanity. Between March 2013 and March 2014, these 85 people grew $668_million_richer each day. It is said that if Bill Gates were to cash in all of his wealth, and spend a million dollars_every single day, it would take him 218 years to spend it all. In reality though, he would never run out of money: even a modest return of just under 2 per cent would make him $4.2 million each day in interest alone.
And extreme wealth is not just a rich-country story: the number of known billionaires in India increased from two in the 1990s, to 65 in early 2014. Sub-Saharan Africa has 16 billionaires, alongside the 358 million people living in extreme poverty.
Why is any of this a problem? The rapid rise of extreme economic inequality is significantly hindering the fight against poverty. Income distribution within a country has a significant impact on the life chances of its people. When public services are not free at the point of use, millions of ordinary women and men are excluded from accessing health care and education. One of the most pervasive – and oldest – forms of inequality is that between men and women. And there also is a very strong link between gender inequality and economic inequality. Men are over-represented at the top of the income ladder and hold more positions of power as ministers and business leaders. Only 23 chief executives of Fortune 500 companies and only three of the 30 richest people in the world are women. Meanwhile, women make up the vast majority of the lowest-paid workers and those in the most precarious jobs. In Bangladesh, for instance, women account for almost 85 per cent of the workers in the garment industry. These jobs, while often better for women than subsistence farming, offer minimal job security or physical safety. There is also a strong correlation between extreme inequality and low social mobility. If you are born poor in a highly unequal country you will most probably die poor, and your children and grandchildren will be poor too. In Pakistan, for instance, a boy born in a rural area to a father from the poorest 20 per cent of the population has only a 1.9 per cent chance of ever moving to the richest 20 per cent . In the U.S., nearly half of all children born to low-income parents will become low-income adults.
The problem, is that a market economy, eventhough it’s brought prosperity to hundreds of millions, without government intervention it tends to concentrate wealth in the hands of a few, leading to greater inequality. Despite this economic approach in recent years have been dominated by a “market fundamentalist” approach that insists that sustained economic growth only comes from reducing government interventions and leaving markets to their own devices.
Women are worst affected by market fundamentalist policies. They lose out most when regulations like paid maternity leave and holiday entitlements are watered down or when state services are eroded. And, because women and children disproportionately benefit from public services like health care or free education, they are hit hardest when these are cut back.
Many of the underlying causes of the growing gap between rich and poor–fast technological change and the rapid globalization of the economy–are deep-seated and likely to persist. The population will soon be divided into two groups: those who are good at working with intelligent machines, and those who can be replaced by them. The former will prosper; the latter will play a lot of video games.
There are many reasons for economic inequality within societies, and they are often interrelated. Acknowledged factors that impact economic inequality include, but are not limited to:inequality in wages and salaries, the income gap between highly skilled workers and low-skilled or no-skills workers ,wealth concentration in the hands of a few individuals or institutions, labor markets, globalization, technological changes, policy reforms, taxes; education, computerization and growing technology; racism, gender, culture, innate ability
A major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job. If few people need that job done, there is low demand for that type of labour. When there is high supply and low demand for a job, it results in a low wage. Conversely, if there is low supply and high demand (as with particular highly skilled jobs), it will result in a high wage. The gap in wages produces inequality between different types of workers.
Elites, in rich and poor countries alike, use their heightened political influence to curry government favors – including tax exemptions, sweetheart contracts, land concessions and subsidies – while blocking policies that strengthen the rights of the many. In Pakistan, the average net-worth of parliamentarians is $900,000, yet few of them pay any taxes. This undermines investment in sectors, such as education, healthcare and small-scale agriculture, which can play a vital role in reducing inequality and poverty.
Solution to all of this? Tax the rich. Per its math, a tax of 1.5 per cent on the wealth of the world’s billionaires today could raise $74 billion. This would be enough to fill the annual gaps in funding needed to get every child into school and deliver health services in the poorest 49 countries.
Dr.Arun Korath, Associate Professor, Department of Management Studies
College of Business and Economics Dilla University, Ethiopia
Source: The Ethiopian Herald
