Ole Hendrickson
Extreme wealth, the plutocrats and Canada

| January 27, 2016
Image: Mike Licht/flickr

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Just ahead of this year's World Economic Forum in Davos, Switzerland, the global charity and relief organization Oxfam issued a stern warning about increasing global inequality. Oxfam's new report, "An Economy for the 1%: How privilege and power in the economy drive extreme inequality and how this can be stopped," points out that in 2015, a handful of billionaires held wealth equal to the world's poorest 3.6 billion people. The world's 62 richest people -- less than 0.000002 per cent of global population -- had as much wealth as the poorest 50 per cent. And global inequality continues to get ever more extreme.

Oxfam offered a series of solutions for policymakers: ensure that workers get a living wage and retain their right to unionize and strike, promote women's economic equality, keep the influence of powerful elites in check, provide universal access to appropriate and affordable medicines, share the tax burden more fairly and use progressive public spending to tackle inequality.

Rise of the super-rich

The Handbook on Wealth and the Super-Rich is a new effort by academics to explain how extreme wealth has arisen and the problems it creates. Two chapters of this book are available for online review.

In Chapter 1, editors Iain Hay and Jonathan Beaverstock credit the 2008 global financial crisis with sparking debate about inequitable levels of wealth in global society. They point to several "informative and popular writings on the rise of the global super-rich, and how they occupy the most exclusive places and networks on the planet, distanced from the rest of us." They cite Canadian journalist Chrystia Freeland's 2012 work, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else, among these.

Ms. Freeland's book received considerable attention and praise. One Amazon review suggested that she may have devoted too much attention to "lifestyles of the rich and famous," but credited her with balancing the picture with facts such as "the massive increase in poverty and early death rates in the former Soviet Union and the increase in rural suicides in India under neoliberal regimes."

There is no shortage of modern examples of plutocrats seizing the reins of power. Vladimir Putin and Silvio Berlusconi are good examples. They also happen also to be good friends: late last year they partied together, sharing a $90,000 bottle of wine in Crimea -- the portion of Ukraine annexed by Russia in March 2014. To the victor go the spoils. If Donald Trump succeeds in his quest for the U.S. presidency, he can join the global plutocrats' club.

Hay and Beaverstock suggest that it's time to go beyond our fascination with "glitzy lifestyles and super-rich consumption" and consider extreme wealth and extreme inequality in a more serious manner. They acknowledge Thomas Piketty's Capital in the Twenty-First Century as "the pinnacle of the academy's intervention on wealth and inequality," while adding "it cannot of course tell the full story."

The Handbook on Wealth and the Super-Rich conveys a sense of urgency. Hay and Beaverstock say that the global distribution of wealth is "now so disproportionate as to be as outrageous and alarming as it is absurd." They find figures for specific jurisdictions "almost as disheartening" as the global picture:

"The richest 86 Canadians‚Ķ have the same wealth as that country's poorest 11.4 million.  Expressed in other terms, 0.002 per cent of Canadians have wealth equivalent to that held by 34 per cent of the population."

The morality of extreme wealth

Another chapter of the Handbook is Andrew Sayer's "moral economic perspective" on extreme wealth. Sayer, Professor of Social Theory and Political Economy at Lancaster University in the U.K., draws upon arguments from his 2014 book, Why We Can't Afford the Rich

Sayer says that while we think of "investment" as a good thing, this term is used in two quite different ways. First, "investment" can mean what we invest in: infrastructure, equipment, training, etc. Here, says Sayer, the focus is on wealth creation. Second, "investment" can mean financial gains from lending, saving, purchasing financial assets or speculation. Sayers calls this wealth extraction and asserts that it results in "unearned income."  

Sayer claims that this distinction is of "enormous practical importance for both economic growth and wealth distribution." The second meaning is "central to the legitimation of the rich," who are "essentially siphoning off wealth produced by others." These "others" -- workers who are actually producing goods and services -- must generate a surplus for the "investors"; and hence on average must be paid less than the value of what they produce.  

While this perspective is hardly new, Sayer calls for much greater attention to the degree to which unproductive "investments" now dominate the economy. He says the main causes of the 2008 financial crisis (and the bubble that preceded it) were "unearned income from speculation on an ever-growing range of financial assets," and "burgeoning tax avoidance, even as taxes on capital fell."

Sayer says, "The massive concentration of wealth over the last 35 years has been both cause and consequence of a shift in political power to the rich." Dominating the media, making political donations, and lobbying for favourable policies, buys the "financial plutocracy" huge political influence. 

This immense power wielded by the plutocrats can clearly have adverse impacts on the well-being of the majority. Sayer says the plutocrats' "most brilliant coup" was "to offload the costs of its financial crisis onto the 99 per cent." He says their next coup will likely be to push through trade treaties such as the Trans-Pacific Partnership (TPP). Under the TPP, a national government that "tries to impose restrictions on capital, say, to protect the environment or protect labour and human rights, regulate finance or keep its public sector public or restrict the growth of corporate property rights" could be sued by a closed international court. Sayer is particularly critical of the TPP's investor-state dispute settlement mechanism, which he says would represent "a huge victory for plutocracy over democracy."

With increasing inequality, "the production of exclusive luxuries takes precedence over production for the needs and wants of the vast majority of population, particularly the poor." Sayer cites the example of housing, where so-called property "investments" by the rich drive up land values and make it impossible for ordinary people to live near their jobs. And not only do the wealthy few consume a disproportionate amount of the Earth's resources, their search for exponential economic growth to get a return on "investments" creates a disincentive to act on climate change.

Environmental injustice

As the vast majority of people -- the 99% -- receive a diminishing share of total wealth, demand stagnates, economies slow, and capacity to pay off accumulated debt diminishes. Sayer warns that "debts piled up into the future can only be repaid if the output produced by future generations grows fast enough." He adds, "Given the size of the debt crisis, this is clearly an impossibility." And he warns that "in a world on the brink of runaway global warming, resumed growth in countries with already massively unsustainable carbon footprints is madness -- again not only dysfunctional, but unjust in damaging the environment of poorer countries and future generations."

Sayer's warnings are important for Canadians and the Canadian government. The euphoria of finding global consensus at the Paris climate change conference is over and the hard slogging of decarbonizing Canada's economy has just begun. The Liberals' promised electoral reform, which could help keep the power of the elites in check, may well founder in a morass of confusing options. 

And, not least, Ms. Freeland, author of Plutocrats, is now Minister of International Trade. Her mandate letter calls upon her to "consult on Canada's potential participation in the Trans-Pacific Partnership." One must assume that she is well aware of the TPP's potential negative impacts on the well-being of the majority of Canadians. The TPP will be a major test for Canada's Liberal government.

Ole Hendrickson is a retired forest ecologist and a founding member of the Ottawa River Institute, a non-profit charitable organization based in the Ottawa Valley.

Image: Mike Licht/flickr

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