This is just a summary of the opening chapters of a book called Ten Years to Midnight (2020), by a team of people from Price Waterhouse Coopers, who figure we have ten years to solve major global problems before the situation becomes irreparable.
Given the organisation the authors come from we would not expect them to be left leaning, so hopefully other people can take what they say about the causes of the problems seriously.
What they say is that wealth asymmetry (when a relatively small group of people own most of the wealth) is one of the fundamental problems facing the planet. Wealth asymmetry has social consequences – especially if people feel they are heading downwards, or struggling to keep up with the prosperity they used to have. I would say that wealth asymmetry affects two of the other three problems they identify: Technology destroying jobs, and political polarisation and increasing distrust.
Less than 1% of the world’s population hold over 45% of the world’s wealth. The top 10% hold 80% of the world’s wealth (p.15-16).
Growth in shareholder income has been more than double the growth in wages between 1999 and 2015 (p.16).
Money is moving from publicly listed companies to private equity markets, which limit investment to the well off. The number of people investing in publicly listed companies is shrinking (p.17-18).
In the OECD the size of the middle class has consistently shrunk since 1988. In North America, the number of people who identify as belonging to the middle class has also fallen “from two thirds to one half of the population since 2008” (p.15).
Home ownership is shrinking (p.18).
“For the first time in recent history a large percentage of parents believe their children will be worse off than they are” (p.15).
Governments collect less tax from the wealthy (p.18), and try to make it up from the less wealthy.
Globalisation, and the technology which enabled it, exported worker’s wealth and jobs from the developed world, which may have been good for the places the jobs were exported to…. but the benefits overwhelmingly went to the upper echelons, even with the revitalising of the so-called ‘knowledge industries’. Most people in the developed world were left behind.
“Unchecked, this crisis will infect (indeed it is already infecting) our social, economic and political systems” (p27).
- One thing missing from all this analysis, is the obvious point that the greater the wealth asymmetry, the greater the power of the wealthy to influence politicians and laws, and to influence what most people believe to be true, and how they act. The wealthy can buy media, media performers and think tanks (and sometimes universities). The greater the wealth asymmetry, the easier it is for the wealthy to make sure they get more of the wealth, and disempower most people even more, making the situation much worse. It also makes it relatively easy to divide and conquer the ‘lower classes’ and get them to hate each other rather than see the problems they have in common – thus increasing polarisation and distrust.
“When the general population is not prospering, societies are in deep trouble”.
- More accurately, I think, societies are in trouble, when people have lost a sense of things improving, or see the world as in decline.
In that situation, people don’t dream, they don’t plan, they don’t purchase things, they don’t set up businesses. Creativity declines. People may get resentful. Community participation may decline, so life gets harder for all. People may fall into drugs and related violence as distractions from their misery. They can become insular. There may be less community involvement, but others are seen as hostile. In particular the dominant groups, can be seen to be the problem. And they might well be part of that problem. People may cling to an idea of a better past, while trampling on the institutions that have failed them; thus destroying that past (p.27).
- I’d also suggest that community can in some circumstances build up during collapse, as people withdraw from dependence on elites and come to mutual dependence upon each other. This happens in many poorer areas in the world, where they create their own economies, politics and self help. But it seems rare in the developed world, perhaps because capitalism destroys such felt interconnection – everyone fights against everyone else… but I don’t know.
Even university graduates no longer have a path to prosperity before them, in the supposed knowledge economy. They probably will not get high paying jobs, they may be expected to intern for free in the hope of a job, they will pay a large portion of their income for accommodation or live with their parents (which may not help maturation) and they will have large education debts to pay off. In the UK the education debt has almost tripled in the last 5 years (p30-31).
Older people face pension cutbacks on inadequate pensions, and those who have pension funds face market risk. If the market truly tanks, then they will loose everything. In the US, pension fraud by employers seems common, and people again lose money (p.32-3).
People in the middle of their career may have a mortgage, especially given the low interest rates we currently have. However, they may be supporting parents and children. Any rise in interest rates, or loss of job (due to automation, market crash, or managerial incompetence) would be catastrophic. They have little potential for resilience. If they fail, then their dependents fail. One estimate suggests that over 35% of existing jobs in the US are threatened by automation and artificial intelligence. So a large number of people’s survival is at risk.
Even if new jobs replace the ones being destroyed, then change is painful, and change does not promise success or new prosperity (p.36-39).
- Technology is designed to render workers irrelevant to cut costs and increase employer power over the production process. This increases wealth asymmetry and occurs because of the separation between levels of wealth. Employers have little care for their workers. Eventually the current style of mass economy will collapse as fewer and fewer people have disposable income.
- To add to this, few people are likely to think, comfortably, the world is currently stable. They likely know (even if unconsciously) jobs and homes (sunk capital) can be threatened, or destroyed, by ecological failure, storm, flood, fire and so on. This conglomeration of potential and painful disruption, makes up an existential crisis.
- I would suspect such people would be prone to trying out fascisms that promise stability and returns to greatness. Without that they may end up with nothing. Fascisms lead to scapegoating, and internal warfare against people defined as the evil other, so they lead to increased intolerance, increased violence and increased precariousness, because you have to make sure you, personally, are never thought of as one of, or even in sympathy with, that evil other.
- The evil other is usually promoted as a distraction from problems generated by the wealth elites. This again points to polarisation as a possible deliberate creation.
The authors of this book point (p.60-61) to the 2020 Edleman Trust Barometer which states
despite a strong global economy and near full employment, none of the four societal institutions that the study measures—government, business, NGOs and media—is trusted. The cause of this paradox can be found in people’s fears about the future and their role in it, which are a wake-up call for our institutions to embrace a new way of effectively building trust [and] balancing competence with ethical behavior….
A majority of respondents in every developed market do not believe they will be better off in five years’ time, and more than half of respondents globally believe that capitalism in its current form is now doing more harm than good in the world…
In a majority of markets, less than half of the mass population trust their institutions to do what is right.2020 Eldelman Trust Barometer
The authors of the Trust Barometer are clear that “distrust is being driven by a growing sense of inequity and unfairness in the system.” They report that a massive:
83 percent of employees say they fear losing their job, attributing it to the gig economy, a looming recession, a lack of skills, cheaper foreign competitors, immigrants who will work for less, automation, or jobs being moved to other countries.2020 Eldelman Trust Barometer
in capitalism, survival depends on jobs, and hence survival seems threatened – and this does not factor in the problems of climate change or pandemic.
These problems around wealth asymmetry are mutually reinforcing (p.39), and affect most people.
- This is a crisis which seems to have no signs of getting better. And pretty much the only solution we are allowed to hear, is “leave it to the market. Don’t trust government. Don’t participate in your own government, or participate violently.” Beat people up or Give up.
The book does not recognise the politics of wealth asymmetry and its tendency to oligarchy, or the rule of the few. It does not appear to consider how the asymmetry and oligarchy has been established, and how that oligarchy makes maintaining its power more important than solving pronounced problems such as: wealth asymmetry; technological displacement of workers; or the ecological destruction which is used to generate wealth. This makes its remedies somewhat dubious.
There is one old point, usually said to have been made by US Supreme Court Justice, Louis Dembitz Brandeis (1856-1941)
We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.Raymond Lonergan in Mr. Justice Brandeis, Great American (1941), p. 42.
Wealth Asymmetry is not a sign of social health, and that leads on to the next two posts about the Carbon or Polluter Oligarchy as the main factor in causing climate change, and in preventing us from dealing with it.