Inequality Study in Countries of the World Fails to Show Its Continuing Rise
The Guardian newspaper’s Global Inequality Project gives us a snapshot of current inequality, but fails to show how inequality is growing with the intensification of capitalism says Prof. Leo Panitch
SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries coming to you from Baltimore.
The British Newspaper, The Guardian, launched a new project, co-funded by the Ford Foundation on global economic inequality. The data compares inequality levels in different countries, and shows that the most equal countries are in Scandinavia, and in Eastern Europe. Meanwhile, the most unequal countries are in southern Africa, and in Latin America. The project shows that the country with the highest current level of inequality is South Africa.
Joining us to discuss this is Leo Panitch. Leo is a Senior Scholar and Professor Emeritus of Political Economy at York University. He has authored, “The Making of Global Capitalism: The Political Economy of American Empire”.
Good to have you with us, Leo.
LEO PANITCH: Great to talk to you Sharmini.
SHARMINI PERIES: So Leo, neo-liberal economists usually disregard inequality. Their argument is if you have enough, why should you care if someone else has more? So, what makes inequality important, and how does it affect society?
LEO PANITCH: Well, the very term society, tells you that if you have vast differences in a given country, between poor people and extremely wealthy people, if some people don’t know where they’re going to sleep, what they’re going to eat. Or, indeed whether they’re going to have a job tomorrow, while others don’t have to work at all, but are able to rake in their dividends, and take advantage of their enormous wealth, well sure, you don’t have a society at all.
What you have is a class system, where, if anything, you have two societies, or sometimes more, rather than anything you can properly call a society. And, you know, looking at the data that this most recent study has shown up, which is just a photograph; it’s just a snapshot. It doesn’t show you anything over time. It can be very, very misleading in terms of whether countries are getting more or less unequal, or inside themselves, or around the world.
You know, the remarkable thing there, is that as you say, you see that South Africa, which just 20 years ago, went through this tremendous democratic revolution, has not been able to close the gap between the enormously wealthy minority, and the vastly impoverished majority. And that has precisely to do with their inability to take advantage and, indeed, the extent to which, if I may use this term, they’ve gotten screwed by their participation in global capitalism.
It’s rather different, let us say, for the Chinese, where what you see is also, over time, enormously growing inequality. But by virtue of China’s participation, and competitiveness in global capitalism, you see that the vast majority of people have increased their standard of living there. Have increased their incomes, even though China has become enormously more unequal.
And the reason for that is, that the vast majority have had an increase in incomes. But the tiny minority, including a lot of the Chinese Communist members who have turned themselves into a bourgeoisie, have increased their wealth and income, far, far more than have Chinese workers.
SHARMINI PERIES: Right. And, Leo is it safe to assume that the gap between the rich and poor has only widened in the last decade, has inequality grown? What does it look like?
LEO PANITCH: Yeah, I call this advanced capitalism, advanced inequality. There was a predominant view throughout the second half of the 20th century, that as capitalism matured, as it grew more global, you would see inequality declining. And this was Dickensian, the welfare state view. Of course, the contrary has happened. Insofar as inequality did decline for a period after World War II, it had to do with the strength of trade unions, and radical, or at least social democratic parties in that period, but primarily trade unions.
The defeat of trade unionism around the world, since the 1970s and 1980s, has led over time, to all these societies becoming more and more unequal, including the wealthiest.
So, if you look at Scandinavia, you get this snapshot that makes it look like some Scandinavian countries are best off, in terms of internal inequality. But what that doesn’t measure, is the aggravated conditions where they become more unequal, even though they still have the vestige of a welfare state that make them more equal than others.
But over time, what you’d see is growing inequality even in those countries.
SHARMINI PERIES: Right. And can government policy be used to mitigate this inequality, and if so, how?
LEO PANITCH: Well, of course it can, but it depends on the balance of forces, rather than honest pulling policies out of our thumb. Of course it can mitigate inequality. You can have programs that provide massive redistribution of income. If you’re measuring a society, in terms of an index of its “happiness”, then you’d be capturing things like, whether there are collective services provided which don’t depend on income.
That is if you have free public transit, if you have extensively free public education, if you have collective services in healthcare, those don’t appear to as related to income. But they make an enormous difference in the well being of the vast majority of people.
So, of course governments can affect them, but, if you have a balance of political forces, where trade unionism is undermined, where all parties, including the social Democratic parties, have turned to neo-liberalism rather than to the provisional collective services, then you’re going to find that the societies are worse off, by virtue of those policies not being there anymore.
SHARMINI PERIES: So, Leo, you made this point earlier about South Africa. We assume, and economists assume, that if you have a democratically elected government, in the interest of the majority of the people, the majority of the people will vote for a government that is going to choose public policy in their interest.
But in the case of South Africa, you said this is not happening. Why is this not happening?
LEO PANITCH: Really good question, Sharmini. And it goes right back to the compromise that was always made in capitalist countries between democracy, and the protection of property. The protection of capital, the protection of wealth, that’s what it’s about. And that’s why capitalist classes, the wealthy, have always feared democracy. They thought, “My God, if everybody gets the vote, the result of that will be that we will lose our wealth. We will lose our privilege, etcetera.”
That hasn’t happened for the most part. And in South Africa you see, even with an ANC government, that was committed to socialism in a big sense, but in partnership with the South African Communist Party, has not been able to do this. What’s going on? Well, it has to do with the democratization of South Africa, having been tied to an agreement with those people who own the mines, and the banks in South Africa, that they would not press the inequality measure above all.
That was the deal that was made. And when that deal was made, that hampered them. Secondly, the deal that was made involved them being linked to international capitalism, oriented to the free-movement of capital, to free trade, etcetera. Well, that means that when you do try to introduce a policy of greater equality, what you find is, that capital immediately threatens that it will leave the country.
Or, if you’re not able to raise taxes enough from the poor people obviously, but from the wealthy because of the deal you made. Then you will find that when you try to borrow the money to allow you to rebuild your economy, so you’re able to sustain redistribution, and better social programs, you’ll find that foreign capital will not lend you the money.
Or, if they did lend you the money, would immediately threaten you with pulling those loans out. That’s been the situation around the world. And what we are increasingly seeing, and this is the tragedy of democracy today, is that insofar as you try to combine democracy with social equality, you find that very quickly you have to move to more radical programs than that.
If you aren’t able to control the movement of capital, if you aren’t about to democratize what’s invested, where it’s invested, how it’s invested, then you find that you can’t hold on to these programs of social equality. The policies no longer work, and you need to move very quickly to a policy of taking the enormous privilege, and wealth away from the tiny minority that has it.
That’s what Occupied pointed to, in their 99 to 1 demonstrations. It wasn’t just about look at all of this inequality; it was about the power of the 1%, which makes doing anything about this inequality almost impossible, unless you remove their power.
SHARMINI PERIES: Now, Leo, there’s been extensive conversations about inequality, even since Thomas Piketty put his book out on this issue titled, “Capital”, I think, in 2014, there’s been intense discussions at institution levels, economic, political, governments, and so forth, and people are quite aware of this problem. It’s not something new and it is clearly tied to neo-liberal economic policies.
But there’s no corrective surgery being done, in fact, the situation’s getting worse in many countries. Like, if you look at Greece and Spain…
LEO PANITCH: Because people will not bite the bullet. I mean, you know, at Davos, the world’s economic and political and social elite, and culture elite, have been discussing this enormous growth in inequality, since the early years of this millennium. That’s been a central topic even before the crisis of 2008. Neo-liberalism was never popular, in the sense of not throwing up evidence of this inequality.
The point is, that the talking about it doesn’t do anything. And those establishment elites, obviously, are not going to deal with what is the central problem. Which is that the question of what’s invested, how it’s invested, where it’s invested, is not democratized. And, you know, therefore, them talking about it is smoke and mirrors, even those who are well intentioned, you know, like George Soros. You know, insofar as they’re well intentioned but will not go to the heart of the matter. Well, then whatever they propose, by way of guaranteed annual incomes, or what have you, is trapped within this problem.
And the result of this is that finally, people are not listening anymore. The institutions of neo-liberalism, not only the ideology of it, have been discredited. That applies to the European Union; it applies to the mainstream parties whether they’re Social Democrata–