Inequality has become the new normal under neoliberal capitalism and has reached unprecedented levels. This level of inequality is unsustainable in the long run.
Policies such as tax cuts for the rich and the corporate class, lower wages, privatization, deregulation and the unfair distribution of wealth have created this huge inequality. The capitalist profit system inevitably offers a much greater reward to the owners and managers of capital than to the workers they employ or the customers they steal.
Left to itself, the wealth of capitalism rises further to the top. The economic system driven by profit, exploitation and greed encourages the concentration of wealth in fewer hands. This is the general tendency of capitalism.
The only exception was the post-war period from the 1950s to the 1970s, the period of post-war settlement between capital and labor. Social democratic governments in many European countries have dramatically increased taxes on businesses and the wealthy. The state has played an essential role in the redistribution of wealth in society. A larger share of national income has been allocated to public services and social security. At the same time, unions have become stronger and better able to fight for a better share of the profits.
In the neoliberal era, all of these reforms were overturned. Taxes on big business and the rich have been cut dramatically, if they are paid at all. Public services have been cut and, in many cases, privatized. The unions have been seriously weakened. The result, as predicted by the neoliberals, is that the increase in GDP is not shared but passes into the hands of the rich.
The inevitable result has been the excruciatingly unequal distribution of wealth between a billionaire class and the rest of us. Never have we seen such outrageous levels of personal opulence. The rich have gotten richer and richer while the rest have stood still or become poorer. For example, in Oxfam’s 2020 annual report, the richest 1% has more than twice as much wealth as 6.9 billion people.
And according to the Credit Suisse Global Wealth Report, 175,000 ultra-rich people own 25 percent of the world’s wealth. Meanwhile, nearly half of humanity lives on less than $ 5.50 a day. And nearly a billion people barely survive in extreme poverty on less than $ 1.90 a day. The coronavirus pandemic has only accelerated this inequality. In 2020, the wealth of the planet’s billionaires soared by 27.5 million, while another 131 million fell into extreme poverty.
Oxfam’s new report “The Inequality Virus” released in January 2021, reveals that: “The wealth of the ten richest men has increased by half a trillion dollars since the start of the pandemic – more than enough to pay for a vaccine for everyone and prevent anyone on Earth from falling into poverty because of the virus. “
These shocking statistics are in fact a major underestimate of global inequality. Industrial-scale tax evasion by the wealthy elite and corporations, which now store much of their wealth in tax havens, masks the real level of wealth. This includes billionaire arms dealers, drug lords, and other criminals who naturally never appear on the Forbes Rich list.
This persistent trend of rising inequalities creates a number of serious contradictions in the system. The continued decline in the purchasing power of assets leads to a decline in overall consumption and economic activity. As each study shows, the poor spend a much larger percentage of their income while the rich tend to accumulate their wealth.
Falling labor costs encourage employers to forgo investing in labor-saving machines. Why spend money on expensive equipment when you can still employ cheap labor to get the job done.
Growing inequalities have other negative consequences. It reduces the level of health and education of the workforce and undermines state resources. With the rich and their businesses paying less and less tax, there are only limits to making up the shortfall by levying more taxes on workers.
Debts are piling up. Developing countries are forced to take out new loans on difficult terms to meet expenses and repay previous loans. The inevitable result is that local and national public services must be further reduced.
Enormous wealth and inequalities create major obstacles to the advancement of all other members of society. Those at the top pass on their wealth and benefits to their children. Birth and connection become the key to its future, the vast majority remaining stuck in a groove of tightening standards of living and insecurity.
The old illusion of creating a true meritocracy within capitalism with all the benefits of efficiency and talent maximization it would offer is quickly dissipating in the nightmarish world of neoliberalism.
All of these negative aspects of rising inequalities lead to increasing polarization of society and growing political instability. The increase in poverty and the worsening of living conditions favor the emergence of demagogues and peddlers of false information who exploit the anger and discontent which accumulate. This is fueling the growth of far-right and even fascist movements.
Thus, we see a right-wing anti-globalization movement with calls for protectionism and trade wars. Actions that go directly against the interests of multinationals and the rich who rely on the growth of international trade to further increase their profits.
On the other hand, extreme inequality opens up the possibility of new radical popular struggles and the outbreak of mass movements. The growing gap between the rich and the rest cannot last forever.
Even among the elites themselves, there is a growing fear of where things are going. All of their closed mansions and separate and secluded lifestyles cannot protect them from people once they decide they have had enough. As we have seen in every popular revolution, there comes a point of obscene wealth when the pitchforks start to come for those at the top.
The writer is a freelance journalist.