Global inequality will rupture capitalism!

Early this year, the international charity Oxfam had probed through a massive, statistical data, assimilated on global inequality. Their revelations have indeed been shocking. As of the current year, 2019, billionaires appear to have acquired more wealth than ever before, while almost half of humanity has barely escaped the clutches of extreme poverty, living on less than $5.50 per day!

Contrary to what was perceived earlier, extreme disparity of wealth has deepened an existing crisis, to likely hurt the very future of capitalism. These findings also shattered the myth of the United States' economic might and its global political standing.

Ray Dalio, is a billionaire and co-chairman of Bridgewater Associates, the world's largest hedge fund. In a recent interview given to the TV show '60-Minutes', has reportedly said that the time was ripe for global leaders, to accept hard core realities, as this crisis of human divide, has deepened to the extent that it is now, deemed to be a matter of national emergency.

In another LinkedIn essay, while elaborating on the connection between capitalism and income inequality, the billionaire, Dalio had warned that conditions in America today are scarily similar to those in the 1930s, when countries like Germany fell into the hands of authoritarian governments. His exact words: 'There has been little or no real income growth for most people for decades', and 'prime-age workers in the bottom 60% have had no real (inflation-adjusted) income growth since 1980',

Dalio has also sounded the alarm on the potential for conflict, that would naturally result from major gaps, between the haves and have-nots: He states: 'Disparity in wealth, especially when accompanied by disparity in values, leads to increasing conflict and, in the government, that manifests itself in the form of populism of the left and populism of the right and often in revolutions of one sort or another.'

While he has advocated for higher taxes on the wealthy in general, public-private partnerships, encouraging politicians to consider return on investments rather than focusing simply on budgets, Dalio is less focused on specific policy ideas that relate to achieving these goals, and preventing the revolution, that he imagined, will likely sweep mankind, in future.

Dalio is concerned not only about the inequality and social divisions caused by capitalism, but also, whether those divisions will have the ability to break the system that allowed him, personally to become a billionaire, in the first place. 'It doesn't need to be abandoned,he said in his 60 Minutes interview. 'Like a car, like anything-a plane, a school system, anything-it needs to be reformed in order to work better.'

About his coming of age, he writes, 'I was raised with the belief that having equal opportunity to have basic care, good education, and employment is what is fair and best for our collective well-being. To have these things and use them to build a great life is what was meant by living the 'American Dream'. Now, Dalio has painfully surmised that perhaps this cherished dream is lost to ambitious, young people who work hard in America.

Obviously, the new model of growth has excluded large portions of the population, which in fact has reinforced inequality in a variety of ways......like access to education, technology, resources and even social connections that help individuals acquire jobs and remain relevant in the labor market.

Confirming other studies that were conducted, in the recent years, the IMF has categorically summarized, that in many countries, the richest 1% of the population has benefited quite disproportionately, from economic growth. Even in countries where rapid economic growth helped large swaths of the population emerge from poverty, the top earners have benefitted much more than others.

The average share of income going to workers versus the firms, has reflected a steep decline in many countries, which is indicative of the fact that in the global labor market, the share of income has generally implied higher income inequality. This report has not been refuted!

Across the countries spread around our globe, those with lower shares in labor income have tended to also experience higher inequality levels in both market income, as well as disposable income. Within countries, further increase in labor income shares, have also been associated with declines in income inequality.

In the US, a quarter of American workers make less than $10 per hour. That creates an income below the federal poverty level. These are the people who wait on fellow Americans, every day. These are the fortunate Americans who live just above the poverty line. They include cashiers, fast food workers, and nurse's aides. Or, maybe they also include many of my valued readers.

In 2012, the top 10 percent of earners in the US could take home 50 percent of all income. That's the highest percentage in the last 100 years. The top 1 percent has been able to take home only 20 percent of the income.

By 2015, America's top 10 percent already averaged more than nine times as much income as the bottom 90 percent. And Americans in the top one percent averaged over 40 times more income than the bottom 90 percent.
While the average family income has grown nearly 26 percent from 1993 to 2015, 52 percent of that total growth was has been of the population.

From 2000 through 2006, the number of Americans living in poverty increased 15 percent. By 2006, almost 33 million workers earned less than $10 per hour. Their annual income is less than $20,614, which is below the poverty level, for a family of four.

Most of these low-wage workers in the US have no Health insurance, nor sick days nor pension plans from the employers. They can't afford to get ill and have no hope of retiring. The resultant healthcare inequality has obviously increased the cost of medical care for everyone.

People who can't afford preventive care, only wait to wind up in the hospital emergency room. In 2009, half of the people (46.3 percent) who used a hospital had stated that they went to the hospital because they had no other place to go. They used the costly emergency room facilities as they would have liked to use their primary care physician's!
In the end, hospitals have passed this cost along to Medicaid.

During this same period, average wages remained flat. That is, despite an increase of worker productivity of 15 percent. Corporate profits increased 13 percentannually, according to Steven Greenhouse's famous book titled 'The Big Squeeze'

Since the rich were able to get richer faster, their piece of the pie grew larger. The wealthiest 1% have increased their share of total income by 10 percent. Everyone else saw their piece of the pie shrink. Even though the income going to the poor improved, they fell further behind when compared to the richest. As a result, economic mobility has now worsened.

Income inequality is also blamed on cheap labor in the Asian superpower China, unfair exchange rates, outsourcing of jobs. Corporations are often blamed for putting profits ahead of workers. But they must do so, to remain competitive.

U.S. companies must compete with lower-priced Chinese and Indian companies who pay their workers much less. As a result, many companies have outsourced their high-tech and manufacturing jobs overseas. The United States has lost 20 percent of its factory jobs since 2000. These had been traditionally, higher-paying union jobs.

Implementing the concept of 'deregulation' means going through less stringent investigations into labor disputes. That also benefited businesses more than the wage earners.It is the technology, not globalization that has read the income inequality, and has also replaced many workers at factory jobs. Those who have training in technology can get higher paid jobs.

During the 1990s, companies went public to gain more funds to invest in growth. Managers must now produce ever-larger profits to please stockholders. For most companies, payroll is the largest budget line item. Reengineering has led to doing more with fewer full-time employees. It also means hiring more contract and temporary employees.
New immigrants....many in the country, illegally, have filled more low-paid service positions. They have less bargaining power to demand higher wages.

Many of the causes of U.S. income inequality can be traced to an underlying shift in the global economy. Emerging market incomes are increasing. Countries such as China, Brazil, India are becoming more competitive in the global marketplace. Their workforces are becoming more skilled. Also, their leaders are becoming more sophisticated in managing their economies. As a result, wealth is shifting to them from the United States and other developed countries.

Trying to prevent U.S. companies from outsourcing will not work. It is punishing them for responding to global redistribution of wealth. Neither will protectionist trade policies or walls, to prevent immigrants from entering illegally.
The United States must accept that global wealth redistribution is occurring. Those in the top fifth of the U.S. income bracket must realize that those in the bottom two-fifths cannot bear the brunt forever.

The government should provide the bottom two-fifths access to education and employment training.
What I have penned above may or may not provide the ideal solutions. We must act timely to avoid another man made crisis of doom, ready to engulf us ...for our very own, shortcomings! Good bye


The writer is a former educator based in Chicago