3.5.6.2 Increasing Inequality – ‘the 1%’
The unbalanced negotiations to share wealth have resulted in increasing inequality, leading to a few people becoming very wealthy: the 1%
There is a tendency for economic inequality to increase – as described in Thomas Piketty’s best-selling book, Capital in the Twenty-First Century. It is a growing problem that is causing discontent, because it is not just virtuous hard work that has made some people so wealthy. A BBC article, Thomas Piketty: The French economist US liberals love, explained how Piketty had shown why those who are already wealthy become more so…
“…because the rate of return on capital has been outpacing the rate of economic growth. In layman’s terms, the rich are getting richer”.
Very wealthy people, a category that includes CEOs and some other directors, have seen their incomes increase disproportionately. As reported by Reuters in July 2019, for example, Rich get richer, everyone else not so much in record U.S. expansion:
“… the longest U.S. economic expansion in history, one perhaps best characterized by the excesses of extreme wealth and an ever-widening chasm between the unfathomably rich and everyone else.”
CEOs had more power than the rest of the workforce, over matters of remuneration, and they took full advantage. Boards of directors are composed of people who know each other. Many sit on the boards of several companies – as described by Dean Baker: Corporate Cronyism: The Secret to Overpaid CEOs.
The shareholders, and those directors who had share options, also gained as share prices have soared. The increasing inequality has caused concern among many people. ‘World’s richest 1% get 82% of the wealth’, says Oxfam, in a report (using data from Credit Suisse) that shows these findings:
“Some 82% of money generated last year went to the richest 1% of the global population while the poorest half saw no increase at all”
“42 people now had as much wealth as the poorest half”.
This inequality is sharply tilted in favour of the billionaires and there are many arguments for taxing them more heavily. Edoardo Campanella, in asking the question Abolish the Billionaires?, has also mentioned the other aspect of inequality: the lack of opportunities for the poor to improve their lot:
“The meritocratic mantra that has long underpinned the American Dream and justified unequal outcomes has begun to lose its appeal as wealthy families monopolize the best educational, social, and economic opportunities.”
As described later, this increasing inequality is creating political pressures – so the politicians may be incentivised to act (6.7.2.2).
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/3562a.htm.