(I wrote this in the Indian context . Purpose of this note is to share information and demonstrate how contrary to indoctrinated opinion of the common public the so called far right conservative/neoliberal ‘Market Economy’ is actually harmful for 99% of population of the country.
If found irrelevant or unworthy of discussion/debate, the note may please be deleted).
Introduction
A very benevolent definition of neoliberalism is that it is a focus on promoting competition through deregulation and on shrinking the state through privatisation and fiscal austerity.
There is, nevertheless, evidence that the far right economic prescription such as Reaganomics and the dominant neoliberal economic policy menu have commonalities: tax cuts for the rich, privatization and cuts to public services. This laissez-faire like policy benefits only the top 1% and actually allows the topmost corporates to control the economy and the government.
The Credit Suisse Global Wealth Report 2019 reported that the bottom half of the world’s population collectively owned less than 1% of total wealth as of mid-2019. The top 10% is estimated to own 82% of global wealth with the top 1% owning 45%. This extreme inequality is the product of an exploitative economic system designed to benefit a wealthy and powerful few. It is built on neoliberal economics and the capture of politics by elites.
Oxfam has published a series of reports highlighting the devastating effects of the neoliberalism pursued for the last 30-35 years throughout the world. The references are included below. Oxfam’s research has revealed that over the last 25 years, the top 1% have gained more income than the bottom 50% put together. Far from trickling down, income and wealth are being sucked upwards at an alarming rate.
Despite the above evidence, many world leaders, nevertheless, still pursue neoliberalism, probably egged on by the cronies that support and uphold such rulers. Former President Trump in the USA, Bolsonaro in Brazil, and Narendra Modi in India are exemplars of this trend, offering regressive policy menus like tax cuts for billionaires, obstructing measures to tackle the climate emergency or turbocharging racism, sexism and hatred of minorities. Common middle class and the poor are so completely indoctrinated in India that they blindly believe the PM.
Far right conservative economic policy has fostered corrosive inequality
Economic inequality is out of control. In 2019, the world’s billionaires, only 2,153 people, had more wealth than 4.6 billion people. Since 2015, the richest 1% has owned more wealth than the rest of the planet. In the US, economist Thomas Piketty has shown that over the last 30 years the growth in the incomes of the bottom 50% has been zero, whereas incomes of the top 1% have grown 300%.
Indian billionaires increased their wealth by 35% during the lockdown to ₹ 3 trillion, ranking India after U.S., China, Germany, Russia and France. Out of these, the rise in fortunes for the top 100 billionaires since the lockdown in March is enough to give every one of the 138 million poorest Indian people a cheque for ₹94,045 each, according to Oxfam’s ‘Inequality Virus Report’.
Mukesh Ambani, who emerged as the richest man in India and Asia, earned ₹90 crore an hour during the pandemic when around 24% of the people in the country were earning under ₹ 3,000 a month during the lockdown.
Increases in income and wealth inequality have too often been triggered by a slew of ideologically driven policies on issues like taxation, spending, corporate accountability, work and wages that serve the interests of the wealthy and powerful few. Public spending has long been hollowed out by regimes of ever lower taxes on the fortunes of rich individuals and corporations. Between 1985 and 2019, the global average statutory corporate tax rate fell from 49% to 23% and since 1980 the top rate of personal income tax in the US has almost halved, from 70% to 37% (data from 2007 to 2017 shown in Fig. 1).
Why Laissez-Faire economic policies creates extreme inequality
The Oxfam report “Economy for the 99%”, lists the following main reasons for the neoliberal economics have caused spiralling inequality: Corporations working only for those at the top; Squeezing workers and producers; Dodging Tax; Super-charged shareholder capitalism; Crony capitalism; The role of the super-rich; and Avoiding tax, buying politics.
The report also discusses the falsity of 6 assumptions that drive the neoliberalism —economy of the 1%. The false assumptions are: The market is always right and the role governments should be minimised; Corporations need to maximise profits and returns to shareholders at all costs; Extreme individual wealth is benign and a sign of success, and inequality is not relevant; GDP growth should be the primary goal of policy making; Economic model is gender neutral; and Planet’s resources are unlimited.
The article states “These six assumptions need to be overturned, and fast. They are outdated, backward looking, and have failed to deliver both shared prosperity and stability. They are driving us off a cliff. An alternative way of running our economy – a human economy – is needed urgently.” The article further goes on to outline the fundamentals of the human economy where governments will have to work for the 99%.
Mainstream economists express worry
Worried over the great divide between the rich and the poor, the leading academics, including the mainstream economic institutions such as the IMF, over the past one decade have produced robust evidence of the corrosive effects of inequality. Affected communities, activists, women’s rights organizations and faith leaders have spoken out and have campaigned for change around the world.
Some economists have opined that billionaires and extreme wealth are a sign of a failing economy rather than of success. In February 2019 The New York Times published an opinion piece on its front page, provocatively entitled ‘Abolish Billionaires’. The opinion piece is based on a blog of Tom Scocca, editor of the essential blog ‘Hmm Daily’, which argued: “A billion dollars is wildly more than anyone needs, even accounting for life’s most excessive lavishes. It’s far more than anyone might reasonably claim to deserve, however much he believes he has contributed to society.”
In an article in The Guardian “The historical case for abolishing billionaires”, Linsey McGoey noted the following.
“Adam Smith is remembered as the patron saint of unregulated commerce, as the world’s greatest prophet of profit. His idea of the “invisible hand” has been used by countless economists and politicians to argue that capitalism works, despite its excesses and inequalities. But this fairytale version is wrong. The actual Smith wrote of his dream for a more equal society, and condemned the rich for serving their own narrow interests at the expense of the wider public.
“The establishment of perfect justice, of perfect liberty, and of perfect equality,” he writes in Wealth of Nations, “is the very simple secret which most effectively secures the highest degree of prosperity to all the three classes.”
Today Smith’s call for “perfect equality” is either ignored or deliberately misrepresented. Fans use his ideas to legitimate their insistence that the rich are “wealth-creators”’ and therefore beyond rebuke. But with 1% of the world’s population now owning half its wealth, that belief is being forcefully called into question. There are growing calls to abolish billionaires and their privileges, including preferential tax treatment, handouts to corporations, and grossly inflated executive salaries that are often subsidized by taxpayers.”
In 2016, IMF published an article named ‘Neoliberalism: oversold?’ by Jonathan D. Ostry, Prakash Loungani, and Davide Furceri, which questions whether the economic approach of neoliberalism has been taken too far. According to the authors: Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.
Of course there has been a pushback from the far right who label the calls to banish the billionaires immoral and moral travesty.They cite examples of Oprah Winfrey, Steve Jobs, and J. K. Rowling who all, as per the far right opponents of a more equitable world order, are self made — They earned their wealth by producing values and offering them in win-win trades.
But perhaps, the exceptions prove the rule. Data show how the top 1% built their wealth on billions of hours of exploitative underpaid and unpaid care work, which is mainly done by women and people from ethnic minorities. Super-rich lives and lifestyles are dependent on this care work, and the economic value these workers create accumulates upwards. Also, It has been estimated that two-thirds of billionaire wealth exists because of inheritance or is tainted by crony connections to government.
The way forward
Recent research published by the World Bank has shown that if countries reduced income inequality by 1% each year, 100 million fewer people would be living in extreme poverty by 2030. The study also found that reducing inequality by 1% each year had a larger impact than increasing growth by one percentage point above forecasts.
The Oxfam report “Economy for the 99%” calls for an economy that will benefit the 99%, not just the 1% and has recommended reintroducing the wealth tax and effecting a one-time COVID-19 cess of 4% on taxable income of over ₹10 lakh to help the economy recover from the lockdown. According to its estimate, wealth tax on the nation’s 954 richest families could raise the equivalent of 1% of the GDP.
References
https://d1ns4ht6ytuzzo.cloudfront.net/oxfamdata/oxfamdatapublic/2021-01/The Inequality Virus - India Supplement (Designed).pdf?RrFsF8iTfT.g_PfT0H7HLpMvSTrb.M__
https://oxfamilibrary.openrepositor.../621149/bp-the-inequality-virus-250121-en.pdf
https://www.oxfamindia.org/sites/default/files/2020-01/India supplement.pdf
https://oxfamilibrary.openrepositor...0928/bp-time-to-care-inequality-200120-en.pdf
Poverty and Shared Prosperity 2020
‟J. D. Ostry, P. Loungani and D. Furceri (2016) Neoliberalism: Oversold?‟, Finance & Development, June 2016, IMF.
https://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf
Opinion | Abolish Billionaires (Published 2019)
https://oi-files-d8-prod.s3.eu-west.../bp-economy-for-99-percent-160117-summ-en.pdf
The historical case for abolishing billionaires
If found irrelevant or unworthy of discussion/debate, the note may please be deleted).
Introduction
A very benevolent definition of neoliberalism is that it is a focus on promoting competition through deregulation and on shrinking the state through privatisation and fiscal austerity.
There is, nevertheless, evidence that the far right economic prescription such as Reaganomics and the dominant neoliberal economic policy menu have commonalities: tax cuts for the rich, privatization and cuts to public services. This laissez-faire like policy benefits only the top 1% and actually allows the topmost corporates to control the economy and the government.
The Credit Suisse Global Wealth Report 2019 reported that the bottom half of the world’s population collectively owned less than 1% of total wealth as of mid-2019. The top 10% is estimated to own 82% of global wealth with the top 1% owning 45%. This extreme inequality is the product of an exploitative economic system designed to benefit a wealthy and powerful few. It is built on neoliberal economics and the capture of politics by elites.
Oxfam has published a series of reports highlighting the devastating effects of the neoliberalism pursued for the last 30-35 years throughout the world. The references are included below. Oxfam’s research has revealed that over the last 25 years, the top 1% have gained more income than the bottom 50% put together. Far from trickling down, income and wealth are being sucked upwards at an alarming rate.
Despite the above evidence, many world leaders, nevertheless, still pursue neoliberalism, probably egged on by the cronies that support and uphold such rulers. Former President Trump in the USA, Bolsonaro in Brazil, and Narendra Modi in India are exemplars of this trend, offering regressive policy menus like tax cuts for billionaires, obstructing measures to tackle the climate emergency or turbocharging racism, sexism and hatred of minorities. Common middle class and the poor are so completely indoctrinated in India that they blindly believe the PM.
Far right conservative economic policy has fostered corrosive inequality
Economic inequality is out of control. In 2019, the world’s billionaires, only 2,153 people, had more wealth than 4.6 billion people. Since 2015, the richest 1% has owned more wealth than the rest of the planet. In the US, economist Thomas Piketty has shown that over the last 30 years the growth in the incomes of the bottom 50% has been zero, whereas incomes of the top 1% have grown 300%.
Indian billionaires increased their wealth by 35% during the lockdown to ₹ 3 trillion, ranking India after U.S., China, Germany, Russia and France. Out of these, the rise in fortunes for the top 100 billionaires since the lockdown in March is enough to give every one of the 138 million poorest Indian people a cheque for ₹94,045 each, according to Oxfam’s ‘Inequality Virus Report’.
Mukesh Ambani, who emerged as the richest man in India and Asia, earned ₹90 crore an hour during the pandemic when around 24% of the people in the country were earning under ₹ 3,000 a month during the lockdown.
Increases in income and wealth inequality have too often been triggered by a slew of ideologically driven policies on issues like taxation, spending, corporate accountability, work and wages that serve the interests of the wealthy and powerful few. Public spending has long been hollowed out by regimes of ever lower taxes on the fortunes of rich individuals and corporations. Between 1985 and 2019, the global average statutory corporate tax rate fell from 49% to 23% and since 1980 the top rate of personal income tax in the US has almost halved, from 70% to 37% (data from 2007 to 2017 shown in Fig. 1).
Why Laissez-Faire economic policies creates extreme inequality
The Oxfam report “Economy for the 99%”, lists the following main reasons for the neoliberal economics have caused spiralling inequality: Corporations working only for those at the top; Squeezing workers and producers; Dodging Tax; Super-charged shareholder capitalism; Crony capitalism; The role of the super-rich; and Avoiding tax, buying politics.
The report also discusses the falsity of 6 assumptions that drive the neoliberalism —economy of the 1%. The false assumptions are: The market is always right and the role governments should be minimised; Corporations need to maximise profits and returns to shareholders at all costs; Extreme individual wealth is benign and a sign of success, and inequality is not relevant; GDP growth should be the primary goal of policy making; Economic model is gender neutral; and Planet’s resources are unlimited.
The article states “These six assumptions need to be overturned, and fast. They are outdated, backward looking, and have failed to deliver both shared prosperity and stability. They are driving us off a cliff. An alternative way of running our economy – a human economy – is needed urgently.” The article further goes on to outline the fundamentals of the human economy where governments will have to work for the 99%.
Mainstream economists express worry
Worried over the great divide between the rich and the poor, the leading academics, including the mainstream economic institutions such as the IMF, over the past one decade have produced robust evidence of the corrosive effects of inequality. Affected communities, activists, women’s rights organizations and faith leaders have spoken out and have campaigned for change around the world.
Some economists have opined that billionaires and extreme wealth are a sign of a failing economy rather than of success. In February 2019 The New York Times published an opinion piece on its front page, provocatively entitled ‘Abolish Billionaires’. The opinion piece is based on a blog of Tom Scocca, editor of the essential blog ‘Hmm Daily’, which argued: “A billion dollars is wildly more than anyone needs, even accounting for life’s most excessive lavishes. It’s far more than anyone might reasonably claim to deserve, however much he believes he has contributed to society.”
In an article in The Guardian “The historical case for abolishing billionaires”, Linsey McGoey noted the following.
“Adam Smith is remembered as the patron saint of unregulated commerce, as the world’s greatest prophet of profit. His idea of the “invisible hand” has been used by countless economists and politicians to argue that capitalism works, despite its excesses and inequalities. But this fairytale version is wrong. The actual Smith wrote of his dream for a more equal society, and condemned the rich for serving their own narrow interests at the expense of the wider public.
“The establishment of perfect justice, of perfect liberty, and of perfect equality,” he writes in Wealth of Nations, “is the very simple secret which most effectively secures the highest degree of prosperity to all the three classes.”
Today Smith’s call for “perfect equality” is either ignored or deliberately misrepresented. Fans use his ideas to legitimate their insistence that the rich are “wealth-creators”’ and therefore beyond rebuke. But with 1% of the world’s population now owning half its wealth, that belief is being forcefully called into question. There are growing calls to abolish billionaires and their privileges, including preferential tax treatment, handouts to corporations, and grossly inflated executive salaries that are often subsidized by taxpayers.”
In 2016, IMF published an article named ‘Neoliberalism: oversold?’ by Jonathan D. Ostry, Prakash Loungani, and Davide Furceri, which questions whether the economic approach of neoliberalism has been taken too far. According to the authors: Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.
Of course there has been a pushback from the far right who label the calls to banish the billionaires immoral and moral travesty.They cite examples of Oprah Winfrey, Steve Jobs, and J. K. Rowling who all, as per the far right opponents of a more equitable world order, are self made — They earned their wealth by producing values and offering them in win-win trades.
But perhaps, the exceptions prove the rule. Data show how the top 1% built their wealth on billions of hours of exploitative underpaid and unpaid care work, which is mainly done by women and people from ethnic minorities. Super-rich lives and lifestyles are dependent on this care work, and the economic value these workers create accumulates upwards. Also, It has been estimated that two-thirds of billionaire wealth exists because of inheritance or is tainted by crony connections to government.
The way forward
Recent research published by the World Bank has shown that if countries reduced income inequality by 1% each year, 100 million fewer people would be living in extreme poverty by 2030. The study also found that reducing inequality by 1% each year had a larger impact than increasing growth by one percentage point above forecasts.
The Oxfam report “Economy for the 99%” calls for an economy that will benefit the 99%, not just the 1% and has recommended reintroducing the wealth tax and effecting a one-time COVID-19 cess of 4% on taxable income of over ₹10 lakh to help the economy recover from the lockdown. According to its estimate, wealth tax on the nation’s 954 richest families could raise the equivalent of 1% of the GDP.
References
https://d1ns4ht6ytuzzo.cloudfront.net/oxfamdata/oxfamdatapublic/2021-01/The Inequality Virus - India Supplement (Designed).pdf?RrFsF8iTfT.g_PfT0H7HLpMvSTrb.M__
https://oxfamilibrary.openrepositor.../621149/bp-the-inequality-virus-250121-en.pdf
https://www.oxfamindia.org/sites/default/files/2020-01/India supplement.pdf
https://oxfamilibrary.openrepositor...0928/bp-time-to-care-inequality-200120-en.pdf
Poverty and Shared Prosperity 2020
‟J. D. Ostry, P. Loungani and D. Furceri (2016) Neoliberalism: Oversold?‟, Finance & Development, June 2016, IMF.
https://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf
Opinion | Abolish Billionaires (Published 2019)
https://oi-files-d8-prod.s3.eu-west.../bp-economy-for-99-percent-160117-summ-en.pdf
The historical case for abolishing billionaires
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