Why won’t the rich address growing inequality?
They’re too busy preserving their position at the top
How is society going to cope with structural unemployment and the envy, hatred and the social warfare? We are destroying the middle classes at this stage and it will affect us. It’s unfair. So that’s what keeps me awake at night.
These aren’t the words of some socialist on the left-wing fringes, but a statement made by billionaire Johann Rupert at a Financial Times summit in Monaco. He’s not alone among the wealthy elite to recognize that growing levels of inequality could tear the world apart, and he’s also not unique in having no real desire to address them.
The growing divide
Instead of making a plan to resolve the growing levels of inequality, the rich are doing all they can to capture all the benefits of automation, while everyone else suffers the consequences of losing their means of survival.
The financial officer of Suncor, the world’s largest producer of bitumen, cares more about the “few hundred thousand [dollars] per person” his company will save by automating 800 truck drivers, and the CEO of Momentum Machines, which sells a burger-making machine, brags that his “device isn’t meant to make employees more efficient. It’s meant to completely obviate them.”
The trend was already in favour of the rich, but since the end of the recession, they’ve been doing even better. In 2011, The New York Times reported that the US economy had already returned to its pre-recession output, but was employing 7 million fewer people, and that while businesses were spending 2% more on wages, their spending on new equipment had increased by 26%. Instead of hiring workers, they were automating them.
The top 1% captured 95% of all the income gains between 2009 and 2012, but this shouldn’t come as a surprise. There’s been next to no real wage growth for average workers in the United States since 1973, yet between 1978 and 2013, CEO pay rose by an almost incomprehensible 937%. In 1978, they made 29.9 times more than the average worker, but by 2013 they were making almost 300 times more.
This growing divide between those at the top and everyone else has received major attention in the past few years, yet little has been done to remedy it. It would almost seem that the rich don’t understand the effects of the soaring inequality they’re creating, but we have clear evidence to the contrary.
Enter the plutonomy
Between 2005 and 2006, Citigroup published three leaked reports known collectively as the “Plutonomy Reports”, referencing an economy fuelled and controlled by the wealthy elite. They projected that
the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.
This describes exactly what we’ve seen in the decade since these reports were published. Since the end of the recession, the stock market has boomed while average people have struggled, all of the economic gains have gone to those at the top, and automation has atomized jobs and displaced workers.
But the authors didn’t ignore the fact that the flow of wealth to the top would create anger among the masses. They predicted a “political backlash against the rising wealth of the rich”, and believed governments may be pushed to try to address the situation “through the revocation of property rights or through the tax system.”
Their best defence against government action was to convince the masses that they too could one day become “Pluto-participants”, which is exactly what we’ve seen in the United States with the debate around taxing the rich. One of the primary reasons many ordinary Americans object to raising taxes on the wealthy is due to a misguided belief that one day they may become rich enough to have to pay those rates themselves.
It’s for this reason that the myth of the American Dream is still one of the central pieces of propaganda used by the wealthy elite. Social mobility is no longer a reality for the poor, yet they need to believe it exists or they’ll turn against the system that oppresses them.
Could the plutonomies die because the dream is dead, because enough of society does not believe they can participate? The answer is of course yes. But we suspect this is a threat more clearly felt during recessions, and periods of falling wealth, than when average citizens feel that they are better off.
The main threats to the plutonomies have become realities. More people are waking up to the fact that neoliberal capitalism has left them behind, and doesn’t represent their interests. They’re demanding a new deal that rebalances the distribution of power and wealth, which is evidenced by support for Bernie Sanders, Jeremy Corbyn, and other movements across Europe.
Why then does nothing seem to be changing?
Preserving the hierarchy
Since the end of the recession, the writings of Karl Marx have reentered the political discourse in a way that we haven’t seen since the end of the Cold War. They aren’t just being reexamined by Occupy supporters and anti-austerity campaigners, but also by those in power.
In 2014, a conference was held in London for the wealthy elite to discuss “inclusive capitalism”, their solution to the growing divide. Christine Lagarde, the head of IMF, invoked Marx in her speech, and repeated his assertion that capitalism “carried the seeds of its own destruction.”
She then admitted her greatest fear: that “massive excess, rising social tensions and growing political disillusion” would cause the masses to turn away from the system, and make Marx’s prediction a reality.
However, the super-rich hadn’t assembled to find a solution to that problem. Nafeez Ahmed concluded that the proposals presented at the conference amounted “to token PR moves to appease the disenfranchised masses.” In other words, the elite don’t want real change, but to continue fooling the masses into supporting a system that keeps them down.
It shouldn’t come as a surprise that the elite don’t want to lose the power to control the world’s governments, nor wealth that affords them lifestyles the masses couldn’t even imagine. And recent political developments give them hope that instead of sweeping capitalism aside, they may instead be able to silence democracy.
The rise of the right
As the masses have lost trust in the dominant political parties of the centre, they haven’t all run to the left. While Sanders, Corbyn, Syriza, Podemos, and the Pirate Party have risen on one side, Donald Trump, UKIP, Geert Wilders, the National Front, Jobbik, and more have risen on the other.
The resurgence of the far-right is troubling for many reasons, including their demonization of minority groups to divide the oppressed masses, but much of the global elite may not see them in such a negative light. While the left wants to attack the capitalist system and the privilege of the wealthy, the resurgent right is largely supportive of capitalist dominance, with a few minor tweaks.
Under a Trump presidency, the elite wouldn’t have to fear a wealth tax or the nationalization of industry, though they may have to provide some more jobs—not a huge demand if it means preserving their position at the top of the hierarchy.
This selfishness could lead us down a path toward rule by the right that would imperil democracy, target minorities, and leave the masses even worse off, all to preserve the elite status of the super-rich. Simply put, they are plutonomists, and their end goal is rule by one of their own.
The masses can’t rely on political leaders backed by the wealthy elite to bridge the divide, nor to redistribute power and wealth more fairly. The only way to achieve a better world is to reforge the broken bonds of community, educate the masses on the problems with the current system, and present a hopeful vision for the future that puts regular people first.
The world of work is changing, faster than we yet realize, but how do we harness automation to create a better world?
Freedom From Jobs identifies the problems with our current economic system, how automation is already impacting the way we work, and presents a vision for the future that would liberate the masses from the exploitative toil of wage labour.
Paris Marx is the author of A Music Industry for the 99%, Dystopia or Utopia?, and Freedom From Jobs. He writes about the growing divide within the capitalist system, movements for alternative forms of economic organization, and ways of living that challenge traditional narratives.