Читать книгу Why Things Are Going to Get Worse - And Why We Should Be Glad - Michael Roscoe - Страница 11
ОглавлениеFor most of the world’s population, the accumulation of wealth is something that happens only to other people: rich people. Even the prospect of buying a modest home is way beyond reach for the vast majority of the global population. Day-to-day existence is the best that can be hoped for: another meal for the family, another week’s rent paid to the landlord, another shirt for a child.
According to a United Nations report from 2006, half the world’s adults had assets of less than $2,200, which meant the poorest 50% owned barely 1% of all wealth between them, while the richest 2% of adults owned over half the world’s assets. The UN researchers estimated that total household wealth at the beginning of this century was in the region of $125 trillion. A more recent report by Credit Suisse gives a figure of $240 trillion for 2013, which would work out at over $50,000 per adult, if it were evenly distributed. The bank estimates that the richest 1% now own 46% of the world’s wealth, and the latest data from the World Economic Forum (as of November 2013) puts this closer to 50%.
Figure 8 shows how wealth has accumulated over the last decade or so. [Credit Suisse actually gives a lower figure than the UN for 2000. These are only educated guesses, as actual figures aren’t available; wealthy people, and Swiss banks, being understandably secretive about their accounts.] This chart, using Credit Suisse data, shows how the world’s privately held wealth has almost doubled this century. If one thinks about it, this is an astonishing fact, assuming these figures are correct. How is it possible that the same amount of wealth has been created in one decade as was accumulated in all of past history?
The short answer: it isn’t possible. Although the boom in China explains some of the rise, this increase in wealth is partly an illusion, linked to the related trends of rising credit (which leads to higher asset prices) and devalued money (especially the US dollar). I will return to these themes in detail later in the book, but first we can still learn something useful from this chart, because although it might be misleading in some respects, in other ways it is accurate enough. For example, the chart shows how wealth is split roughly into thirds between North America, Europe and the rest of the world, which means of course that it’s very unevenly distributed, as we might expect. The US, with 4% of global population, has 30% of all wealth and over 40% of all individuals with $50 million or more.
Figure 8
What we find, in other words, is that wealth is highly concentrated among relatively few very rich people, and, as I noted in the opening chapter, this inequality is increasing.
Figure 3 showed how the richest 1% were grabbing ever more of the world’s wealth, leaving less for everyone else. Figure 9 shows the huge gains seen by the wealthiest 10% in Britain and the US, especially since 1980, compared to the rest of the population, whose incomes have actually fallen in recent years, to the point where most people are earning less, in real (inflation-adjusted) terms, than they did in the 1970s.
Figure 9
It isn’t possible to get such accurate data for most countries but, although the equivalent figures for Europe might show less of a gap between the rich and everyone else (because Europe generally has a more even spread of wealth), the trend in most of the developed world is for declining wages in real terms, as Figure 10 shows.
This trend for declining earnings for the majority, while the rich get richer, coincides with the decline in manufacturing jobs that we saw in Figure 2. As the number of jobs in industry falls relative to output, the share of corporate profit that goes to owners and executives increases and the share that goes to the general population falls. Combine this with the rise of the financial sector, where a relatively small workforce – traders and fund managers and so on – earn large incomes, as can be seen in Figure 11, and we begin to see why income inequality, and especially wealth inequality, is increasing.
There are various ways of looking at the gap between the very wealthy and the rest of us, but they all show the same trend: the rich are getting richer while the middle classes of the developed world get poorer and everyone else – the really poor – struggle along on next to nothing, as they always have done. Something has gone seriously wrong with the idea that free-market capitalism is the best way to spread wealth.
Figure 10
Yet in the relatively recent past, over the last half-century or so, a vast amount of wealth has been made in this world, all of it originating in the earth before being turned into something useful by industrial workers. So what’s gone wrong with the system? How can so much of the earth’s wealth, most of which comes from natural resources that can’t really ‘belong’ to any one person – should surely belong equally to everyone – end up in the hands of so few?
To answer this question, we first need to distinguish between different types of wealth. For most of history the real wealth was in the land. In ancient civilizations, and much of Europe until quite recently, most land was claimed by the ruler of the state, or the Crown. Under the feudal system, the monarch could grant the rights to parcels of land to his barons, or lords, in return for their military service. The lords, who became tenants-in-chief, could then sub-divide this land among their own favored knights, who could in turn sub-let to other lesser mortals, and so on. In this way, over centuries, the land ended up as estates in the hands of the aristocracy, who either farmed the land themselves or rented it to other farmers, either for money or a share of the crop – as in sharecropping, a form of land tenure common throughout much of the world.
Figure 11
So the old money – the wealth of the old aristocracy of Europe – came from ownership of agricultural land, and also, in the last two centuries, from land that became more valuable as it was gradually absorbed into the growing towns and cities. This wealth passed down the generations, though some of it went to the government as taxes. But although it caused much anger among the ‘proletariat’, or at least among those intellectuals and revolutionaries who took up the cause of the proletariat, the inherited wealth of the aristocracy wasn’t that great compared to the new wealth that came after industrialization; the wealth of the capitalist owners of industry. Even the wealth of the 19th-century industrialists doesn’t look all that significant when compared to recent levels of wealth accumulation, mainly because of inflation; a millionaire of 1850 had the status of a billionaire by today’s standards. And, more to the point, there are far more very wealthy people around now.
Figure 12
Figure 12 shows an estimation of private wealth accumulation over the last century, based on the reports I’ve already mentioned, plus a few other sources as indicated. I’ve also plotted the world population. We can see how wealth has grown much more quickly than population, especially in the last two decades.
We can also see how the value of this accumulating wealth occasionally falls with the fortunes of stock markets and house prices; hence the blips around the times of the 1929 Wall Street crash and the crises of 1997 and 2008. But we also know that no real wealth was actually lost in these crashes; no buildings or gold bars were destroyed, nor bank-vaults full of cash burnt to ashes. The falls were numerical only, in the perceived values of companies and houses, which had been pushed beyond their true value by unrealistic expectations and the eagerness of banks to lend. Even when a bank fails, no real wealth is lost. As with the stock market, some people might lose money, but other people must have gained that money. In the case of company stock, the person who sells a share certificate when the price is high gains, while the buyer, if the price falls, loses.
If you have savings in a bank that fails and you’re told that your money has somehow disappeared, the chances are that it went on a bad loan. But where did that money actually go? What happened to all the money lost in the crash of 2008?
Figures in the ether
Various estimates have been made of the ‘cost’ of the recent financial crisis. The International Monetary Fund (IMF) reckoned in 2009 that $12 trillion had been lost, while in 2012 the US Treasury Department gave a figure of $19 trillion. Either way, it’s a huge amount of money. But what does it really mean? Where did that $19 trillion disappear to? Outer space?
All it really means is that the wealth of the world after the crash was valued at $19 trillion less than it was before the crash. But not one single penny coin was actually lost. All the real wealth – all the actual solid stuff like houses and factories and gold bars and even banknotes – still exists, exactly as it did before the crash. The losses are all a matter of figures in the ether, so, yes, in a way the money did end up in outer space. But, more to the point, it never really existed in the first place.
That $19 trillion was the credit bubble, or at least a part of it. In other words, the global financial system was responsible for creating $19 trillion out of nothing over the previous decade or so. In fact, according to my calculations regarding the difference between GDP figures and the real wealth of the global economy, as shown in my first chart, the credit bubble amounted to considerably more than $19 trillion. At its peak, the GDP figure for the world as a whole was overstating real economic output by over $20 trillion annually, and this situation had been going on for well over a decade, and is still going on now. The credit bubble hasn’t really burst, it just deflated slightly.
I return to this problem in more detail later in the book, because I think this overestimation of real economic activity has serious consequences for us all and is the main reason that parts of the world, especially Europe, will have to adjust to a new economic reality. In these difficult times – times in which the majority of the population in the developed world will continue to experience declining income in real terms (adjusted for inflation) – we need to look again at certain values.
The boom times are over and they won’t be coming back, and the main reason for this is the lack of real jobs, a shortage caused by the increasing productivity of industry, which in turn is linked to the growth of the financial sector, a sector of the economy that has no apparent interest in job creation but a very great interest in debt creation.
There has been a massive fraud committed by the banking sector generally, one in which the wealth that should belong to everyone has been taken by the rich. It wasn’t a planned theft, and no particular person or organization is to blame; it’s just the way things have worked out, a direct result of the free-market capitalist system, an inevitable consequence of the accumulation of ever more wealth in the hands of the few. It can’t go on for much longer.
I don’t mean that in a moral-outrage sense, though obviously I think it’s a bad thing. I believe that there are practical reasons why this situation cannot continue for much longer. The dynamics of the economy have changed greatly over the past few decades, in a way never seen before. The proportion of genuine wealth creation relative to total wealth has been falling. The rise of the banking sector has resulted in the credit bubble, and although this might have deflated slightly during the crash of 2008, as long as central banks keep paying off one type of debt by creating another type of debt, the problem can only get worse.
This transition from an industrial society to a financial society – from one that produces real wealth to one that produces credit – is obviously unsustainable. The free-market capitalist system is rapidly approaching its inherent limits. For the last two centuries, the developed world has thrived on industrial growth but, for the last three decades, that real growth has been increasingly overshadowed by a financial system that depends on the creation of credit for profit, while at the same time relying on real industrial growth to generate enough wealth to pay those debts. We have become dependent on economic growth, but continuous economic growth is impossible.
