Economic lie number 4; inequality is good for the system…

The whole Capitalist system is dependent on aspiration, or so we are told. Our Chancellor of the Exchequer has just heralded his 2013 budget as something for an ‘aspiration nation’- seeking to help those who want to help themselves- those who want to own their own houses.

Without the wealth creators (business entrepreneurs) there can be no long term prosperity. All that you will have is stagnation- look what happened in the old soviet bloc countries.

Without greed we have bad cars, cabbage soup and bureaucrats in stone washed denim.

Except that the rich are getting richer, even WITHIN our western economies. This from The Telegraph;

The world’s rich are getting richer. The Forbes billionaire list was published this morning (there are now 1,426 of them globally in dollar terms, with 210 new entrants in the last year), and collectively they are $800bn richer than they were a year ago. Each billionaire is, on average, $100m richer than in 2011, with an average wealth of $3.7bn.

And the poor poorer; The Institute of Fiscal Studies forecasts that, as a result of UK tax and benefit policies, there will be significant increases in child poverty in the coming years. In Scotland alone forecast trends would suggest between 50,000 and 100,000 more children being pushed into poverty by 2020. (See here.)

And what is more, the argument can be questioned even by people on the inside;

There is the opposite argument too- that the more equal societies are in terms of income, the better its citizens seem to do. This from here;

In The Spirit Level Wilkinson and Pickett base their analysis on data from 23 rich countries as well as data from the 50 American states. They say that in the main this shows that the following problems are much more pronounced in countries with higher levels of income inequality.

Health inequalities: At the end of the 1990s there was an average gap of 7.3 years in mortality between rich and poor people in unequal societies. This can rise to as much as 28 years in some American states. They argue that research shows these differences cannot simply be explained by differences in health behaviours.
Mental illness: They argue that ‘inequality is  causally related to mental illness’; that rates of mental illness are five times higher in the most unequal societies compared to the least unequal.  Illegal drug taking is also higher.
Obesity: Unequal societies are more likely to have higher levels of obesity, with poor people most at risk, partly because of the attractions of ‘comfort eating’.  Indeed the rate of obesity is six times higher in the most unequal, compared to the least unequal, societies.
Divorce rates: There have been larger rises in more unequal societies. This then creates more stress for children.
Teenage pregnancy: This is more prevalent in unequal societies. Indeed in the USA the rate of teenage pregnancy is four times the EU average.
Violence: Wilkinson and Pickett argue that the strongest evidence or the negative effects of inequality is violence figures. The reasons for this are explored below.
Imprisonment: Unequal societies are more punitive. People are five times more likely to be imprisoned in the most unequal societies than the least unequal.
Social mobility: Inequality leads to less social mobility. Inequality ‘solidifies the social structure’ and also depresses educational attainment for the poor.
Women’s position: In general women are less likely to be in higher status jobs in unequal societies and they also have worse health than women in more equal societies.

Wilkinson and Pickett argue that the problem of inequality is not just for poor people: everyone suffers. The life expectancy figures even for rich people is lower in unequal societies than more equal ones. The reason they advance for this is that unequal societies have lower levels of trust than more equal societies. This lack of trust leads to more hostility, fear and lower levels of community participation. In this way everyone suffers.

In the data they present the societies which are most unequal, and have the biggest health inequalities and social problems, are the USA, the UK, Portugal, Australia and New Zealand. The least unequal are the Scandinavian countries and Japan.


Greed, Capitalism and Gordon Gekko…

I had an early start this morning- leaving the house at 7.30 am for a two hour drive. As ever, BBC radio 4 was my faithful companion on the road…

And of course, the morning news was full of the current world financial crisis, brought about by the so-called ‘credit crunch’ and the collapse of an American bank sending shock waves round the world’s stock markets.

We await to see whether the giant insurance firm AIG, responsible for trillions of dollars investments, will topple and fall over also.

We are finding out that when a butterfly flaps in the windows of a wall street office, then not even a post office account in sleepy Argyll is unaffected by the resultant tidal waves of monetary insecurity.

And no-one seems to have any clear idea of what happens next. It is almost as if the animal that we created now has a will of its own, and a malevolent will at that… The radio carried interviews of doom mongers, and other folk seeming to suggest that the worst was over, and we just needed to stop the panic, which was the cause of the whole thing in the first place.

And then there was this other discussion- about the nature of the capitalist system itself, and the greed at the heart of it all.

And we remember again the words uttered by the fictional stock broker Gordon Gekko in the 1987 film ‘Wall Street’ (played brilliantly by Michael Douglas)- Greed is good…

Gekko has become an iconic figure, acting as an archetypal capitalist, but in the process asking questions about the meaning and nature of a culture built on the pursuit of MORE, always MORE. Capitalism, and neo-liberal economics rule the economic roost at the moment, and no-one seems to be able to challenge the ideological truth of ‘trickle-down’ benefits of the creation of wealth, and the release of entrepreneurial aspiration, red in tooth and claw.

This morning, world renowned economists were asked whether they thought that this crisis had been brought about by greed. Both replied that they thought that it had. They thought that some greed was needed- but there had been too much!

They described how a long period (16 years) of economic growth had resulted in complacency and increased risk taking on the part of bankers, stock brokers and financiers. And how ‘rocket scientists’ (a euphemism for people who design ever more complicated financial products in order to seek out profit) have designed complicated financial processed that are not understood by most of the people whose companies are selling them.

Many of the huge profits generated by the banks have been made by selling and buying products with borrowed money. Sometimes, the borrowing ratio to the assets of banks can be 30-40-even 50 to 1. This is fine as long as there is lots of money sloshing around the system, but it only takes a few variables to change- interest rates, commodity and fuel prices, economic slow down, the rise of the Far East, etc etc, and suddenly, apparently impregnable banks are dreadfully exposed and vulnerable.

These are, after all, human institutions, made after our own image.

But we are made in the image of God are we not? And as a Christian, I find myself experiencing dissonance with any system that depends on greed and grasping as the engine of its very survival. Is there really no other way? Do I have to be complicit with this way of living?

I have a mortgage and a car loan from the Bank of Scotland. This bank has lost 40% of it’s share price in the last two days. Who knows what the future is for the BOS, and for my accounts?

But, is this the most pressing economic reality pressing in on our culture? Is Capitalism really working? Or is it serving only the narrow interests of people like me, who experience many of its benefits at the expense of those who do not?

Is the real economic crisis to be found in a world in which things like this are ever present;

So what on earth can be, or should be our response?

I am humbled again. Reminded that my storehouse is not on earth, but in heaven.

And that when I serve the least of these, I serve Jesus.