Sixteen Ways that Neoliberals Redistribute Wealth Worldwide

 

by Jeff Gates ©                       

 

  1. From the bottom to the top.  In the U.S., the bipartisan embrace of neoliberal nostrums quickened the pace of redistribution from bottom to top over the past two decades.  For example, the wealth of the Forbes 400 richest Americans grew an average $1.44 billion each from 1997-2000 for an average daily increase in wealth of $1,920,000 per person ($240,000 per hour).[1]  From 1983-1997, only the top five percent of U.S. households saw an increase in their net worth, while wealth declined for everyone else.[2]  The share of the nation’s after-tax income received by the top one percent nearly doubled from 1979-1997.  By 1998, the top-earning one percent had as much combined income as the 100 million Americans with the lowest earnings.[3]  That reflects the key distributional principle guiding neoliberal theory: “Drink your fill and thirst for more.”

 

  1. From the future to the present.  Unsustainable production methods are now standard practice worldwide, due largely to the worldwide embrace of a financial model that insists on maximizing net present value, a stance that routinely and richly rewards those who internalize gains and externalize costs.  That shareholder value-maximizing model signals executives to embrace manufacturing practices such that worldwide, as of 1996, the biologically productive area needed to produce the natural resources consumed and absorb the carbon dioxide emitted was 30 percent larger than the area available.[4]  This result reflects the key operational principle guiding neoliberalism: “Maximize financial returns and, trust us, everything will work out fine.”  U.S. money managers now invest $17 trillion in reliance on that mechanistic model, the heart of neoliberal economics.

 

  1. From poor nations to rich.  The UN Development Program (UNDP) reports that 80 countries have per capita incomes lower than a decade ago.[5]  Sixty countries have grown steadily poorer since 1980.[6]  In 1960, the income gap between the fifth of the world’s people living in the richest countries and the fifth in the poorest countries was 30 to 1.  By 1990, the gap had widened to 60 to 1.  By 1998, it had grown to 74 to 1.[7]  Meanwhile, the world’s 200 wealthiest people doubled their net worth in the four years to 1999, to $1,000 billion.[8]  Their combined wealth (165 of the 200 live in OECD countries) equals the combined annual income of the world’s poorest 2.5 billion people.[9]  UNDP’s assessment: “Development that perpetuates today’s inequalities in neither sustainable nor worth sustaining.”[10]

 

  1. From developing nations to developed nations.  The widening wealth and income gap between poor and rich nations is matched by a steady redistribution of the world’s natural capital from poor to rich nations. In all three ecosystems suffering the worst declines (forests, freshwater and marine), the most severe damage has occurred in the southern temperate or tropical regions.  Thus, we must add to today’s fast-widening economic divide the fact that industrial nations (located mainly in northern temperate zones) are primarily responsible for the ongoing loss of natural capital elsewhere in the world.[11]

 

  1. From public health to private wealth.  The financial benefits of modern production practices are harvested predominantly by a few while costs are habitually imposed on the public.  For instance, there’s now 75,000-plus manmade chemicals in use worldwide; all are heading somewhere.  Where?  More than 500 measurable chemicals are found in our bodies that were not in anyone’s body before the 1920s, including a range of endocrine-disrupting chemicals linked to an array of adverse (and transgenerational) health effects, including weakened immune systems, reproductive problems, metabolic maladies and functional deficits in intelligence, sexual function and behavior.[12]  Relying on trend data suggesting that almost half of U.S. males (and one-third of females) will contract a non smoking-related cancer, Dr. Samuel Epstein, a specialist in cancer prevention, documents as the causal factor our non-optional exposure to carcinogenic elements, resulting in a particularly high incidence of cancer among children.[13]

 

  1. From competitors to monopolists and oligopolists.  In 1995, the financial wealth of the top one percent of Americans was equal to the combined household financial wealth of the bottom 90 percent.  By 1999, the wealth of the top one percent was equivalent to that of the bottom 95 percent.  Allowed to monopolize digital gateways to the New Economy, Microsoft’s Bill Gates could become a trillionaire by March 2005 and a quadrillionaire (a million billion) by March 2020.[14]  The neoliberal “emerging markets” model is poised to replicate today’s wealth patterns worldwide.  For instance, 61.7 percent of Indonesia’s stock market value is held by that nation’s 15 richest families.  The comparable figure for the Philippines is 55.1 percent and 53.3 percent for Thailand.[15]  Worldwide, there’s now approximately $60 trillion in securitized assets, with an estimated $90 trillion in additional securitizable assets.  Neoliberals may yet create a world where a handful of already well-to-do families worldwide pocket more than 50% of that $90 trillion in financial wealth.

 

  1. From the community to the individual. The neoliberal emphasis on efficiency makes the modern near-monopoly and the megastore appear an appealing phenomenon despite the impact on wealth and income distribution, on communities and on democracy.  Wal-Mart alone, with its 4,251 outlets worldwide and $191 billion in 2000 sales, accounts for six percent of U.S. retail spending, giving the five heirs of Sam Walton a combined wealth of $85 billion.  The Home Depot and Lowe’s account for one-quarter of hardware sales.  Rite Aid, Walgreens, and CVS, with a combined 9,000 stores and $37 billion in revenues, dominate what were once locally owned pharmacies.  Independent bookstores saw their market share plummet from 58 percent in 1972 to 17 percent in 1999, as Borders and Barnes & Noble captured 45 percent of the market.  In the mid-1970s, 50 firms accounted for 50 percent of U.S. media outlets.  By 2000, it was six.  Seven firms now account for 74% of domestic trade book sales, down from fifty in 1993.  According to research at the State University of Iowa, between 1983 and 1993 alone, Wal-Mart’s expansion closed 7,326 businesses, eliminating a generation of sole proprietors, long the nation’s most robust source of civic leadership.  The wave of cross-border megamergers is fast concentrating economic power in megacorporations while the public’s airwaves are being converted into immense “conglomediates,” jeopardizing an array of democratic values – diverse views, community-attuned self-reliance, civic cohesion.  By 1998, the top 10 firms in pesticides controlled 85 percent of a $31 billion market while the top 10 companies in telecommunications controlled 86 percent of a $262 billion global market.  Today’s results reflect the neoliberal fixation on finance-calibrated efficiency and price-based competition -- to the exclusion of societal effectiveness.

 

  1. From diverse cultures to monocultures.  The dominance now granted financial values is reflected in a neoliberal metaphor that now guides policy-making worldwide, commonly stated as the goal of ensuring a “level playing field” as the ideal policy environment so that the forces of finance can operate unimpeded by the petty distractions of public policy. In the parlance common to Wall Street: “money is smarter than people.”  By granting that narrow bandwidth of values not just deference but policy-enforced dominance, today’s neoliberal-inspired version of globalization ensures the steady crowding out of diversity worldwide – led by those financially-dominant nations whose lawmakers insist that this cramped range of value, this One Single Idea, must prevail.

 

  1. From the common good to uncommon greed.  In 1980, the federal debt was $909 billion.  By 2000, it was $5711 billion.  Fiscal capacity is a public asset available for any purpose to which policy-makers agree.  In 1981, neoliberals enacted a $872 billion tax cut, much of it supply-side investment incentives, all of it deficit-financed.  In 1982, $91 million was required for inclusion on the Forbes 400 list.  Average wealth was then $200 million and the list included 13 billionaires.  By 1986, average wealth was $500 million.  By 2000, $725 million was required for admission to a list with 274 billionaires and average wealth of $1.2 billion.  Government debt securities are owned dominantly by upper-income households.  The latest figures show that tax-exempt interest was reported on 4.9 million personal tax returns, about 4 percent of all taxpayers.  Total tax-exempt interest income was $48.5 billion in 1997.[16]  The fiscal cost of the tax cut enacted in 2001 is more than double the long-term Social Security shortfall.[17]  The top one percent will receive about three-eighths of the tax cuts once the tax cut is fully phased in.

 

  1. From job-holders to wealth-holders.  The largest tax now paid by 74% of Americans (90% of Generation X) is the Social Security payroll tax, a flat tax now assessed at a fixed 15.3 percent on all earnings up to $80,400.  Social Security entitlements are now the largest single asset for a majority of Americans.  Proposals to privatize Social Security would divert approximately $100 billion per year of job tax revenues into financial markets where, from 1983 to 1998, 53% of market gains flowed to the top one percent of households while 91 percent went to the most well-to-do 20 percent.[18]

 

  1. From minorities to majorities.  The Social Security payroll tax is doubly burdensome for those who are disadvantaged in their access to the job market because of discrimination in education, hiring, training, benefits, advancement, access to credit, etc.  The payroll tax both costs minorities more and pays them less because, for instance, the National Institute of Aging chronicles that Blacks die at age 70, six to seven years earlier than Whites.

 

  1. From families to financial markets.  The work year for the typical American expanded by 184 hours since 1970, an additional 4-1/2 weeks on the job for roughly the same pay.[19]   Household working hours reached 3,149 in 1998, roughly 60 hours a week for the typical family, moving Americans into first place worldwide in the number of hours worked, nudging aside the workaholic Japanese.[20]  According to the Bureau of Labor statistics, American workers now labor 350 hours more per year than typical Europeans.  Parents in the U.S. spend 40 percent less time with their children today than 30 years ago.[21]  The Census Bureau reports that the pretax median income was $1,001 higher in 1998 than in 1989, for a decade-long average annual raise, adjusted for inflation, of $111.22, or 0.3 percent, while productivity over that period grew 33 percent.  The after-tax income flowing to the middle 60 percent of households in 1999 is the lowest recorded since 1977.  Among the bottom fifth of households, average after-tax income fell nine percent from 1977 to 1999. 

 

  1. From consumers to cartels.  Energy demand in California rose by 4% between 1999 and 2000 while wholesale electricity prices rose 266% and generators’ income went up an average 508%.  In 2000, California spent $7 billion on energy; this year California faces energy expenditures that may exceed $50 billion.

 

  1. From the commons to the personal.  The capital market-led neoliberal model signals investors that natural capital is more valuable when converted to financial capital.  Thus, for instance, farming in the fertile Mississippi River valley has long been considered an attractive and prudent investment.  Yet the topsoil there is being depleted at 17 times its replacement rate (a truckload of topsoil flows by New Orleans every second); the vast Ogallala aquifer, millions of years old, is now projected to last only another 30 years; and enough growth-inducing nitrates have been flushed down the Mississippi River that there’s now an 8,000 square mile “dead zone” in the Gulf of Mexico, a marine desert the size of Massachusetts where nothing grows. 

 

  1. From the living to the dead.  According to a recent poll by the American Museum of Natural History, 69% of biologists surveyed agree that the human species is the unique cause of the Sixth Great Extinction, now well underway.  Biologically and ecologically, our species exhibits the unique evolutionary distinction of being a desert-making species.  Not only do we produce deserts by removing vegetation (as with the rainforests), we’ve also mastered the art of extending deserts to places normally watered by rainforest-produced clouds, disrupting the planet’s climate-control system.  Whereas the human species has survived several Ice Ages, the Earth’s last hot age occurred long before humans, flooding continents and leaving only a few mountain-peak islands in a world of water.[22]

 

  1. From the real to the abstract.  The neoliberal perspective on progress suggests that the U.S. is enjoying two decades of unprecedented financial prosperity, yet social and environmental indicators confirm that the world’s “richest” nation is experiencing a steady 20-year decline across an array of crucial quality-of-life indicators and in numerous living systems.

 

[Draft of Aug. 21, 2001]

Shared Capitalism Institute

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www.sharedcapitalism.org

jeffgates@mindspring.com


[1] See www.forbes.com.  To compare wealth accumulation with earnings of the typical employee, the figures assume wealth was earned over 40-hour week and a 50-week year.

[2] Federal Reserve Bulletin, January 2000, p. 10.

[3] Congressional Budget Office Memorandum, Estimates of Federal Tax Liabilities for Individuals and Families by Income Categoy and Family Type for 1995 and 1999, May 1998. 

[4]  See Living Planet Report 2000 by United Nations Development Program and World Wildlife Fund.

[5] United Nations Human Development Report 1999 (New York: Oxford University Press, 1999), p. 2. 

[6] Ibid. at p. v.

[7] Ibid. p. 28.

[8] Ibid.

[9] United Nations Human Development Report 1998 (New York: Oxford University Press, 1998).

[10] United Nations Human Development Report 1996 (New York: Oxford University Press, 1996), p. 4.

[11] Lester Brown et al., State of the World 2001 (Washington, D.C.: Worldwatch Institute, 2001).

[12] Theo Colborn, Dianne Dumanoski and John Peterson Myers, Our Stolen Future (New York: Plume, 1997).

[13] Samuel Epstein, The Politics of Cancer Revisited (Fremont Center, N.Y.: East Ridge Press, 1998).

[14] Evan L. Marcus, “The World’s First Trillionaire,” Wired, September 1999, p. 163.

[15] Stijn Claessens, Simeon Djankov and Larry H.P. Lang, “Who Controls East Asian Corporations?” (Washington, D.C.: The World Bank, 1999).

[16] “Tax Report,” The Wall Street Journal, July 21, 1999, p. 1

[17] This projection assumes that the tax cut provisions enacted in 2001 are made permanent rather than, as now, assuming that they will automatically expire in 2011.  Washington, D.C.: Center on Budget and Policy Priorities, August 3, 2001.  See www.cbpp.org/8-3-01tax.htm.

[18] Edward N. Wolff, “Where has all the Money Gone?,” The Milken Institute Review, Third Quarter 2001, p. 34.

[19] Juliet S. Schor, The Overworked American (New York: Basic Books, 1992) indicating that the annual work year increased by 139 hours from 1969-1989.  The Washington, D.C.-based Economic Policy Institute found that the annual hours worked expanded by 45 hours from 1989-1994. 

[20] Steven Greenhouse, “So Much Work, So Little Time,” The New York Times, Sept. 5, 1999, p. WK1.

[21] Charles Handy, The Hungry Spirit (New York: Broadway, 1998), p. 17.

[22] Elisabet Sahtouris, “A Call for an Evolutionary Leap to Maturity,” in The Bridge, Vol. 1, No. 1, June 2001, E-Square Inc. Tokyo.