Wealth Inequality Is Not A Problem, It’s A Symptom

by  at The Automatic Earth

A comment on an article that comments on a book. I don’t think either provides, for the topic they deal with, the depth it needs and deserves. Not so much a criticism, more a ‘look further, keep digging, and ye shall find more’. And since the topic in question is perhaps the most defining one of our day and age, it seems worth it to me to try and explain.

The article in question is Charles Hugh Smith’s Why Nations (and organizations) Fail: Self-Serving Elites, and the book he references is Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson.

Charles starts off by saying:

The book neatly summarizes why nations fail in a few lines:

(A nation) is poor precisely because it has been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it.

The Amazon blurb for the book states that the writers “conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it)”, and continues with examples used such as ancient Rome, North Korea, Zimbabwe, the Congo, to make the point that some countries get rich and others don’t, because of differences in leadership structures. That in itself certainly seems true, but that doesn’t necessarily make it the whole story.

In the case of the Congo, for instance, the perhaps richest place on earth when it comes to resources, there’s not only the devastating history it’s had to endure with incredibly cruel Belgian colonial powers, there’s to this day a lot of western involvement aimed at keeping the region off balance, and feed different tribes and peoples with weaponry up the wazoo, in order to allow the west to keep plundering it. It’s not just about national goings-on, it’s – also – a supra-national thing.

That’s one of two shortcomings in the material, the breadth and width of why nations and organizations fail their people but serve their masters. In the present day, national boundaries, whether they are physical or merely legal/political, are not the best yardsticks anymore by which to measure and gauge events.

The second shortcoming, in my view, is that inequality, a theme so popular that even Janet Yellen addressed it this week in what can only be seen as her worst possible impression of Marie Antoinette, and expressed her ‘worry’ about wealth inequality in America. The very person publicly responsible for that inequality thinks it’s ‘just awful’. Go bake a cake, gramps.

Wealth inequality is but a symptom of what goes on. Charles Hugh Smith has a few graphs depicting just how bad wealth inequality has become in the US. We all know those by now. It’s bad indeed. But where does that come from? Charles touches on it, but still hits a foul ball:

I submit that this dynamic of failure – the concentrated power and wealth of self-serving elites – is scale-invariant, meaning that it is equally true of communities, towns, cities, states, nations and empires alike: all fail when they’re run for the benefit of a narrow elite. There is a bitter irony in the ease with which American pundits discern this dynamic in developing-world kleptocracies while ignoring the same dynamic in America. One would imagine it would be easier to see the elites-inevitably-cause-failure in one’s home country, but the pundits by and large are members of the Clerisy Upper Caste, well-paid functionaries, apparatchiks, lackeys, factotums, toadies, sycophants and apologists for the very elites that are leading America down the path of systemic failure as the ontological consequence of their self-serving consolidation of wealth and power.

Here’s the thing: especially after WWII, though before that already as well, the western world woke up to the need for international co-operation. Dozens of organizations were established to structure that co-operation. But then, in yet another fountain of unintended consequences, something man is better at than just about anything else, we let those organizations loose upon the world without ever asking what happened to what they were intended for, or whether the original grounds for founding them still existed, and whether they should perhaps be abolished or put on a tight leash.

These are questions that should be asked about any large-scale organization. Be they multinational corporations, global banks, Google or indeed the United States of America. We can’t just assume these powers, which gather more power as time goes by, share and serve the purposes of the people. What if they gradually come to serve only their own purpose, and it contradicts that of the people? Should we not get that leash out?

Turns out, we never do. If someone would suggest today to break up the USA, because its present status contradicts that which the Founding Fathers had in mind (and there are plenty of arguments to be made that such contradictions exist in plain view), (s)he would not even be sent to a nuthouse, because no-one would take him/her serious enough to do so.

But wealth inequality still rises rapidly within America, and it doesn’t serve the people. So why does it happen, and why do we let it? Because the inequality that matters most is not wealth, but power. And we’ve been made to believe that we still have that power, but we don’t. Voting in elections has the same function today as singing around a Christmas tree: everyone feels a strong emotional connection, but it’s all just become one giant TV commercial.

Even if families are genuinely happy to meet up and exchange gifts and stories, it’s all modeled after the building blocks handed to us by chain stores. It isn’t really our story anymore, and Jesus certainly wasn’t born in a manger: he was born in a MacMansion and the first thing the child saw was his mom’s fake boobs, a wall-sized TV and an iPhone.

In that same vein, we lost the stories bitterly fought and suffered for by our grandparents through two world wars and the brutal invasions of Vietnam and Iraq, the stories of how we can best keep ourselves safe and out of – international – trouble. Not just military trouble, but economic and political trouble. These things are no longer our decision. We founded supra-national, indeed global, institutions for that. And then let them slip out of our sight.

The US is a bit of an outlier here, simply because it’s older. But the IMF, the World Bank, UN, NATO and the EU absolutely all fit the picture of organizations that have – happily – grown beyond our range of view, and that exhibit the exact same inverted pyramid characteristics we see on wealth inequality, only for these organizations it’s not wealth that floats and concentrates increasingly from the bottom to the top, it’s power.

Wealth comes after that. And one shouldn’t confuse that order. Because power buys wealth infinitely faster than wealth buys power.

All these supra-national institutions were established with good intentions – at least from some of the founders. But then we forgot, ignored, to check on them, and they accumulated ever more power when we weren’t watching (we were watching TV, remember?)

And what we see now is that any effort, any at all, to break up the IMF, World Bank, UN, NATO and EU would be met with the same derision that an effort to break up the USA would be met with. We have built, in true sorcerer’s apprentice or Frankenstein fashion, entities that we cannot control. And they have taken over our lives. They serve the interests of elites, not of the people. So why do we let them continue to exist?

What powers do we have left when it comes to bailing out banks, invading countries, making sure our young people have jobs when they leave school? We have none. We lost the decision making power along the way, and we’re not getting it back unless we quit watching the tube (or the plasma) and fight for it. Until we do, power will keep floating to the top like so much excrement; it’s a law of – human – nature.

That the people we voluntarily endow with such control over our lives would also use that control to enrich themselves, is so obvious it barely requires mentioning. But that doesn’t mean this is about wealth inequality, that’s not the main issue, in fact it’s not much more than an afterthought. It’s about the power we have over our lives. Or rather, the power we don’t have.



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