In the year 1918, David Lloyd George came very near to dying of the Spanish flu pandemic. He was bedridden for days and had to be attended to by a doctor for over a month. In the year 2020, we witness Boris Johnson, the Prime minister of the United Kingdom, contact the coronavirus and he was under intensive care for several days. An eerie coincidence emerges out of these two separate events. During the Spanish flu pandemic in 1918, David Lloyd George was the Prime minister of the United Kingdom.
This must make you wonder what exactly has changed in the past 100 years. Many things beyond imagination.
Has it turned out for the good? Debatable.
1. THE INVISIBLE HAND
One of the most influential thinkers of the modern world, Adam Smith authored the book “Wealth of Nations” which is the bedrock for free-market arguments. He defines the invisible hand as unseen forces that move the free economy market. He believed that the best interest of society can be fulfilled through individual self-interest and freedom of production as well as consumption. Adam Smith strongly believed in the principle of the free market and the essence of his strong belief is captured in his own words.
“Every individual necessarily labors to render the annual revenue of the society as great as he can … He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention … By pursuing his own interests, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”
After more than two centuries after the release of the book, we are at a stage where we can assess the efficacy of his belief.
Laissez-faire capitalism was heralded as the perfect market system where the buyers and the sellers will negotiate without any governmental interference and everything will take its own course. The world has largely been in a growth stagnation for the best part of humanity, but the advent of the industrial revolution changed the whole landscape. The resource outputs skyrocketed, new sea routes opened immense trade opportunities, innovation, and technology spearheaded our development, and the dominance of the human species over natural resources significantly increased.
Capitalism brought a promise of eradicating poverty and creating a utopian world. It promised equal opportunity. We were told that hard work is the key to success. There is nothing in this world that you cannot achieve. The dream of an ordinary human and his journey to becoming an extraordinary individual gave hope to people at the bottom of the pyramid.
If you were born in the 1980s, the chances of a person being a success story were higher than a person who was born in the late 2000s. Increased competition has blocked the pipeline to the top but that is not the only force that is acting against you. Entry barriers have dramatically increased. Although, a report by Wealth-X states that around 67% of the high net income individual is self-made but the number is concentrated in a few areas of finance, real estate, and technology. The number of successes pales in proportion to the population. Jason ford, a “self-made” entrepreneur explains it neatly.
“Just as not everyone is qualified to be an astronaut, it takes a special kind of person to be an entrepreneur,” he added. “You need discipline, intelligence, extreme dedication. But the best astronaut in the world can’t fly to the moon unless someone gives them the rocket.”
The question that remains is whether the hand is really invisible.
The failure of “trickle-down” economics has become more evident in recent times when the rich are getting richer and the poor getting poorer. The significance of wealth concentration is extremely important for most of the problems that we are facing today.
To put my case, we should look into history and look into the patterns to understand why do we feel poor in spite of the fact that more people have been pulled out of poverty than ever before in the history of mankind.
Our resource consumption has drastically increased from pre-industry times. We have significantly increased our energy consumption from less than 5000 TWh at the beginning of the Industrial Revolution to more than 140,000 TWh in 2018. The timespan has been extremely short on a human scale and such kind of development is unprecedented. The booming population increased the human lifespan. This coupled with improving health infrastructure and advancements in technology improved the standard of living. Poverty reduction rapidly occurred in many early industrial countries. The poverty levels in 1820 were an astounding 94% of the human population whereas the poverty levels in 2018 are 11.8%. This percentage has been declining year on year.
This herculean endeavor to pull the majority of the human population out of poverty has been a roaring success. Access to education, improved connectivity, increased job opportunities, a healthy life, improved standard of living, and all things that a good life comprises have been delivered by the economic model as practiced.
The invisible hand seems to be working. The system appears to be flawless. Humans have never been in such a great position and their dominance over Earth has been unmatched. The idea of a utopian world does not seem far away.
Despite these successes, why are millions of people still malnourished? Why do people exploit children? Why are animals killed just so we can wear them? Why has climate change become an existential threat to our specie with all our scientific advancements?
There is no doubt the incomes from economic growth are filling the pockets. The question is whose pockets are being filled?
2. CONCENTRATION OF WEALTH
Various studies point toward the global misconception regarding the efforts of the countries in alleviating poverty. The countries that were under the low-income category understand that poverty has significantly decreased but on the contrary, people in rich countries who have escaped the poverty trap perceive a rise in poverty. To understand the data, follow the link here.
It is a fact backed by data that people are getting out of the poverty trap yet there is a misconception that people are getting poorer in countries that have already escaped the poverty trap. Economic growth is associated with an increase in income, but we cannot investigate income from a one-dimensional perspective. We need to understand the concentration of income across the population to understand the misconception. To put this into perspective, a worrying statistic came from India which states that income inequality has become worse over the years. The top 1% make up 73% of the country’s wealth. In the period between 2006 and 2015, ordinary workers’ income raised by an average of 2% while billionaires’ wealth increased almost six times faster.
The term “economic development” should not be synonymously used with the term “economic growth”. Economic growth is simply the ballooning of income without any regard for where that income goes whereas economic development takes into consideration the issue of income inequality. Most data have suggested that income is concentrated at one end of the spectrum and the rate of concentration is increasing exponentially.
According to the Congressional budget office, the rich top 1% have massively outpaced the bottom 20% in the acquisition of wealth in the United States between 1980 and 2015. People in the bottom 20% could increase their wealth by 23%in a period of 35 years whereas the rich were able to increase their wealth by a whopping 200-230% in the same time period.
According to a report titled “State of Working America wages 2019” published by Economic policy institute, the paycheck levels for the top 0.1% and 1% have boomed astronomically but wages for the bottom 90% have marginally increased from the 1980s. The top 0.1% had increased their annual earnings by 340.7% compared to 1980 earnings. A similar observation is made for the top 1% increasing their annual earnings by 157.8% compared to 1980 earnings. An abysmal narration is presented for the rest bottom 90% whose annual earnings marginally increased by 23.9% compared to 1980 earnings.
As per a report titled “Poverty and Shared responsibility 2016: Taking on inequality” by World bank observed that the trend of the Global Gini coefficient shows a downward trend over time. Italian statistician Corrado Gini developed a Gini coefficient which represents the income inequality of a region based on various parameters. Gini scale ranges from zero to one wherein zero represents an equal income society whereas one represents an unequal income society. The reason behind this downward trend in the Gini coefficient was subject to the rise of China and India which accounted for the highest number of people being pulled out of poverty, but a corresponding worrying trend was observed. The Gini coefficient between the countries dropped from 80 in 1988 to 65 in 2013 but the Gini coefficient within the country has constantly increased from 20 in 1980 to 35 in 2013. Although, inequality between the nations is decreasing the inequality within the nations is on a rise. Click here to access the full report.
The Davos report 2019 titled “public good or private wealth?” indicates that hundreds of millions of people live in poverty yet huge rewards go to those at the very top. The wealth of the world’s 1900 billionaires increased by USD 900 billion in the last year whereas the wealth of the poorest half 3.8 billion people fell by 11% causing further concentration of wealth. Earlier 44 people held wealth equivalent to 3.8 billion people. The number has dropped to 26 people in the consequent year. To know more, click here.
Based on the above facts, it can be sufficiently concluded that the benefits of economic growth have benefited the few. Helen Keller perfectly captured this in her book “The Rebel Lives: Helen Keller”.
“The few own the many because they possess the means of livelihood of all … The country is governed for the richest, for the corporations, the bankers, the land speculators, and for the exploiters of labor. The majority of mankind are working people. So long as their fair demands — the ownership and control of their livelihoods — are set at naught, we can have neither men’s rights nor women’s rights. The majority of mankind is ground down by industrial oppression in order that the small remnant may live in ease.”
3. DYNAMIC OF WEALTH AND POWER
A paper published by David Card and his team from the University of Berkeley titled “Unions and Wage Inequality” studied the difference in wages of a unionized workforce compared to a non-unionized workforce for similar nature of work. It was observed that a unionized workforce received higher wages compared to a non-unionized workforce. A person who works in a non-unionized workforce receiving 1.50 units of wages could have received 1.90 units of wages for similar nature of work had he been a part of a unionized workforce. The fall in wages observed happened due to reduced bargaining power of the non-unionized workforce over the business. To know more, click here to access the report.
This highlights the relationship between power and inequality, the invisible hand which was supposed to be impartial is tainted with power. It works in accordance with the ordinance of power. One of the bad habits of power is that it runs behind wealth. The direct consequence of wealth concentration is the reduced bargaining power of the masses. The politicians in power do not favor the decision of the electorate but surrender their allegiance to the whims of their wealthy masters who have brought them to power.
Economic tripartism exists in corporatism: labor force, business interest groups, and government. The business group and labor force generate the cycle of demand and supply. The elected governments act as a fair and impartial regulator of this cycle. Economic inequality reduces the bargaining power of the labor force over the business interest groups. Free from the latches of labor demands, these business group colludes with the government and corrupt them to work in their favor and the vicious cycle continues. This is a cancerous form of capitalism known as "Crony Capitalism" that has no regard for anything but profit.
I call it malevolent corporatism.
Malevolent corporatism is the invisible hand of modern capitalism.
4. THE FOUR HORSEMEN
Walter Schiedel, author of the “Great Leveler: Violence and the History of inequality from the stone age to the twenty-first century” defines the ills of inequality and the four horsemen of leveling.
“For thousands of years, civilization did not lend itself to peaceful equalization. Across a wide range of societies and different levels of development, stability favored economic inequality. This was as true of Pharaonic Egypt as it was of Victorian England, as true of the Roman Empire as of the United States. Violent shocks were of paramount importance in disrupting the established order, compressing the distribution of income and wealth, in narrowing the gap between rich and poor. Throughout recorded history, the most powerful leveling invariably resulted from the most powerful shocks. Four different kinds of violent ruptures have flattened inequality: mass mobilization warfare, transformative revolution, state failure, and lethal pandemics. I call these the Four Horsemen of Leveling. Just like their biblical counterparts, they went forth to “take peace from the earth” and “kill with sword, and with hunger, and with death, and with the beasts of the earth.” Sometimes acting individually and sometimes in concert with one another, they produced outcomes that to contemporaries often seemed nothing short of apocalyptic. Hundreds of millions perished in their wake. And by the time the dust had settled, the gap between the haves and the have-nots had shrunk, sometimes dramatically.”
The four horsemen have returned.
Before 1790, France was a monarchy ruled by a King. The Estate-General or the general assembly of France was divided into three classes namely clergy, nobility, and commoners. 95% of the population belonged to the third estate of commoners but 35% of the land was occupied by clergy and nobles combined. The sequence of events before the revolution sowed seeds of deep mistrust among the commoners towards the ruling class. The culmination of bad harvests and regressive taxation schemes which burdened the lower class so that the higher class can maintain its lifestyle kindled the hatred of the masses and caused a huge uproar and violent attacks on 14 July 1789 in an event we remember as the “Storming of the Bastille”. This started the struggle against power famously referred to as “The French Revolution”.
Although proponents of capitalism put forward arguments that capitalism has been a catalyst to avoid such situations by giving equal opportunity to everyone. Capitalism does not take into consideration your background privilege, race, religion, sex, or class. It only cares about the merits and value of your contribution to global society. The sad reality of our mutated capitalism is that the excesses and misdeeds of the wealthy are endured by the less privileged. The financial recession of 2008 is a classic example of the greed that spurred the rich and the price of the fall had to be paid by the innocent poor.
Lewis Ranieri is credited for popularizing the term “Securitization” to the financial world which essentially means a financial instrument created by merging or pooling of various financial assets into one group in order to be sold to investors who believe these products are easily liquidated rather than buying the physical asset. The banks gained a commission fee on every sale of mortgage-backed bonds but after a time period, banks ran out of these instruments because there can be only so many houses with people having good jobs and good credit history. Banks got aggressive and created riskier products called the sub-prime mortgage where the money was lent to people with poor credit history and the cycle continued. when the interest rates increased in 2007, the number of defaults increased rapidly causing the whole bonds to go bust. The housing market crashed, and people lost homes. World unemployment was above 200 million at the time. To know more, watch the movie “The Big Short” on Netflix.
Amartya Sen, a famous economist, noted that food shortages and famines are not caused due to actual lack of food but due to political mismanagement. Our food systems are very complex in nature. Trade of goods and services ideally makes the world a resilient place, but the fragility of this statement was exposed during the rise of the Arab spring. The protests in North Africa were predominantly a war against rising food prices.
The correlation between food prices and oil prices was high due to the energy costs involved in the production of food. The demand for oil steeply declined after the 2008 recession but bounced back quickly due to low prices creating demand from emerging markets. The food prices shot up in the wake of rising oil prices. Coupled with climate change effects causing prolonged droughts in the region culminated in extreme social unrest. On December 10, Mohammad Bouazizi, a vegetable vendor from Tunisia, set himself on fire. This marked the beginning of the Arab spring. Apparently, the financial dealers who caused the Arab spring pounced over commodity markets driving the food prices to peak levels. The agriculture market had become extremely financialized and new players such as pension funds, investment banks, and hedge funds entered the commodities market after the crash of financial markets which increased speculation and volatility. Click here to read the report by Oxfam International on speculation and food security.
This highlighted the problems of the less developed nation or net importers of food who could not bear the twists and turns of the global economic situation.
“The Garden Slide” predicament is a problem that stems from unfair power distribution. I loved to play on the garden slide but there were many children and only one garden slide. The kids who were more powerful than us formed a gang and did not let smaller kids like me play on the slide. They played to their heart’s extent and they left only when it was too late for us to play. We had a few options. We could complain about it to their parents or we could revolt against them. We tried to negotiate with them regarding playtime. We tried everything. They didn’t want to give up on the fun. We could not do anything. A few months later, those kids broke the garden slide and hurt themselves. It was replaced with a new slide.
Don’t treat our earth as a garden slide. We cannot replace the earth.
5. CORONAVIRUS AND GREED
The rise of the covid19 pandemic shocked the world’s status quo. Numerous countries went under lockdown and the world economy has tanked. Trade has been halted, flights are grounded, ground transportation have reduced drastically, and the number of deaths is rising. As of 16th April, the cases have risen to over 2,000,000 leading to over 140,000 deaths around the globe.
The crisis has exposed the over-reliance on China. This has led to various countries rethink their supply chain strategy and reduce their dependence on China. This over-reliance on china was a direct consequence of the madness that ruled the principles of the firms to reduce the cost as low as possible to reflect higher profits for their shareholder. Putting all the eggs in one basket, firms overestimated the invincibility of the basket.
The nature of greed and coronavirus are eerily similar. Both spread rapidly and threaten the existence of the host in which it grows. It is self-destructive and leaves nothing.
We have already witnessed three out of four horsemen. State collapses in the middle east, transformative revolutions across North Africa, and rising numbers of a lethal pandemic. Are we ready to face the fourth horseman of mass warfare? Time will only tell.
Why is it that a sense of social justice, morality, and ethics is clouded in front of economic growth? Edward Abbey defines precisely the ideology of growth that has no empathy.
“Growth for the sake of growth is the ideology of the cancer cells.”
The fact that greed is deeply rooted in our monetary system and corporates have created a one-dimensional system of profits. This has become the sole purpose of the existence of a firm and all efforts are put into maximizing it without any regard to the ill effects it has on the natural and social environment.
Greed stems from the need for material possessions and community status. The mantra of “greed is good” has become an existential threat. It is a pathogen that has originated from our own mind and is slowly pushing us toward destruction. Michael H Taylor in his article titled, “On Greed: Concrete and Contemporary guidance for Christians” states that it is insecurity and not perversity that causes greed.
“At many different levels, and in many different ways…we do not feel safe: a condition that a Gospel which speaks about acceptance, unconditional love, and a totally faithful parent God can certainly be heard to address. We, therefore, act in ways we judge will protect us and best safeguard our interests: by accumulating possessions for example and ignoring the claims of justice as we put our interests over and above those of others and the claims of well-being, and judge that safety lies in a narrow set of preoccupations.”
Jung Mo Sung, a Roman Catholic, comments on the essence of individual selfish capitalism, which has no regard for anyone apart from themselves, in the concept of “consumption spirituality”.
“People desire more than they need or more than their fair share because they want, through this accumulation, to be more than others. They want to win in the rivalry of mimetic desire. They wish to be recognized as being more than others. In capitalism, this desire is nourished by ‘consumption spirituality.’ And this ‘consumption spirituality’ is the spirit that moves people to look for more success and efficiency within the system.”
6. COST OF GREED
Meat and dairy consumption are a good examples to understand the cost of greed. The global consumption of meat is 315 million tonnes. It is rising and is associated with an increase in the wealth of a region except in a few regions like India where plant-based diets are prescribed in religious texts. The cost of meat and dairy consumption to our natural and finite resources are as follows:
a) Livestock is responsible for 65% of nitrous oxide emissions which is 296 times more destructive than carbon dioxide as a greenhouse gas.
b) It is responsible for the majority of Amazon rainforest destruction as lands cut down are used to grow feed for cattle. The major rainforests in Malaysia and Indonesia are under threat with many exotic species on the verge of extinction due to the ridiculous demand for palm oil plantations.
c) Meat puts extreme pressure on freshwater resources of the world.
d) Meat consumption is associated with a rise in the risk of degenerative diseases such as cancer and diabetes.
e) Meat and other dairy products form a sizable chunk of water usage. A kilogram of cheese can take up to 5000 liters of fresh water and a kilogram of beef can take up to 2700 liters of fresh water.
f) According to Sandstorm et. al (2018), meat and dairy consumption contributes to 83% of greenhouse gas emission of all the food consumed in the European Union and 70% of all land-use changes in the European union occurs from growing animal feed in order to sustain the demand of meat and dairy.
These are just a few examples of the cost that we incur damaging the prospects of our existence. The opportunity cost of diverting freshwater in water-scarce regions for drinking and irrigation purposes and the cruelty to factory animals are immense.
Does that mean should we stop eating meat and dairy products altogether?
There is no need to change your diet, but it needs to be regulated. We must check our consumption. Our small act of sacrifice can go a long way towards making sizable impacts on our survival as a species.
According to World Resources Institute, if the world’s 2 billion consumers of meat and dairy products cut their consumption by 40%, we can save around 168 billion tonnes of greenhouse gas emissions which is 3 times the total emission for the year 2009 and can save an area of land twice the size of India.
A shift in behavior creates massive changes to one of the most crucial problems we faced in the history of humanity. A person in the United States with an average diet can reduce greenhouse gas emissions per person by 14% by substituting 33% of beef consumption with pork and poultry, 16% by substituting 33% of beef consumption with legumes, 43% by reducing 50% protein consumption from animal-based products and 56% by adopting a vegetarian diet.
Desmond Tutu aptly remarks in his famous quote rallying humanity to fight against climate change.
“Climate change: Never before in history have human beings been called on to act collectively in defense of the Earth”
But I believe we are not a lost cause. For every evil, we have a conscience of good that is ready to fight against it. The innate nature of selflessness has again risen in times of the Covid19 pandemic. The battles being fought on the frontlines by selfless workers, the cooperation between nations in times of crisis, donations made by people despite uncertain times, and the spike in generosity have brought the power of compassion into practice. This collectiveness in times of crisis has reinforced the power of humanity. Our potential as a species should not be wasted. If greed had a physical existence, it would have been a mere insect trampled under the feet of growing compassion. Individualism falls flat in face of crisis and collectivism rises. Desmond Tutu captures the essence of Ubuntu through the following remark.
“A person is a person through other persons. None of us comes into the world fully formed. We would not know how to think, walk, speak, or behave as human beings unless we learned it from other human beings. We need other human beings in order to be human. I am because other people are. A person is entitled to stable community life, and the first of these communities is the family.”
At Nelson Mandela’s memorial, former United States President Barack Obama spoke about Ubuntu.
“There is a word in South Africa – Ubuntu – a word that captures Mandela’s greatest gift: his recognition that we are all bound together in ways that are invisible to the eye; that there is oneness to humanity; that we achieve ourselves by sharing ourselves with others, and caring for those around us. We can never know how much of this sense was innate in him, or how much was shaped in a dark and solitary cell. But we remember the gestures, large and small introducing his jailors as honored guests at his inauguration; taking a pitch in a Springbok uniform; turning his family’s heartbreak into a call to confront HIV/AIDS that revealed the depth of his empathy and his understanding. He not only embodied Ubuntu, but he also taught millions to find the truth within themselves.”
In the face of crisis, it is the collective consciousness that gives us the courage to stand up against it. The prospects of climate change, hunger, poverty, pandemic, and water have become a grave concern. I want to remind us about our potential to redeem. The power of individuals will have to become the strength of the collective one if we are to defeat our sufferings.
The drive of the collective spirit is to become more fully and in unity with fellow men. Ubuntu lies in the core of every human. It is the responsibility of every human irrespective of ethnicity, nationality, or religion to strive hard and access that core releasing a wonderful possibility of collective humanity dancing through the hardships paving way for a safe future that we can give to our children. A utopian world in the right sense.
There is a wonderful and strong story that shines upon what collective humanity means and how relevant “Ubuntu” is in a world post-pandemic. An anthropologist had been studying the customs and habits of a tribe in Africa. He was waiting for his transportation to the airport as he had finished his work. In order to pass time, he proposed a game to the children there. He placed a basket of candies under a solitary tree, and he drew a line. He told the kids that they should all wait behind the line and wait for his signal. As soon as he signals to go, the person first to reach would win all the candies.
He signaled the kids to go but he was surprised. Instead of rushing toward the tree, all the children held their hands and ran towards the tree together. they shared the candies and enjoyed it. The anthropologist asks the children why all of them went together. To this a young girl simply replied,
“How can one of us be happy if all others are sad?”