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We Live in a Time of Extreme Inequality – Thomas Piketty Shows us a Way Out

July 2, 2020 in Poverty

After his bestseller Capital in the 21st Century, the French star economist Thomas Piketty published his new monumental book. It is about the history of inequality and the vision of a more just society. The book is currently only available in French and will be published in English in March 2020. Here is a summary of the most important theses of Piketty’s Capital and Ideology.

1. THE POST-WAR SOCIAL DEMOCRATIC ERA WAS A GOLDEN ERA. WHY? REDISTRIBUTION!

Piketty starts his historical analysis in the feudal period and then defines three more epochs: The rentier society (from the French Revolution to the end of the Second World War), the social-democratic society (from 1945 to the 1980s) and the neo-rentier society (from the 1980s to today).

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Thomas Piketty Capital und Ideology summary
In Capital and Ideology, Piketty presents four different social epochs.

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With the exception of The social democratic society – from 1945 to the 1980s – all epochs from the Middle Ages onwards were marked by extreme inequality.

The rich became richer and richer, the poor poorer. In addition, the rich paid hardly any taxes in all the unequal epochs; the working people were the ones who bore almost the entire tax burden. This is true for the Middle Ages when the nobles were tax-exempt – just as it is for today when the rich hide their wealth in offshore accounts from tax authorities.

Only in the Social Democratic era was it possible to defuse this contradiction:

In the 1950s, the distribution of income and wealth was more balanced than ever before in modern history. That remained stable for over thirty years.

Strongly progressive income and inheritance taxes ensured that the rich contributed more to society and that wealth was not concentrated in their hands as much as it had been in the past. Until the 1980s, the highest income tax rate in the United States was 81 percent, in Great Britain it was even as high as 89 percent.

Since the 1980s, top income tax rates have fallen steadily.

By comparison, the highest income tax rate in Austria of 55% is today one of the highest in the EU. During the social democratic period, politicians invested the money generated from tax revenues in education and health. This was of particular benefit to middle and lower-income groups and increased social equality as well.

2. NEW INEQUALITY THROUGH DEREGULATION AND TAX GIFTS FOR THE RICH

Towards the end of the 1980s, the neo-rentier society replaced the golden era of the social democratic society. Taxes for the rich and corporations were lowered – the working population again bore most of the tax burden. Neo-liberals and conservatives abolished inheritance taxes, wealth was once more concentrated in a few families. This lead to an increase in the overall level of inequality. Government spending – such as on education – has modified to benefit the social elites, not the general public.

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In Capital and Ideology, Piketty shows that social inequality has increased worldwide since the end of the social democratic phase.

In addition, the deregulation of the international financial system has led many rich people to park their wealth in tax havens. The lack of control over international capital flows allowed them to hide their money from tax authorities in tax havens such as Panama or the Cayman Islands.

As a result, the rich avoided paying even the little taxes they were supposed to pay.

The lowering of taxes for the rich was combined with cuts to the welfare system. These cuts affected mostly small and medium-income families, exactly the groups who were already shouldering most of the tax burden.

This trend of increasing inequality was also the main topic of Piketty’s last bestseller, Capital in the 21st Century. Due to the popularity of the book and the importance of its message, the director Justin Pemberton made it into a film.

3. SOCIAL DEMOCRATIC PARTIES HAVE CEASED TO BE WORKERS’ PARTIES

For Piketty, there are several reasons why the social democratic era came to an end and high levels of inequality returned. For example, the end of the Soviet Union and the transformation of the former Eastern bloc states into a laboratory for hyper-capitalism. His analysis, however, focuses primarily on changes in electoral behavior, where he identifies two massive changes.

  • First, voter turnout is falling – but not evenly across all social classes. While the wealthy continue to participate actively in political life, voters from the lower classes tend to turn away from it.
  • Second, the social origin of right-wing and left-wing voters has changed. In the past, the rich voted primarily for right-wing parties, while voters from poorer backgrounds usually supported left-wing parties. Today it is often the other way round: while the working-class votes mainly for the right, the left voters are mostly from the educated middle class.

4. THE TWO LINES OF CONFLICT: CLASS AND IDENTITY

For Piketty, both identity and class are the main lines of conflict in our society. It follows that simply differentiating between left and right is no longer sufficient. There are four political camps today: social internationalists, social nationalists, elitist internationalists and elitist nationalists.

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Thomas Piketty Capital and Ideology summary
According to Thomas Piketty, class and identity are the new central lines of conflict. This results in this new political raster.

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A left that relegates class conflict to the background runs the risk of losing working-class votes to right-wing parties. Especially when these right-wing parties are able to develop a form of social nationalism and win the votes of the working class. The success of the FPÖ under the idea of the “social patriotic party” is a good example of this.

5. PARTICIPATORY SOCIALISM AS NEW LEFT POLITICS. A VISION OF PIKETTY

In Capital and Ideology, however, Piketty outlines a way in which the right can be defeated and the rampant social inequality reduced. He calls this new path “participative socialism” and builds it on three pillars:

  1. Codetermination at the workplace
  2. Nationalization
  3. Tax progression.

Thomas Piketty builds upon the Central and Northern European model of social partnership but he wants to push the codetermination even further. Workers should have more say in the management of their companies. This private sector with strong co-determination should stand alongside a strong public sector. The state should organize education, health, and infrastructure, not the market.

However, Piketty’s most radical demand concerns the tax system:

He advocates a top income tax rate of 90 percent. In addition, he argues for a wealth tax that is higher than the average increase in wealth. This would reduce wealth inequality instead of increasing it.

With the tax income from wealth taxes, each citizen gets an unconditional capital stock. The capital stock should be 60 percent of the average wealth and would be paid to everyone on their 25th birthday, according to Piketty’s proposal. For every Austrian that would be a share capital of €120,000. That would be the democratization of wealth.

Thomas Piketty

Thomas Piketty Capital and Ideology

CC BY 2.0 – Regierung von Chile

The 44-year-old star economist Thomas Piketty earned his doctorate in economics at the age of 22 and became a professor at the Massachusetts Institute of Technology at the age of 26. He is a founding director of the Paris School of Economics and is also active at the École des Hautes Études en Sciences Sociales (EHESS). His research focuses on social inequality and the question of how we can create a fairer economic order. In 2014, Piketty published Capital in the 21st Century and became world-famous. Capital and Ideology is his new monumental work.

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This article was originally published in Scoop.me by Kontrast.at/Thomas Hackl 

The featured image (Frantisek Krejci) was added by Neo Citizens from Pixabay.com

by Editorial Board

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Neo Citizens Has a Logo With a Very Progressive Meaning

July 2, 2020 in General - OTHER

A logo is a very important component of any brand. In fact, it is the face and heart of your brand. A brand, in its more general sense, is a marker that the public can recognize as being you. At Neo Citizens, we recognize that our brand is what represents our organization and tells others who we are and what we stand for, our mission, our cause. Above everything else, our brand is our logo and our attitude.

The Neo Citizens logo has a deep progressive meaning, which is not so hidden, once you understand it. It’s crafted to differentiate us from other progressive organizations and is aimed to create trust among the public that we are a credible organization and that we are true to our word and our cause.

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The blue sphere undoubtedly represents our planet Earth and reaffirms the global character of the Neo Citizens movement. Ours is a wounded planet and therefore the 3 incisions represent the three great diseases of this world: social injustice, economic injustice, and environmental injustice.

The three arrows signify the direction of our movement: upward, toward progress, toward the light. The upper part of the sphere is lighter than the rest, indicating precisely that possible light that awaits at the end of our fight.

At the same time, the three arrows are of different sizes and thicknesses, indicating that growth and progress should encompass everyone equally: the weakest and the strongest, the smallest and the largest, the poorest and the richest. All and not only to the elite.

Finally, the spaces between the wounds of the planet and the spaces between the arrows of progress recall the shape of the letter “V” for “victory“, as a repeated reminder that we are in this fight to WIN, so that we keep in mind that every action we undertake – big or small – must contribute, in one way or another, to that great objective:

Achieve power on a global scale, gradually but continuously, at the local, state, and national levels, and from these positions, promote the necessary changes.

Humanity Will Always Win: How a Left-wing Mayor Governs the City with Austria’s Largest Refugee Camp

July 1, 2020 in Progress

The small town of Traiskirchen is home to both Austria’s largest refugee camp and a successful left-wing mayor. While right-wing populists are gaining ground around the world, the Social Democrats hold 28 of the 37 local councilors in Traiskirchen. The small town is trying to defy large international corporations and put the community above hate. “Tha´s our mission”, says Mayor Andreas Babler.

“We are a typical community, but at the same time an extraordinary one,” says Mayor Andreas Babler about his small Austrian town Traiskirchen. By “typical” he means Industrial location, around 20,000 inhabitants, and a few inns. By “extraordinary” he means everything else. Living together with refugees, for example. Traiskirchen is home to the largest refugee camp in Austria. At the time of the refugee movement in 2015, up to 4,500 refugees lived here in a very confined space – that is almost a quarter of the total population of Traiskirchen. While refugees elsewhere are abused in the streets, the citizens in Traiskirchen organize relief actions for them.

It is also unusual that Traiskirchen is governed on the left. Despite the fact that the town is located in the predominantly conservative province of Lower Austria, the Social Democrats under Babler rule in Traiskirchen with over 70% of the vote.

In Traiskirchen, community and solidarity dominate over hate and populism. What makes life in this small Austrian town so special? It all began over 120 years ago, says Mayor Andreas Babler.

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Austrian town Traiskirchen boomed through strong trade unions

At the time of industrialization at the end of the 19th century, the rubber manufacturer Semperit built a factory in Traiskirchen, which was to bring prosperity to the small town for many decades. In the 1930s, around 9,000 people lived in Traiskirchen – 2,000 of them worked at the Semperit factory. “The performance of the workers back then produced the prosperity of the town,” says the social democrat Babler. This was only possible because the trade union in Traiskirchen was well organized. It ensured high wages and a decent company pension scheme. The Semperit workers earned so well that they and their families were able to spend money in the community – the whole town flourished.

Over 100 years later, the Semperit factory closed, but the jobs remained. Globalization and increasing competitive pressure ensured that Semperit was sold to the German tire giant Continental in the 1980s. The Production was gradually outsourced to countries with cheaper labor costs, and in 2010 the Traiskirchen site finally closed its doors.

“We do not want to make ourselves dependent on large corporations,” says Mayor Babler. The community is, therefore, working on revitalizing the former Semperit factory site. There are now more than 1,000 jobs there again.

Pressure on politicians, not refugees

Like industry, the refugee camp also shapes Traiskirchen’s identity. For more than 60 years, Austria’s largest refugee accommodation has been located there. The refugee camp is somehow a mirror of the world: In 1968, after the fall of the Prague Spring, mainly people from Czechoslovakia found shelter in Traiskirchen, in 1973 Chileans fled to Traiskirchen from the massacres of the Pinochet regime, in the 2000s it was mainly Iraqis and Afghans.

In 2015, as a result of the Syrian war, up to 4,500 refugees were living in Traiskirchen – which is a quarter of the total resident population. That time, the refugee movement led to the rise of right-wing populists throughout Europe. Not in Traiskirchen.

“In 2015 we had to accommodate some of the refugees in tents because we no longer had any room left,” says Mayor Babler. “When the temperature in the tents rose to 60 degrees Celcius in summer, the population called for water to be brought to the refugee camp. The solidarity was great”.

In Traiskirchen, according to the mayor, refugee policy is always made under the aspect of humanism. “Elsewhere, the pressure is being exerted on refugees, although they are not responsible for the fact that they have to flee.” Instead, he says, the town of Traiskirchen tries to put political pressure on those who are to blame for the wars that force people to flee.

Everyone plays a part

Traiskirchen also played a pioneering role in the Corona crisis. The municipality reacted with a bundle of measures. Traiskirchen was the first town in Austria to offer food and medicine deliveries for the elderly. Older people and people with special needs were telephoned during the crisis to help them in isolation and offer them, someone, to talk to. The payments for childcare facilities were suspended in order to relieve the financial burden on Traiskirchen parents during the crisis. Concerts were even organized in the gardens of retirement homes to give the residents a change from everyday life in their home – the mayor himself also picked up a guitar. “We tried to protect the most important thing in this crisis: the people. Humanity will always win.”

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Traiskirchen, Austria, home to a large refugee camp, Mayor Andreas Babler plays the guitar
Mayor Andreas Babler plays a garden concert in front of a retirement home

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People are always the focus of attention in Traiskirchen. Everyone, regardless of their financial possibilities, should be able to participate in social life. That is why the city supports associations and voluntary work. There are music clubs, sports clubs, cultural clubs, parents’ associations, and even a stamp club in small Traiskirchen. They all offer citizens the opportunity to be part of it without having to pay a lot of money for it. To be able to learn an instrument in a music club or to play in a football team – that means to be part of it, that means to participate in social life.

“We are part of a worldwide movement”

The success seems to prove Andreas Babler and his Social Democrats right. While right-wing populists are on the rise, also in Austria, the Social Democrats in Traiskirchen achieved a large majority of 71% in the 2020 elections. 28 of the 37 local councilors in Traiskirchen are occupied by the left-wing party.

Babler has no advice for his social democratic colleagues around the world. Just a reminder: “Even if we are only sitting in a small Austrian town, we are still part of a worldwide movement. Our mission is and has always been to be a mouthpiece for the broad mass of working people.”

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This article was originally published by Scoop.me by Philipp Stadler

Making The Case For Overseas Aid. Debunking The Myths

June 30, 2020 in General - OTHER

Back in 2011, Jamie Drummond wrote a great piece of content about Overseas Aid in response to Ian Birrell’s article in the Daily Mall, supposedly busting the 10 “myths” that he claimed are used to justify the UK’s outstanding commitment to helping the world’s poorest people. Drummond profoundly disagreed and as a result, he built a very strong case. You can check the original article HERE.

‘Myth 1: We can afford to spend a few billion pounds to help the world’s poor’
To pretend that cutting spending on aid is the answer to Britain’s budget problems is woefully misleading. Total government spending in the last financial year was £697 billion. The government made a £850 billion commitment to our banking sector at the height of the financial crisis and we pay £44 billion annually in debt interest. The 0.56% of national income, or £8.7 billion, we currently spend on development assistance and the 0.7% we have promised would not put a significant dent in our deficit even if it were cut completely.

‘Myth 2: We must hit the UN target to give away 0.7 percent of our GNP in aid’

This was an internationally agreed commitment that was signed and reaffirmed in this very country in 2005 to global acclaim. It is Britain that leads larger developed nations on meeting this target – and the practical benefits are immense. It adds to our wealth. It plays to our strengths. It lends stature to our nation. It significantly increases our influence. It means Britain can be trusted. And it was empirically justified by analyses such as that done by the Commission for Africa. But beyond the empirical and practical, is there not something especially fundamental, and dare I say sacrosanct about a promise from one developed nation to the very poorest people in the world?

‘Myth 3: Aid works’
Smart aid in Africa often works extremely well. Charles Kenny’s new book ‘Getting Better’ sees an important role for aid in the hugely positive trends in global development. It helps communities stabilize themselves at the basic level of healthcare, education, infrastructure, and agriculture. This allows for society to sustain a rudimentary but viable standard of living, and creates the conditions for a decent level of economic growth. Charity – in the form of short-term handouts – can keep people alive at times of crisis but without some smart aid, combined with other policies, catalyzing longer-term economic opportunities and jobs they will usually be unable to lift themselves out of poverty. Smart governmental aid is simply the next step up from a pound in the charity tin – it is the structured charitable will of the people.

Alongside other prerequisites for progress – trade and investment, improved governance, stability -smart aid play a vital role in promoting development in the poorest countries. In Africa, in the past decade, 18 non-oil exporting countries grew at an average of 5.5% per year (good, but many would argue that’s still not fast enough). But they could not have done this without debt cancellation and aid. Ghana and Zambia are now classified as lower-middle-income countries, a fact that should be celebrated, and the role of foreign assistance has been acknowledged as an important part of the equation.

‘Myth 4: OK, it hasn’t worked in the past, but it will in the future’

We know that in the Cold War era aid was given more to win friends and influence people than to help tackle poverty and save lives. Too much emphasis was put on paternalistic handouts. Back then results weren’t tracked, and aid was often tied to Western companies in ways that significantly reduced its effectiveness. That’s the bad old aid approach we’ve been shaking off ever since and especially since the advent of the Millennium Development Goals.

The UK has been at the forefront of this smart aid revolution that is demanding transparency and results and is improving efforts to ensure that there is accountability to both taxpayers in rich countries and crucially the poor in developing countries. ONE is campaigning to ensure that all donors publish their aid spending data in an easily comparable format. Aid has improved and so have the results.

‘Myth 5: We will ensure 100 pence of value for every £1 spent on aid’

Value for money is not a principle to be scorned at – taxpayers want it, donors want it and poor people need it. That’s why the British Government has conducted a thorough review of all its spending, rooting out the least effective and asking all its country offices to be clear in what they can deliver in return for taxpayers’ money. A new Independent Commission on Aid Impact will evaluate whether those targets are being met.

A rigorous focus on results is also helping to increase value for money in other parts of the system. Innovative programs like the Global Alliance for Vaccines and Immunisations (GAVI), which deploys private sector expertise, are closely monitoring what they can achieve with every penny of their budget. Over the next 5 years, for example, GAVI will spend $4.3 billion on vaccinating 250 million children and save over 4 million lives as a result. This is just one example – but what a magnificent result.

‘Myth 6: Aid changes the world for the better’

Poverty clearly will not be solved by aid alone, but what smart aid can do is help create the conditions needed for sustainable economic growth. And that means a well-fed, healthy and educated workforce. This is happening throughout Africa, which last year according to McKinsey had more discretionary spending than Russia or India. This is the story – backed by statistics – of an ‘Africa Rising’. But clearly, there’s still a story in countries like Somalia and Ethiopia of an ‘Africa starving’. That doesn’t mean we should ignore the great progress and only focus on the challenges that remain. The world has changed. This century’s giants will be China, India, and Brazil – but an integrated Africa will also be a leader. By supporting this trend through smart aid within a broader strategic development partnership Britain is in pole position to benefit from Africa’s progress.

‘Myth 7: The slew of statistics prove that aid is a success’
It is a very twisted sort of cynicism that dismisses hard factual evidence of development progress as ‘grief-stained’ and a ‘stunt’. These statistics are real and are worth repeating. The number of deaths of children under the age of five declined from 12.4 million in 1990 to 8.1 million in 2009, which means nearly 12,000 fewer children die each day. Much of that decline has happened in the last five years since campaigns like Make Poverty History called for increased investments in vaccinations and anti-malarial bed nets. Increased funding and intensive control efforts have cut deaths from malaria by 20 percent worldwide – from nearly 985,000 in 2000 to 781,000 in 2009, with most of the decline concentrated in 12 African countries. New HIV infections have also declined steadily. In 2009, 2.6 million people were newly infected with HIV – a 21 percent drop since infections peaked in 1997. The number of people receiving antiretroviral therapy has increased 13-fold from 2004 to 2009 with 5 million Africans in need now on life-preserving antiretroviral therapy. That is down to effective, innovative, and donor-supported mechanisms such as the Global Fund to Fight AIDS, TB, and Malaria. From 1990-2008 an estimated 1.1 billion people in urban areas and 723 million people in rural areas gained access to an improved drinking water source. Primary school enrolment in sub-Saharan Africa increased by 18% between 1999 and 2009, the best improvement of any region. It is absurd to argue that aid played no part in making these staggering statistics of progress happen.

‘Myth 8: Britain will no longer tolerate misspending of funds’

Badly spent aid is unacceptable and must not be tolerated. But let’s not kid ourselves that corruption can be eradicated overnight, or that inefficiency and human error can be banished in aid any more than it can in other endeavors. What can be done is to make it as difficult as possible for money to go missing, through maximum transparency and severe sentences for those caught stealing or corrupting. Initiatives like citizen report cards can make sure feedback loops operate to improve efficiency. The Independent Commission on Aid Impact will help with this. Its board includes fearless anti-corruption activists, and hard-headed accountants to crunch the numbers and crush the perpetrators. But while problems remain, the majority of aid is now spent effectively – which is why we are seeing such significant results.

‘Myth 9: Aid is in our interest to prevent immigration’

People don’t like to leave their own countries and families. They do so only because they are driven to out of necessity. If a country thrives and gives its people access to jobs and livelihood the population is much less likely to leave. It is clear that the way to prevent immigration is to help countries develop, grow, and thrive. It is unarguable that there are practical and self-interested reasons to support spending on smart and effective aid programs.

‘Myth 10: Developing nations are desperate to be saved’

Aid alone cannot ‘save’ a country. It pump-primes progress by helping the growth drivers of a national economy – its people – stabilize themselves. Africa is building itself up with a little help from its friends. And it is very good news for our mutual futures that Britain in particular – as it has demonstrated admirably and endlessly in the public, private and political sphere – means what it says and has been a true ally.

Africa’s economies are growing strongly, they are attracting private investment, spawning new technologies, and are home to a burgeoning middle-class of consumers and entrepreneurs. This is not the activists speaking. This is the hard-boiled analysts of McKinsey and the harder-nosed investors now pouring their vast billions of investment money into Africa. For example, Helios announced last month that their £900 million African private equity fund is ready to go. This is a story of ‘Africa Rising’ and it is being told by African citizens like Ngozi Okonjo-Iweala, Ory Okolloh, and Rakesh Rajani – not well-meaning Western hand-wringers. Yet it is essential to understand the supportive and transitional role that smart aid has played, and will continue to play, in this process.

So the pragmatic view based on solid analysis is that aid supports countries through tough times, helps them build up systems and expertise, and as soon as possible puts itself out of business. In fact, if there’s one thing that both the skeptics and those that support evidence-based spending on aid can agree on, it is that the world without aid is the ultimate goal.

This blog post was originally published on the Huffington Post   Featured picture was added by Neo Citizens Editorial Board.

Technology Ends Poverty, but Where is the Trick?

June 22, 2020 in Technology

Technology allows many things today that were inconceivable or impractical in the past. Bringing new technologies into play and creating partnerships is essential in the plan to end extreme poverty. However, there is still a long way to go. Creating apps or funny gadgets just for the sake of having them is not what will help the world achieve the overall objective of ending poverty.

Advances have indeed made a huge difference in the lives of the poor, but there’s also a healthy amount of skepticism out there, and some very respectful people are calling out naïve or inappropriate uses of information and communication technologies.

Kentaro Toyama, a Professor of Michigan School of Information, warned us about the extra excitement about this theme: “Technology -no matter how well designed- is only a magnifier of human intent and capacity. It is not a substitute. If you have a foundation of competent, well-intentioned people, then the appropriate technology can amplify their capacity and lead to amazing achievements. But, in circumstances with negative human intent, as in the case of corrupt government bureaucrats, or minimal capacity, as in the case of people who have been denied basic education, no amount of technology will turn things around”.

In their bestseller “Abundance: The Future is Better Than You Think”, Peter Diamandis and Steven Kotler demonstrated that “higher productivity associated with the falling cost of technology is leading us to a world of plenty”.

But the real trick, wrote Susan Davis in the Harvard Business Review (), “is making sure everyone shares in the coming abundance- or at least has a fair shot at doing so”. And this is very difficult to achieve in a world where most product innovations are geared toward the rich.

In Mr. Toyama’s words, “Disseminating a technology would work if, somehow, the technology did more for the poor, undereducated, and powerless than it did for the rich, well-educated, and mighty. But the theory of technology-as-magnifier leads to the opposite conclusion: the greater one’s capacity, the more technology delivers; the lesser one’s capacity, the less value technology has. In effect, technology helps the rich get richer while doing little for the incomes of the poor, thus widening the gaps between haves and have-nots”.

“The myth of scale is seductive because it is easier to spread technology than to effect extensive change in social attitudes and human capacity. In other words, it is much less painful to purchase a hundred thousand PCs than to provide a real education for a hundred thousand children; it is easier to run a text-messaging health hotline than to convince people to boil water before ingesting it; it is easier to write an app that helps people find out where they can buy medicine than it is to persuade them that medicine is good for their health.”

Based on the wide experience accumulated by BRAC (the organization she is part of), Susan Davis points to three main aspects of Social Entrepreneurship:

Invest in local innovation: The poor and marginalized may not have been to school, but that doesn’t mean they’re uneducated. They’re often experts at “frugal innovation”. Piecemeal, low-tech solutions often go further -and are more easily scaled-up-than anything dreamed up by R&D-centric outsiders”.

Grapple with the human dimensions of the problem: You need to understand not just the thrill of empowering people in principle, but the challenges in practice. You must take in account the workaday hassles easily overlooked in the excitement of helping people. One must be sensitive to the stress of uncertainty with new innovations.

Immerse yourself in the details: If you find yourself frustrated, bored, or driven to distraction by the nitty-gritty, that’s a sign you may be on the right track.

Professor Toyama goes a step further, when states:

“My point is not that technology is useless. To the extent that we are willing and able to put technology to positive ends, it has a positive effect… the value of a technology remains contingent on the motivations and abilities of organizations applying it—villagers must be organized, content must be produced, and instructors must be trained… In other words, disseminating technology is easy; nurturing human capacity and human institutions that put it to good use is the crux.”

 

Modern Inequality: Statistical Challenge or Global Disaster

June 2, 2020 in General - OTHER

Modern Inequality is also known as the gap between rich and poor, income inequality, wealth disparity, etc. The term usually refers to inequality among individuals and groups within a society, but can also refer to inequality among countries, and includes sub-terms like “equality of income” and “equality of opportunities”.

As John W. Schoen, from NBC News says, the real question here is “whether the playing field is level. Equality of opportunity isn’t just a matter of fairness. No society can expect to thrive if it doesn’t fully tap the talent and ability of its entire workforce — including those who happen to be born poor.

In 2009 a group of University of York academics stated and demonstrated that “income inequality is bad for our health, well-being, and welfare”. But why this issue can be considered a global disaster?

• Scientists have confirmed that inequality has psychosocial effects causing insecurities about social status, with knock-on effects for stress levels, cognitive performance, and emotional stability.
• Greater inequality leads to shorter spells of economic expansion and more frequent to severe boom-bust cycles.
• We live in a society where the wealthiest seem to have better luck tipping the playing field in their favor. Wealth generates access to those who make the rules; those rules can be written to further generate more wealth for the wealthy.
• Privatization and the doctrine of maximizing value for shareholders have increased the amount of economic activity focused on extracting the largest possible short-term profit.
• Increasing inequality depresses demand since consumption levels depend more on the wages of those at the lower end of the income scale than the profits of the wealthy.
• We are increasingly unhealthy with the growing difference in life expectancy between rich and poor areas.
• Even in the most developed countries, households rely increasingly on debt to maintain their lifestyles with rising asset prices, especially in residential housing, worsening this.
• We live in an era of unprecedented prosperity, comfort, and extravagance, yet we find ourselves more isolated and unhappy than ever.

We strongly recommend visiting the Inequality.org website where you can find a lot of graphics and diagrams supporting the facts we’re bringing below.

Tracking levels of world inequality can pose a variety of statistical challenges for researchers. Different nations, for starters, tally income and wealth in different ways, and some nations barely tally reliable stats at all.

The share of the global population defined as “poor” — those making less than $2/day — has fallen since 2001 by nearly half, to 15 percent. Overall, the world has become “wealthier” compared to the turn of the millennium. Notably, those in the middle-income bracket making between $10 and $20/day have nearly doubled their global presence, from 7 to 13 percent.

Good News? Yes, of course…, but please keep reading.

Nearly three-quarters of the world’s adults own under $10,000 in wealth. This 71 percent of the world holds only 3 percent of global wealth. The world’s wealthiest individuals, those owning over $100,000 in assets, total only 8.1 percent of the global population but own 84.6 percent of global wealth.

Western and European countries host the lion’s share of the world’s millionaires. Some 78 percent of the world’s millionaires reside in Europe or North America, with nearly half of these millionaires calling the United State home. The only non-Western nations with a significant share of millionaires: the industrial powerhouses Japan, China, and Taiwan.

Ultra high net worth individuals” — the wealth management industry’s term of art for deep pockets worth more than $30 million — hold an astoundingly disproportionate share of global wealth. These wealth owners own 12.8 percent of the total global wealth, yet represent only a tiny fraction of the world population.

The world’s 10 richest billionaires, according to Forbes, own $505 billion in combined wealth, a sum greater than the total goods and services most nations produce on an annual basis.

Wealth disparity in the United States is running twice as wide — and more — as wealth gaps in the rest of the industrial world.

The top 1 percent in the United States hold an average $15 million in wealth, a total only comparable to the prosperous microstate of Luxembourg. No other nation’s top 1 percent own even half of the wealth the top 1 percent’s in the United States and Luxembourg hold.

Capemini and RBC Wealth Management define a “high net worth individual” as someone with at least $1 million in assets”. The vast bulk of the world’s millionaires holds less than $5 million.

A small share of the world’s millionaire population holds a large majority of world millionaire wealth.

The United States dominates the global population of high net worth individuals, with over 4.3 million individuals owning at least $1 million in financial assets (not including their primary residence or consumer goods).

The United States has become home to more than twice as many adults with at least $50 million in assets as the next five nations with the most super-rich combined.

The middle class in the United States has less than half the wealth share of the middle classes in much of the rest of the developed world.

As of March 2016, Forbes reported that the world hosted 1,810 billionaires, over double the 793 billionaires Forbes counted in 2009, at the depth of the Great Recession. These 1,810 billionaires together hold $6.5 trillion in wealth.

The 3.4 billion adults in the world with less than $10,000 to their name, Credit Suisse noted in October 2015, together hold $7.4 trillion in net worth, a $200 billion decrease from the previous year’s estimate of $7.6 trillion net worth.

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Summarizing

This above-described situation is ineffective and unsustainable: the pursuit of higher returns for the already wealthy cannot persist forever. With wealth refusing year on year to trickle down, debt has been used to plug the wage-consumption gap for the rest. This is also very dangerous…, like a time bomb.