The truth about extreme global inequality

Global inequality is growing in part because o

policies imposed on developing countries.

f the neoliberal economic

The crisis of capital, the rise of the Occupy movement and the crash of Southern Europe have brought the problem
of income inequality into mainstream consciousness in the West for the first time in many decades. Now everyone
is talking about how the richest 1 percent have captured such a disproportionate share of wealth in their respective
countries. This point came crashing home once again when an animated video, illustrating wealth disparities in the
US, went viral last month. When an infographic catches the attention of tens of millions of internet users, you know
it is hitting a nerve.
But the global scale of inequality remains largely absent from this story. So we at /The Rules decided to put
together a video that would give it some attention.
While this information is not new, it is still startling. In the video we say that the richest 300 people on earth have
more wealth than the poorest 3bn - almost half the world's population. We chose those numbers because it makes
for a clear and memorable comparison, but in truth the situation is even worse: the richest 200 people have
about $2.7 trillion, which is more than the poorest 3.5bn people, who have only $2.2 trillion combined. It is very
difficult to wrap one's mind around such extreme figures.
But we wanted to do more than just illustrate the brutal extent of inequality; we also wanted to demonstrate that it
has been getting progressively worse. A recent Oxfam report shows that "the richest 1 percent has increased its
income by 60 percent in the last 20 years, with the financial crisis accelerating rather than slowing the
process", while the income of the top 0.01 percent has seen even greater growth.
The video shows how this widening disparity operates between countries. During the colonial period, the gap
between the richest countries and the poorest countrieswidened from 3:1 to 35:1, in part because European powers
extracted so much wealth from the Global South in the form of resources and labour. Since then, that gap has
grown to almost 80:1. How is this possible?

Capital flows from poor to rich

The gap is growing in part because of the neoliberal economic policies that international institutions like the World
Bank, the International Monetary Fund (IMF) and the World Trade Organization (WTO) have imposed on
developing countries over the past few decades. These policies are designed to forcibly liberalise markets, prying
them open in order to give multinational corporations unprecedented access to cheap land, resources and labour.
But at a serious cost: poor countries have lost around $500bn per year in GDP as a consequence of these policies,
according to economist Robert Pollin of the University of Massachusetts.

Millions of Americans Still in Poverty

As a result we see a clear net flow of wealth from poor places to rich places. We designed the video to help people
visualise this flow, and to show how it pumps up the Global North at devastating expense to the Global South.
Few people know about this constant siphoning of wealth. One reason for this is that the discourse of aid takes up
so much space. Consider the enormous publicity captured by Jeffrey Sachs and the Millennium Development
Goals, or Bono and Bob Geldof, or even big charities such as Save the Children, Christian Aid and Action Aid.

Governments of rich countries constantly celebrate how much they spend in aid to developing countries, and
multinational corporations splash CSR credentials across annual reports and product lines - neither of them
confess how much they take out of developing countries.
The video highlights the fact that aid disbursements from rich to poor pale in comparison to the amount of capital
that flows the other direction. Tax avoidance alone accounts for more than $900bn each year - money that
corporations steal from developing countries and hide in tax havens (or thiefdoms, more accurately), of which the
City of London is the global hub. Debt service accounts for about $600bn each year, much of it paid on the
compound interest of illegitimate loans accumulated by dictators long since deposed. Both of these flows can be
understood as direct transfusions of cash from poor to rich.
There is much more that we could have included in the video. Land grabs, for example: Fred Pearce's new
book, The Land Grabbers, shows that land exceeding the size of Western Europe has been grabbed from
developing countries by corporations in the past decade alone. If we could quantify the value of that land, we could
have added a huge amount to the $2 trillion stack of cash that the video depicts flowing from poor to rich.
Or consider climate change: A 2 degree rise in global temperature will cost regions like Africa and South Asia about
5 percent of their GDP, much more than rich countries will suffer despite the fact that they bear most of the
responsibility for causing this disaster. Losses on this level make aid seem insignificant.
These are the ultimate drivers of poverty and inequality. These are the problems that we need to tackle.
Democratic deficit
It bears pointing out that the geographic divide that the video depicts between the Global North and the Global
South does not make as much sense today as it once did. We tried to show how both China and Russia embody
this divide within their borders. But to be even more accurate we would have had to depict a small wealthy core of
corporations and individuals - a global elite versus the majority of the world's people. It is no longer only about the
West versus the Rest; the class divide is now internationally dispersed.
It remains true that the institutions that control the global economy (the World Bank, the IMF, the WTO and various
bilateral Free Trade Agreements, or FTAs) are monopolised by Western countries. But that does not mean that they
represent the interests of voters in those countries, for the people who run these institutions - central bankers, trade
representatives and their corporate lobbyists - are not elected by any democratic process.

The World Bank and the IMF have the power to impose economic policies on developing countries even when
voters and elected politicians in those countries unanimously reject them. On top of this, they enjoy "sovereign
immunity" status that protects them from lawsuit when their loans fail and their policies cause economic crisis and
human devastation.
In other words, not only are these institutions undemocratic, they also trump local democracies and override the will
of voters in independent nations. The people affected have no recourse to justice.
We see the same democratic deficit in corporations. The majority of the world's biggest economic entities are now
corporations, not countries. They are run by CEOs who are unelected and unaccountable to any citizens; they are
responsible only to their shareholders, and their mandate is to turn as much profit as possible at whatever cost to
human life or the planet.

These corporations often have more power than the governments of the countries in which they operate. One
reason for this is that the WTO and most FTAs enforce "investor-state dispute agreements" that allow corporations
to sue local governments for legislation that compromises their profits, like minimum wage laws or pollution laws.

We need to change the rules

The point here is that corporate power regularly transcends national sovereignty. We have to face the fact that the
democratic institutions we worked so hard to shore up during the 20th century are no longer sufficient to protect us
in this brave new world.
We need to change the rules, and we need to do it quickly. Given that real power is now routinely wielded at the
supra-national level, we need to start building global democratic capacity that can keep rampant greed and
profiteering in check.
This might mean a global corporate minimum tax that will put an end to trade mispricing and tax havens. It might
mean a global minimum wage that will put a floor on the "race to the bottom" for labour. It will certainly mean
wresting control of international trade laws from the hands of IMF bankers and WTO technocrats and placing it
under new institutions that are transparent and democratic.
If we are going to have a global economy, we need to have global democratic oversight. Can we accomplish this?
Yes. And anyhow, we have no choice; the future of humanity, and of the planet, depends on it. They will say we are
dreamers for demanding these changes. But the dreamers are those who imagine that we can feasibly carry on
with the status quo.