William Reville
Science of Life
Oxfam has released figures showing that the richest people on the planet are rapidly growing even richer. The 62 wealthiest people on Earth (you could easily seat them on one bus) have as much money as the entire poorer 50% (3.6 billion) of the global population. And this concentration of wealth at the top is rapidly growing as illustrated by the number of the wealthiest that together equaled the wealth of the bottom 50% over the past five years: 388 (2010), 177 (2011), 159 (2012), 92 (2013), 80 (2014), 62 (2015).
It scarcely requires a degree in economics to see that something is radically wrong with a system that throws up such inequality. And while it is true that hunger and poverty are generally declining worldwide it remains the case that one in nine people goes to bed hungry every night while the very richest accumulate an ever bigger slice of the cake.
One major problem is that tax-avoidance havens are increasingly used by wealthy individuals and companies to avoid paying taxes, thereby depriving governments of resources to tackle poverty and inequality.
Oxfam estimates that wealthy individuals have put a total of $7.6 trillion in offshore accounts. If the income generated by this wealth were taxed an extra $190 billion would be available to governments annually.
Wealth
In Africa alone as much as 30% of the wealth is reckoned to be held offshore. This loses $14 billion in tax revenues per year, enough to pay health-care costs for mothers and children, saving four million children’s lives a year, and to employ enough teachers to take every African child into school.
We are familiar in Ireland with multinational corporations paying the State low rates of tax on their profits, although we must acknowledge that the great majority of the profits made by these companies are on sales of products outside Ireland.
However, these companies employ hundreds of thousands of Irish workers and our low Irish corporation tax rates are a powerful attraction when they are deciding where to locate in Europe.
Ireland could charge a higher rate of corporation tax but many of these giant corporations might pull out, something we could not afford because of the jobs. Also, 88% of our exports are multinational product. All things considered, successive Irish governments have probably performed quite a successful juggling act in this area.
Huge wealth has a corrosive effect on those who have it. Imagine being paid €1.5 million per year as the CEO of a corporation. The average industrial wage is about €40,000 a year so inevitably you will try to justify your huge salary to yourself. You will tend to see yourself as especially deserving and the mass of people on average salaries as less deserving than you.
In extreme cases you may stop seeing people on average salaries as people at all. MRI scans show that certain areas of the brain are activated when you view a picture of another person. However a study by Susan Fiske of students at prestigious Princeton University found that these brain areas did not light up when the students were presented with images of drug addicts or homeless people. The students reacted to these images as if they “had stumbled on a pile of trash”.
When economic inequality is great more people tend to quickly size up the status of other people they meet. Casting your eyes down or looking over their shoulder when you meet another person shows you don’t respect them.
A social psychology study by Daniel Goleman showed that when strangers meet and one tells the other of a difficult personal experience, e.g. death of a parent, the larger the social gap between the two the less the compassion shown.
Salaries
We have all become familiar with the fabulous salaries (€1 million and more) paid to the top executives in banks and corporations – the top 1%. The implication often is that the ordinary workers on salaries of about €40,000 are lucky to have jobs at all and they owe their good fortune to the superior leadership skills of the top 1%.
Of course the leadership skills of the fabulously paid top bankers didn’t prevent them running their banks onto the rocks and ruining the Irish economy in recent times.
In fact the contrary seems to be true. If the top 1% of earners is kept in check they seem to work better for the good of all. In Germany the top 1% of earners are paid about half what their counterparts in the USA receive but the German economy is booming and unemployment is at a 20-year low.
Gross inequalities in wealth are bad for everyone – even for the wealthy. Abolition of offshore tax havens and wealth taxes on the top 1% of earners and redistribution of these taxes into social services and amelioration of inequality are essential to balance things up. Certainly the frantic pursuit of fabulous wealth by the few only leads to tears. Aesop (620BC – 584BC) knew this long ago when he told the following story: A man and his wife owned a very special goose. Every day the goose would lay a golden egg, which made the couple very rich. “Just think,” said the man’s wife, “if we could have all the golden eggs that are inside the goose, we could be richer much faster.” “You’re right,” said her husband, “we wouldn’t have to wait for the goose to lay her egg every day.” So, the couple killed the goose and cut her open, only to find that she had no golden eggs inside of her at all, and they had no more golden eggs.
The moral: much wants more and loses everything.
William Reville is an Emeritus Professor of Biochemistry at UCC http://understandingscience.ucc.ie