Wealth Inequality


The inequality associated with western society’s governments being preoccupied with growth has become a genuine social and economic problem in itself, for not only the US and Australia but also across the entire developed world.  So who or what is to blame for this break down?  Sure government has a role to play but government per se is not the answer and it is not just about money and legislative change.  Each and everyone of us has a role to play in addressing the wealth inequalities across western society and in particular Australia.  For it is we ordinary voter that determine the makeup of government and while we persist in only voting for “what’s in it for me” rather than “what is good for the country and the common good” how can we expect any more than more of the same.   Within this flawed democratic process, how does the real will of the people finds its way through this quagmire of wealth, induced deceit and deception?   

Ordinary people have no other platform to turn to, other than joining some political party and being absorbed into the wealthy power group play (be they corrupt unions or corrupt businesses).  The more dis-functional government becomes the more wealthy pressure groups take advantage of people’s apathy within our broken democratic processes.  People need to take more personal responsibility for their own life and the life that surrounds them.   Becoming more aware of what is actually happening around us and being awakened to the flaws in our democratic processes is a good place to start.   Is there some way to address the current apathetic mindset of individuals and to provide a platform whereby the voice of the people can be clearly and unequivocally heard?

Fifty years ago (1964) President Linden B Johnson (LBJ) declared war on US poverty, when it stood at an all-time high – where 19% the US population was living beneath the globally recognised poverty line.  The LBJ “War on Poverty” was facilitated by protracted and effective advertising that brought about a mindset shift in the US electorate.   Through effective collaboration with Congress, LBJ was able to pass more than 200 pieces of legislation, which included early education programs and social safety nets such as Medicare and Medicaid.   By 1977 the US poverty level had reduced to 11%.  One might have expected that this recipe for poverty reduction to continue of its own accord.   No so.  Today (2014) some 50 years later, the US population numbers living beneath the poverty line is back up to 15% and increasing.   There are now 46 million US people living beneath the poverty line in the most advanced and strongest economy in the world.   This is far too many, especially when one recalls that the richest 1% of the population control 95% of the overall wealth of the nation.  This economic inequality is mostly a consequence of these big hard problems, not the cause. 

True the rich keep getting richer but the poor who work also gain some, simply because wealth is redistributed as income from the top first and then down to the poorest (“trickle-down economics”).  This is not about punishing the rich to pay for the poor. What is missing is the empowering of people generally towards their own self-betterment and the betterment of others without qualified dependencies.  People know best!   Or do they?   This is what frustrates Presidents and Prime Ministers in our so-called democratic societies.  Through frustration they are imploring the people to do something about this.  What we have today is conditional democracy.  As explained earlier, governments have sold their souls to the wealthy and powerful pressure groups supporting their election.  Now that they are elected they are behold ant to these pressure groups, if they are to be re-elected.  But without a majority in the “upper house” (Senate), all important legislation is stuck in the quagmire of other fragmented pressure groups claiming to be reflective of a divided and apathetic electorate.  Does this sound familiar?   You could say there is an imbalance here!   Could it be that this imbalance is reflective of the imbalances in our own divided minds?  Could it be that we are getting what we deserve – imbalances in our own mindsets are being reflected as imbalanced in our democratic processes?

Let’s consider why this financial imbalance is so today, with some fact-based analysis from Harvard research may throw some light on the vexing complex problem.

  “Large-scale studies of class mobility show that the forces that move people out of poverty are more diffuse than can fit in any pocketbook. They have less to do with bank statements than conversations between two people and the distance between two points.

In the largest study of its kind, Harvard researchers found that geography was the most important factor in determining whether a child living in poverty would rise to middle class in adulthood.  Living in mixed-income neighbourhoods mattered more than tax credits or even access to higher education – or race. Living in areas that had the most established school systems and extensive public transit systems meant that children born to families making less than $25,000 who lived in Seattle had a 10% chance at ending up making over $107,000; a child raised in Atlanta had half as much a shot. And that’s just the extreme end. That child in Seattle will most likely wind up making $34,000; the child in Atlanta can expect just $28,000. That is the difference between barely making it out of poverty and actually becoming middle class.

Given what we know about class mobility in general – the richer you are, the better chance you have at getting richer – the disparity in opportunity will just get more stark as the generations move forward.”  

Whatever the US government has been doing is clearly not working, so more of the same does not make sense.  In fact, it is making things worse and the government to whom we pay all our taxes is unable to fix the problem even though they know whatis needed (ie. the will of the people). Worker mobility or migration to areas where reasonable paid work is available would appear to be part of the answer.  This migration is a mechanism of economic improvement and for poverty reduction that has become more powerful with globalisation of trade and export-driven work.  Paying poorer workers a more equitable salary would also help, especially with the rich getting far easier access to cheap money.  But it’s shifting the mindset of people to leave their current comfort zones and their move/migrate to a totally new environment of opportunity that is the real problem/challenge. Don’t address the later and it isn’t going to happen or be sustainable!

Coming out of the GFC, secular increases in inequality has been driven by technology and globalisation which, in developing countries, favours the skilled and owners of capital.  The sight of banks being bailed out with taxpayers money has not helped these inequalities.  Equally unimpressed is the news that our global financial regulators who first allowed us to get into this GFC predicament, are now being invited by government to work with them in rectify this regulator-induced crisis.   As Albert Einstien said “Never get the people who created the problem to fix it”.   Banks are being required to pay massive fines for corruptive behaviour for both before and after the GFC. But those who knowingly, deliberately, wilfully and illegally made money out of people’s ignorance continue to get off scot free.   The struggling court cases to punish those responsible for bank’s unlawful actions (like rate fixing, collusion and loans scams) are floundering because the powerful Banking Industry is holding government to ransom, because again of the ineffectiveness governments attempting to operating within broken democratic processes. The people wearing the brunt of the austerity measures to rectify the governments’ problems are again the innocent tax payers, the un-empowered working middle class and the poor.  These same people, believing in their banks, took on these shonky home loan products with all the best intentions.   Why is it, one might ask, that the financial regulators have only imposed fines on only a few large financial institutions (like JP Morgan), whilst those senior individuals of responsibility within these corrupt organisations not only continue to operate and command enormous salaries but also continue to work hand-in-glove with the same financial regulators charged with preventing the problem for ever arising again?

Those nations with good education systems, high research budgets and flexible labour markets have come through the GFC the best (like Australia and Canada).   EU has an unemployment levels of 10%, the US 4% and Australia with 5%.   People are hurting out there.  The democratic processes won’t allow governments to appropriately represent the real will of the people through meaningful “rubber on the ground” solutions.  The democratic process requires that our representatives to be sufficiently wealth to be elected.  And then to become beholden to the wealthy lobby groups funding their election campaigns.  

Wealth inequality is typically the “disempowerment” of selected communities, especially when it comes to education, employment, job creation and funds distribution for good works.  Most government authorities, departments and large charities fall foul of their own “trickle down” bureaucracy.   Massive amounts of ordinary people’s taxation and donation are accumulate within these bureaucratic establishments, funds that mostly “feeds the beast” with little of it actually ever reaching the ordinary people in need of support for whom the money was originally intended.  The bureaucracy become so preoccupied with their own survival, they spend an inordinate amount of their time, effort and funding in activities designed to raise more money for their own survival in the name of the cause they are meant to represent.  There accounting, annual reports and the like are geared towards showing how sectors of their administration are devoted to supporting their cause and their target communities in need of their support.

The model which has been shown to work far more effectively is the reverse of “trickle down” – bottom-up.   Here funds collected or allocated are given directly to the target communities.  Its the communities of inequalities who in turn determine how the money should be spent, including the need for support from the bureaucracy involved.   This results in far better outcomes for those in need, creates a more equality in wealth distribution and a serious reduction in the size of the bureaucracy and the amount of funds it absorbs.  The “disempowered” communities become “empowered” and become in control of their own destinies and feel they are responsible for their own lives, rather than dependent upon these mega-institutions.

In the “awakening” section which follows (to be written based upon more uptodate information than is currently available, for obvious reasons) you will be guided as to which government organisations and charities operate to this bottom-up model effectively.  For example, in the US there are almost one million charities.  They receive approximately $200 bill. a year with an additional $100bill. donated to various religious communities.    The problems is that few of them are sufficiently transparent to allow donors to judge whether they are really doing good.  Most donors are stimulated by images designed to generate an emotional response and a positive disposition towards the charity and government organisation is (supposedly) helping.   Little data is available on how effective their funding is on making a difference and actually doing good.  Incentives are required for such organisations to demonstrate their real effectiveness.  Most are involved in hand-outs that do nothing more than increase the communities’ dependence on such handouts and actually contribute to worsening their situation.   Rarely is data available showing what these organisations were achieving and at what cost.  There is a web site in the US called “Give Well” that attempts to identify those charities that are transparent in this way, which identifies the top-rated charities so that donors can be sure that their donations are doing good and are highly cost-effective.        

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