The Economy: It’s the Income Inequality, Stupid

In my student days our thermodynamics lecturer gave us a little talk regarding examinations.  He started with the usual advice about reading the question carefully, not to panic if we could not initially answer the question, and to move on to another, etc.  Finally, he said, do not do what one student wrote to the examiner: “I am sorry I cannot answer this question but I can answer the following one”.  He then proceeded to write his own question, and to answer it perfectly.

The above story sums up the actions of politicians thus far as they respond to the economic crisis engulfing capitalism worldwide.  The politicians are unwilling, unable, or both, to tackle the causes of the problem which are the lack of demand as a result of unemployment, cuts in real wages and soaring energy prices, with profits rising by 700% since June 2011. Instead, they continue to pump more and more billions into the banks, with the gap between the poor and the super-rich that lies at the core of the problem forever widening.

Jeffrey Sachs, a well-known American economist, interviewed on BBC radio 4 Today programme (October15, 2011) about his book The Price of Civilisation, made some very telling remarks:

International capital at the top is mobile, and is running circles around our government: this is the essence of globalisation.

Of course, this clearly implies that democracy itself is being subverted and corrupted.  The ordinary citizen is no longer able to effect change through the ballot box.  Is it any wonder that people are taking to the streets in the U.S and Europe, in actions that mirror the Arab spring to demand that they should be heard?

He continued:

One major Chairman of the Board of one of the world’s largest companies put it to me accurately a few months ago when he said to me: You have to understand that the big companies do not feel any national loyalty anymore, we are beyond that, we can pay ourselves gargantuan compensation packages that are offensive to the social norms of the host country because we do not feel part of the host country anymore

There you have it; judge the bosses of these global corporations by what they say and do.

He praised Northern European countries thus:

The countries that have done the best [under globalisation] are the social democracies of Northern Europe. They tax themselves heavily but then governments really perform, it is honest, it is not corrupted, and delivering services that the public want, and it is creating and ensuring an inclusive society, not one that is divided between the very top and the rest.

It is clearly possible for fairness, fair taxes, social justice and capitalism to exist together; more than that, these attributes are good for the economy too.  It also does not consign a large number of people to the scrapheap of the unemployed with its attendant misery and its detrimental effect on community cohesion.  Norway, for example, has an unemployment rate of 3.6%, compared to the U.S. — 9.1%, the UK — 8.1%.  All of that and the Scandinavian countries also have one of the best welfare provisions in the western world.

The demonstrations and the resistance worldwide to the immorality and the policies of governments in cahoots with global corporations and the “moneymen” are gaining in strength, and will eventually force politicians to address the real question; namely, that of reforming and controlling this corrupt form of capitalism.

Adnan Al-Daini (PhD, Birmingham University, UK) is a retired University Engineering lecturer. He is a British citizen born in Iraq. He writes regularly on issues of social justice and the Middle East. Read other articles by Adnan.