The World Is Now the Property of the 1 Percent
Diana Parkhouse / CC BY 2.0
As we head into 2019, leaving the chaos of this year behind, a major
question remains unanswered when it comes to the state of Main Street, not
just here but across the planet. If the global economy really is booming, as
many politicians claim, why are leaders and their parties around the world
continuing to get booted out of office in such a sweeping fashion?
One obvious answer: the post-Great Recession economic recovery was largely
reserved for the few who could participate in the rising financial markets
of those years, not the majority who continued to work longer hours,
sometimes at multiple jobs, to stay afloat. In other words, the good times
have left out so many people, like those struggling to keep even a few
hundred dollars in their bank accounts to cover an emergency or the 80% of
American workers who live paycheck to paycheck.
In todays global economy, financial security is increasingly the property
of the 1%. No surprise, then, that, as a sense of economic instability
continued to grow over the past decade, angst turned to anger, a transition
that from the U.S. to the Philippines, Hungary to Brazil, Poland to Mexico
has provoked a plethora of voter upheavals. In the process, a 1930s-style
brew of rising nationalism and blaming the other whether that other was
an immigrant, a religious group, a country, or the rest of the world
emerged.
This phenomenon offered a series of Trumpian figures, including of course
The Donald himself, an opening to ride a wave of populism to the heights
of the political system. That the backgrounds and records of none of them
whether youre talking about Donald Trump, Viktor Orbán, Rodrigo Duterte, or
Jair Bolsonaro (among others) reflected the daily concerns of the common
people, as the classic definition of populism might have it, hardly
mattered. Even a billionaire could, it turned out, exploit economic
insecurity effectively and use it to rise to ultimate power.
Ironically, as that American master at evoking the fears of apprentices
everywhere showed, to assume the highest office in the land was only to
begin a process of creating yet more fear and insecurity. Trumps trade
wars, for instance, have typically infused the world with increased anxiety
and distrust toward the U.S., even as they thwarted the ability of domestic
business leaders and ordinary people to plan for the future. Meanwhile, just
under the surface of the reputed good times, the damage to that future only
intensified. In other words, the groundwork has already been laid for what
could be a frightening transformation, both domestically and globally.
That Old Financial Crisis
To understand how we got here, lets take a step back. Only a decade ago,
the world experienced a genuine global financial crisis, a meltdown of the
first order. Economic growth ended; shrinking economies threatened to
collapse; countless jobs were cut; homes were foreclosed upon and lives
wrecked. For regular people, access to credit suddenly disappeared. No
wonder fears rose. No wonder for so many a brighter tomorrow ceased to
exist.
The details of just why the Great Recession happened have since been glossed
over by time and partisan spin. This September, when the 10th anniversary of
the collapse of the global financial services firm Lehman Brothers came
around, major business news channels considered whether the world might be
at risk of another such crisis. However, coverage of such fears, like so
many other topics, was quickly tossed aside in favor of paying yet more
attention to Donald Trumps latest tweets, complaints, insults, and lies.
Why? Because such a crisis was so 2008 in a year in which, it was claimed,
we were enjoying a first class economic high and edging toward the longest
bull-market in Wall Street history. When it came to boom versus gloom,
boom won hands down.
None of that changed one thing, though: most people still feel left behind
both in the U.S. and globally. Thanks to the massive accumulation of wealth
by a 1% skilled at gaming the system, the roots of a crisis that didnt end
with the end of the Great Recession have spread across the planet, while the
dividing line between the have-nots and the have-a-lots only sharpened
and widened.
Though the media hasnt been paying much attention to the resulting
inequality, the statistics (when you see them) on that ever-widening wealth
gap are mind-boggling. According to Inequality.org, for instance, those with
at least $30 million in wealth globally had the fastest growth rate of any
group between 2016 and 2017. The size of that club rose by 25.5% during
those years, to 174,800 members. Or if you really want to grasp whats been
happening, consider that, between 2009 and 2017, the number of billionaires
whose combined wealth was greater than that of the worlds poorest 50% fell
from 380 to just eight. And by the way, despite claims by the president that
every other country is screwing America, the U.S. leads the pack when it
comes to the growth of inequality. As Inequality.org notes, it has much
greater shares of national wealth and income going to the richest 1% than
any other country.
That, in part, is due to an institution many in the U.S. normally pay little
attention to: the U.S. central bank, the Federal Reserve. It helped spark
that increase in wealth disparity domestically and globally by adopting a
post-crisis monetary policy in which electronically fabricated money (via a
program called quantitative easing, or QE) was offered to banks and
corporations at significantly cheaper rates than to ordinary Americans.
Pumped into financial markets, that money sent stock prices soaring, which
naturally ballooned the wealth of the small percentage of the population
that actually owned stocks. According to economist Stephen Roach,
considering the Feds Survey of Consumer Finances, It is hardly a stretch
to conclude that QE exacerbated Americas already severe income
disparities.
Wall Street, Central Banks and Everyday People
What has since taken place around the world seems right out of the 1930s. At
that time, as the world was emerging from the Great Depression, a sense of
broad economic security was slow to return. Instead, fascism and other forms
of nationalism only gained steam as people turned on the usual cast of
politicians, on other countries, and on each other. (If that sounds faintly
Trumpian to you, it should.)
In our post-2008 era, people have witnessed trillions of dollars flowing
into bank bailouts and other financial subsidies, not just from governments
but from the worlds major central banks. Theoretically, private banks, as a
result, would have more money and pay less interest to get it. They would
then lend that money to Main Street. Businesses, big and small, would tap
into those funds and, in turn, produce real economic growth through
expansion, hiring sprees, and wage increases. People would then have more
dollars in their pockets and, feeling more financially secure, would spend
that money driving the economy to new heights and all, of course, would
then be well.
That fairy tale was pitched around the globe. In fact, cheap money also
pushed debt to epic levels, while the share prices of banks rose, as did
those of all sorts of other firms, to record-shattering heights.
Even in the U.S., however, where a magnificent recovery was supposed to have
been in place for years, actual economic growth simply didnt materialize at
the levels promised. At 2% per year, the average growth of the American
gross domestic product over the past decade, for instance, has been half the
average of 4% before the 2008 crisis. Similar numbers were repeated
throughout the developed world and most emerging markets. In the meantime,
total global debt hit $247 trillion in the first quarter of 2018. As the
Institute of International Finance found, countries were, on average,
borrowing about three dollars for every dollar of goods or services created.
Global Consequences
What the Fed (along with central banks from Europe to Japan) ignited, in
fact, was a disproportionate rise in the stock and bond markets with the
money they created. That capital sought higher and faster returns than could
be achieved in crucial infrastructure or social strengthening projects like
building roads, high-speed railways, hospitals, or schools.
What followed was anything but fair. As former Federal Reserve Chair Janet
Yellen noted four years ago, It is no secret that the past few decades of
widening inequality can be summed up as significant income and wealth gains
for those at the very top and stagnant living standards for the majority.
And, of course, continuing to pour money into the highest levels of the
private banking system was anything but a formula for walking that back.
Instead, as more citizens fell behind, a sense of disenfranchisement and
bitterness with existing governments only grew. In the U.S., that meant
Donald Trump. In the United Kingdom, similar discontent was reflected in the
June 2016 Brexit vote to leave the European Union (EU), which those who felt
economically squeezed to death clearly meant as a slap at both the
establishment domestically and EU leaders abroad.
Since then, multiple governments in the European Union, too, have shifted
toward the populist right. In Germany, recent elections swung both right and
left just six years after, in July 2012, European Central Bank (ECB) head
Mario Draghi exuded optimism over the ability of such banks to protect the
financial system, the Euro, and generally hold things together.
Like the Fed in the U.S., the ECB went on to manufacture money, adding
another $3 trillion to its books that would be deployed to buy bonds from
favored countries and companies. That artificial stimulus, too, only
increased inequality within and between countries in Europe. Meanwhile,
Brexit negotiations remain ruinously divisive, threatening to rip Great
Britain apart.
Nor was such a story the captive of the North Atlantic. In Brazil, where
left-wing president Dilma Rouseff was ousted from power in 2016, her
successor Michel Temer oversaw plummeting economic growth and escalating
unemployment. That, in turn, led to the election of that countrys own
Donald Trump, nationalistic far-right candidate Jair Bolsonaro who won a
striking 55.2% of the vote against a backdrop of popular discontent. In true
Trumpian style, he is disposed against both the very idea of climate change
and multilateral trade agreements.
In Mexico, dissatisfied voters similarly rejected the political known, but
by swinging left for the first time in 70 years. New president Andrés Manuel
López Obrador, popularly known by his initials AMLO, promised to put the
needs of ordinary Mexicans first. However, he has the U.S. and the whims
of Donald Trump and his great wall to contend with, which could hamper
those efforts.
As AMLO took office on December 1st, the G20 summit of world leaders was
unfolding in Argentina. There, amid a glittering backdrop of power and
influence, the trade war between the U.S. and the worlds rising superpower,
China, came even more clearly into focus. While its president, Xi Jinping,
having fully consolidated power amid a wave of Chinese nationalism, could
become his countrys longest serving leader, he faces an international
landscape that would have amazed and befuddled Mao Zedong.
Though Trump declared his meeting with Xi a success because the two sides
agreed on a 90-day tariff truce, his prompt appointment of an anti-Chinese
hardliner, Robert Lighthizer, to head negotiations, a tweet in which he
referred to himself in superhero fashion as a Tariff Man, and news that
the U.S. had requested that Canada arrest and extradite an executive of a
key Chinese tech company, caused the Dow to take its fourth largest plunge
in history and then fluctuate wildly as economic fears of a future Great
Something rose. More uncertainty and distrust were the true product of that
meeting.
In fact, we are now in a world whose key leaders, especially the president
of the United States, remain willfully oblivious to its long-term problems,
putting policies like deregulation, fake nationalist solutions, and profits
for the already grotesquely wealthy ahead of the future lives of the mass of
citizens. Consider the yellow-vest protests that have broken out in France,
where protestors identifying with left and right political parties are
calling for the resignation of neoliberal French President Emmanuel Macron.
Many of them, from financially starved provincial towns, are angry that
their purchasing power has dropped so low they can barely make ends meet.
Ultimately, what transcends geography and geopolitics is an underlying level
of economic discontent sparked by twenty-first-century economics and a
resulting Grand Canyon-sized global inequality gap that is still widening.
Whether the protests go left or right, what continues to lie at the heart of
the matter is the way failed policies and stop-gap measures put in place
around the world are no longer working, not when it comes to the non-1%
anyway. People from Washington to Paris, London to Beijing, increasingly
grasp that their economic circumstances are not getting better and are not
likely to in any presently imaginable future, given those now in power.
A Dangerous Recipe
The financial crisis of 2008 initially fostered a policy of bailing out
banks with cheap money that went not into Main Street economies but into
markets enriching the few. As a result, large numbers of people increasingly
felt that they were being left behind and so turned against their leaders
and sometimes each other as well.
This situation was then exploited by a set of self-appointed politicians of
the people, including a billionaire TV personality who capitalized on an
increasingly widespread fear of a future at risk. Their promises of economic
prosperity were wrapped in populist platitudes, normally (but not always) of
a right-wing sort. Lost in this shift away from previously dominant
political parties and the systems that went with them was a true form of
populism, which would genuinely put the needs of the majority of people over
the elite few, build real things including infrastructure, foster organic
wealth distribution, and stabilize economies above financial markets.
In the meantime, what we have is, of course, a recipe for an increasingly
unstable and vicious world.
Nomi Prins / TomDispatch
Nomi Prins
Contributor
Nomi Prins is a renowned investigative journalist, author of six books and
international speaker. Her advice on financial and banking issues is sought
by governments and policy institutes throughout