Who’s to blame for most of us becoming poorer, while the fortunes of the super-rich grow to almost unimaginable heights? Why are Wal-Mart and the “dollar stores” losing profits while there is a growth of 4-6 percent for luxury goods in the US?
Since the early 1970s, income inequality in the United States has grown significantly. Australia and most OECD countries are on the same trajectory. What has caused this growing disparity? Reaganism, Thatcherism, globalization – they, and many others, have been blamed. But they are not the cause.
Thomas Piketty says that the capitalist system itself is the culprit. Piketty analyzed data from more than 20 countries from the 18th Century to the present and found that inequalities of wealth that inexorably increase is an inherent effect of our economic system. Returns on capital will always exceed the rate of economic growth, and this naturally results in a very few inheriting vast riches.
Nevertheless, between 1930 and 1970 this trajectory of inequality shrank. I grew up in the 50s and 60s and, as in the US and Europe, these were the years where not only America, but our countries too, felt like ‘lands of opportunity’.
What happened? Before 1930 inequality was very high, but then came the crash of 1929 and then World War II. These cataclysms disrupted inherited wealth. Between 1945 and 1975 the capitalist system rebooted. The thirty ‘glorious’ years were merely a pause in the process.
But what does inequality of wealth matter? When it combines with the representative democratic system, it results in the very few fabulously wealthy owning the agenda. It results, in fact, in the death of democracy.
To win our democratic system back, do we have to wish for another World War?