International aid agency Oxfam, last week revealed that the
eight wealthiest people in the world own as much as the poorest half of the
world’s population put together. Oxfam, used this as an indicator of how wide
the wealth inequalities are, how unsustainable the current situation is and how
it could lead to increased crime, conflict and widespread instability.
Among their suggestions to end the current situation is to
put a stop to the illicit flow of finances especially by powerful
multinationals, which is helping companies evade taxes, denying the poor the
social services and infrastructure improvements that would allow them climb the
social ladder.
"It is morally wrong for a few people to amass so much wealth while billions of people live in abject poverty. However bridging the divide will not come through moral suasion or even threats of doom...
The key to
addressing the issue will lie in understanding how the wealth is created and
why it is not “trickling” down to the masses.
The wealthiest people are so because they are providing a
good or service that is considered valuable to the market. Considered valuable because you may debate the
value of diamonds or financial services or Whatsapp but the market votes with
its wallet.
Contrary to what we think of the wealthiest as the most
selfish and most self-centred people, none of them would have made the money
they make if they tried to go it alone. On the contrary they brought people
together, linked up with other organisations and networks to exploit an
opportunity or unlock value in a situation.
It’s a long story but the origin of all wealth is knowledge.
Mr A is wealthier or earns more than Mr B because Mr A knows something that Mr
B does not.
So from the above the wealthy are so because they are more
collaborative than the poor and that they know something that poor do not know.
Another thing is that the true wealthy are not burning the
midnight oil counting their billions, plotting how to grow more. At some point
wealth creation takes on a life of its own and even if some of these tycoons
wanted to stop they would just keep on making money as a function of the good
or service their companies continue to provide to the market.
Bill Gates for instance has donated $28b -- or the total GDP of the Uganda, of his
wealth to fight disease and alleviate poverty around the world, but his wealth
continues to growth as Microsoft, where most of his net worth is derived continues
to grow. IN fact he is richer today than he was when he started giving away his
money!
Wealth builds on itself so the accumulation of wealth is not
necessarily a function of greed.
So to pull more and more people out of poverty we need to
increase their knowledge and the wealth will follow.
That is where government's come in – and where Oxfam is
correct to appeal to them to redress the situation.
If there is inequality anywhere in the world it is an
indictment on the respective governments more than anyone. It means either they
are not creating an environment for enough wealth to be created to go around or/and
they are not distributing the wealth properly once it is created.
Kenya’s founding President Jomo Kenyatta famously admonished
his Tanzanian counterpart Julius Nyerere for pushing socialism by asking “What
do you want to share? Poverty?”
"The point is wealth has to be created first before we can start raising general living standards or bridging wealthy inequalities. Governments enable wealth creation by easing the process of doing business in their respective countries by improving physical infrastructure, promoting the rule of law and investing in its human resource...
The better they are at doing the above the wealthier the
country is.
By taxing the wealth creators the government is then able to
continue improving the environment but most especially improving the quality of
their people.
Thankfully we have seen this process happen in our life
time. The people who had the head start at independence are those who went to
school, the higher the better. But to benefit from this they had to live past
their infancy, better health care improved their chances of doingthis. We take
it for granted but the immunisation regimen we got as kids made the difference
between life or death for easily half of us alive today.
Which brings us back to why governments are responsible for
wealth inequalities.
"If government cannot collect tax and even that, that it collects is not utilised properly, it denies millions – especially those at the bottom of the food chain quality education and health care that would improve their chances of better incomes in future...
Government fail out of sheer incompetence, different
priorities or corruption.
That is on a national scale.
On a global scale what is also true is that many of these
huge companies have been able to leverage their power to influence policy
towards maximisation of their profit. So for instance the movement of capital
and not people has been freed for most of the world.
What that means is that the owners of capital have huge
bargaining power in dealing with labour.
They can move their operations to
where labour costs are low, while labour cannot easily move to places where
wages are higher – in fact they are actively resisted.
But that is a discussion for another day.
