The Billionaires' World

 Putin’s invasion of Ukraine has, almost inevitably, dredged up the only historical analogy most people are capable of making – that of the appeasement of Adolf Hitler before World War Two. Sun columnist Piers Morgan – who according to the adverts ‘says out loud what most people are thinking’ – has dutifully obliged with the Neville Chamberlain vibe. But according to many American politicians it’s just like 1938 all over again …. again.

Actually, and more worryingly, the most apt historical echo is not the Second World War but the First, when a group of states who had, ideologically much in common, slogged it out for four long years over a cause few could remember, resulting the deaths of around 20 million people.

On the eve of the 21^st century, the Italian historian Domenico Losurdo recalled the 1910 funeral of Edward VII of England. It was, he wrote, “the occasion for a splendid procession which saw kings, hereditary princes and dukes, united by ties of kinship and common mourning, parade on horseback. Time seemed not to have made the least dent in the power and prestige of the European aristocracy. Nine monarchs, all descendants of William the Silent, occupied the stage …”

Yet a little over four years later, these same countries were dragged by a series of alliances into, at the time, the most destructive war in world history. These were resolutely capitalist nations – often officially led by people related to each other – that had, over the previous 30 years, taken possession of over 8.6 million square miles of Africa and Asia in the name of progress and trade. They were, on the surface, united by racial, economic, political and familial ties. Nonetheless these countries were plunged into insane nationalistic fervour and a seemingly endless fight to the death.

Of course certain ideological differences were stressed. Britain, France and, latterly, America – the Entente – were presented as bastions of liberalism in contrast to the militarism of the other side (Germany, Austro-Hungary and the Ottoman Empire). But the Entente was also allied with Tsarist Russia, an absolute monarchy, police state and profoundly anti-Semitic regime.

Likewise today, Patriarch Kirill,  the head of the Russian Orthodox Church, has backed Putin’s invasion on the grounds that it is a “metaphysical” struggle against immoral Western values (such as LGBT rights and same-sex marriage). At the same time, however, Boris Johnson has scuttled off to Saudi Arabia to beg for more oil from that erstwhile British ally, which happens to be an absolute monarchy and beheaded 81 people prior to his arrival. And which, in addition to visiting hell upon neighbouring Yemen, is also probably the most anti-Semitic regime on earth. Such does history rhyme.

In the current world the ties that don’t bind are not based on monarchy, aristocracy or Empire. Rather the common denominator across liberal, conservative and authoritarian countries is the dominance and ubiquitous presence of the ultra-rich. In 2021, there were 2,755 billionaires in the world, 660 more than the previous year. During 2020, a new billionaire was created every 17 hours. Billionaires are, collectively, worth $13.1 trillion, up from $8 trillion just 12 months previously and less than $3 trillion in 2006. To give a sense of perspective, a billion is a thousand million.

Their mere presence inevitably dominates and skews the societies they inhabit – be it the U.S, Britain or Russia. It is widely known, for example, that Russian billionaires – the infamous oligarchs – were created after the collapse of communism through the process of “voucher privatisation” which enabled a small group of people to acquire former state assets and amass stupendous wealth. But the number of Russian billionaires has, in common with the rest of world, dramatically increased in the 21^st century; from several to over 100. They are taxed at just 2 per cent more than the rest of the population (and this increase was introduced in 2020!), while the rest of the country is subjected to austerity.

Venerated Ukrainian war leader, Volodymyr Zelenskiy, posed as an anti-oligarch in order to be elected president in 2019. But his campaign was launched on the TV channel of billionaire Igor Kolomoyskyi. And his putative hostility to oligarchs hasn’t stopped him, together with the partners in his TV company, owning a network of offshore companies registered in the British Virgin Islands, Cyprus and Belize. Repressing the Left and gutting labour rights, which Zelenskiy has done in the middle of a war, is strangely in tune with the interests of the mega rich.

Controlling the state, and using it to amass and protect great wealth, has become almost customary in the 21^st century. Ba’athism emerged in the 1940s and 50s as a pan-Arab, quasi-socialist ideology, though one which was brutally repressive of leftists. But under Assad in Syria, Ba’athism has simply become the means through which a small elite have enriched themselves through privatisation and neoliberal ‘reforms’ – a process which has notably intensified since the turn of the millennium. In China, the official communist ideology and an interventionist state has proved no impediment to the leadership and company managers accruing huge fortunes. The Panama Papers, for example, named the families of eight current or former members of China’s politburo. Levels of inequality are similar to those of South Africa, peasants are regularly stripped of their land and turned into proletarians and super exploitation of workers occurs.

The liberal heartlands of America and Britain – despite their ostensibly democratic institutions – exhibit the identical thumbprints of billionaire domination, manifested in the gravy train of privatisation, quantitative easing, political funding and control of the media. Oligarchs in Britain, George Monbiot said in 2020, “use their economic power and translate it into political power, which is what oligarchs do the world over”. And given that billionaires (oligarchs) have hugely increased in number in the first two decades of this century, the process will only get more explicit.

It may be objected, plausibly, that the interests of billionaires lie in a strong state that protects them and ensures the conditions for their continued accumulation of capital, but that they definitely don’t lie in the division of the world into warring blocs that impose sanctions on each other and confiscate wealth. This is undoubtedly true. But it was also the case that the so-called liberal ‘golden age’ of capitalism (1870-1913) degenerated into the internecine carnage of World War One despite it being in no-one’s interest that it do so. The pre-WW1 era and our own are remarkably similar in many ways. The resemblances include a commitment to a globalised economy, few cross border restrictions on the movement of goods, capital and people, and a belief in balanced government budgets. But the liberal age of capitalism can to an abrupt and brutal end in 1914. Ours can too.

Those old enough to remember the 1990s will recall the air of triumphalism around the collapse of Communism and the fervent belief that, now the world was entering an era of globalisation, free trade and liberal capitalism, countries would regard war as irrational and anachronistic. No two countries with a McDonalds’ franchise have ever gone to war with each other, it was said. Well Russia has – or had – McDonalds.

The question which now inserts itself is whether nationalism, racism, authoritarianism and war are the inevitable shadows of liberal capitalism and market fundamentalism. That despite many in the global elite not wanting a world of war and division, the world is inevitably predisposed to such a disaster because of the inequality and suppressed conflict inherent in a  global economy designed exclusively around the needs of the rich.

If you ignore the noise about Hitler and appeasement, you can hear those chimes of history ringing now.

 

 

 

 

 

 

 

 

 

 

Hyper-globalised Capitalism is Slowly Killing Civilisation

It is easier, according to the adage, to imagine the end of the world than the end of capitalism. Judging by the muted reaction to the raging Australian bush fires, the truth of that observation is being borne out. But actually it may be worse than that – it is easier to imagine the end of the world than the end of the particular version of hyper-globalized capitalism we live under.

Over the previous decade – in spite of calamitous warnings of what lies in store if massive cuts are not instituted – carbon emissions have continue to rise. Except that is for three years (2014-2016) when coincidentally world trade – but not, strangely, global economic growth – shrank.

Look closely and 2019 follows a similar pattern. According to first estimates, carbon emissions continued to increase last year, but the rate of increase – at 0.6% – was smaller than before. It compares to 1.4% in 2017 and 1.7% in 2018, according to one means of calculation, and 1.5% and 2.1% according to another. It should also be noted that the 0.6% estimate is based solely on the first 9-10 months of last years and could be revised downwards.

Coincidentally, 2019 was also a decidedly rough year for world trade – when it faced the headwinds of a trade war between Trump’s America and China. The imposition of unilateral tariffs on goods by both countries undoubtedly had a dampening effect on trade levels. After the strong rebound of 2017 and 2018, trade suffered. In October, the World Trade Organisation revised its April estimate of a 2.6% increase in world merchandise trade downwards to just 1.2%.  But given that a – possibly temporary – truce has been called in the trade war, rates may return to more ‘normal’ levels in 2020 – unless of course a global recession, or war, intervenes.

The conventional perception of world trade is that it involves the one-time transport of finished goods – clothes, cars or refrigerators for example – to the consumer. Undoubtedly that’s part of it but not all, or even most, of the story. Most world trade now occurs within firms during the production process. It is part of what are called ‘global value chains’ – where multi-national corporations scour the world for the most cost-effective and appropriate venue for making one part of a commodity – the engineering of components in one country, assembly in another (poorer) one and branding in yet another. The sinews of intra-firm trade between numerous countries involved in the construction of an iPhone illustrate the ‘new nomadism.’

But Apple is far from unique. Global value chains make up, it is estimated, 2/3rds of world trade. The ‘value chain’ of US vehicle manufacturer, General Motors, comprises 20,000 businesses worldwide, while the imported parts can make up 50% of cars ostensibly ‘made in the USA’. The World Bank defines global value chains in the following way:

Companies used to make things primarily in one country. That has all changed. Today, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.

There is a glaring contradiction between, on the one hand, wanting to reduce the world’s carbon emissions and, on the other, aiming to increase, or shore up, the volume of global free trade. Yet any number of conservative, centrist, liberal and social-democratic politicians happily exist in such a state of cognitive dissonance.

Just as it makes no sense for a consumer to proclaim a commitment to the environment while simultaneously seeking out the cheapest products regardless of how they were made, it makes no sense for corporations – and their backers in the media and politics – to say arresting global warming is their overwhelmingly priority whilst, at the same time, pursuing a production strategy whose fundamental amoral, profit-maximising purpose ensures that it won’t happen. Yet the latter is precisely what our political and economic system has reified as sacrosanct and non-negotiable.

And we are talking about maximising profit here, not the difference between profit and no profit at all. Apple, for example, would still have an ample profit margin if its iPhones were assembled in the US, not China. Just not quite as big.

But it is not, sadly, a question of corporations simply pursuing their institutionally selfish aims without the public in their domestic countries knowing or approving. They also enable us to physically and mentally outsource the problem of global warming to other countries. They are the ones burning coal to produce commodities flooding the global market, while we are ‘doing our bit’ by reducing our territorial emissions (ironically largely because we have off-shored dirty production to those very countries). It becomes a matter of out of sight, out of mind. And that suits a lot of people just fine.

Is the world getting richer?

There’s a Twitter hashtag called #firstworldproblems. Your WiFi packs up, a fat person sits next to you on the train and talks into their phone for the entire journey, Waitrose runs out of Italian Prosciutto slices forcing you to buy ordinary ham. Mildly irritating events that appear all-consuming, prompting you to take to social media to vent your frustration and simultaneously display a mature self-awareness that your petty grievances are as nothing in the scheme of things.

For accuracy although not brevity, #firstworldproblems should be rebranded #firstworldproblemsofthereasonablyprivilegedindevelopedcountries. A tweet complaining, ‘Had to wait 1 ½ hours for baked beans & noodles at the food bank today! #firstworldproblems’, doesn’t sound right.

Is, though, economic stagnation and decline a ‘first world problem™’? The 2008 Global Financial Crisis had, as its name suggests, a world-wide impact but has been felt most severely in developed economies. The UK’s economic ‘recovery’ disappears into thin air when GDP is calculated per capita – ie per person, taking into account the increase in population over the last six years. Europe has suffered two recessions since 2008. The near zero interest rates in evidence throughout the developed world betray the fact that no real economic recovery has taken place. If it had, borrowing by companies to invest would have pushed the price of money – the interest rate – upwards. This hasn’t happened.

By contrast, consider China. The Chinese economy has slowed to a growth rate not seen since the last year of the 20^th century. But, at 6.8%, it still stands at a level that makes developed economies green with envy and represents a record of economic growth they have rarely equalled at any time in history. Per capita income in China grew fivefold between 1990 and 2010. In advanced economies, the story is the opposite. Between 2005 and 2014, real incomes were flat or declined for two-thirds of households in 25 rich economies.

Elsewhere, India, now the world’s seventh largest economy, has achieved an average of 7% annual GDP growth for the last two decades. The Turkish economy has grown by nearly 4% a year since 1999.  So is the malaise of weak economic growth, halting business investment and dwindling wealth limited to developed economies? Is it a first world problem?

Paul Mason, in his book Postcapitalism, marshals the evidence to suggest it is. According to him, the era of globalisation (the late 1980s onwards) has witnessed a palpable growth in the incomes of two-thirds of the world’s population. In terms of GDP per person, the developing world, he says, has grown by 404% since 1989, a spurt of economic expansion that outpaces even the post-Second World War boom, which was centred in Europe and the US.

In contrast, the people who have decidedly not benefited from globalisation live in the developed world. “They gained almost nothing from capitalism in the past twenty years,” Mason writes. “In fact some of them lost out.” The losers of globalisation include “black America, poor white Britain and much of the workforce of southern Europe”.

Branko Milanovic, a World Bank economist, argues that while the global 1% and the middle classes of so-called ‘emerging market’ economies have been the main beneficiaries of globalisation, they are not, by far, the only ones. The poor have also got decidedly less poor. “The surprise is that those at the bottom third of the global income distribution have also made significant gains, with real incomes rising between more than 40% and almost 70%,” he says. It is this rise in wealth at the bottom of the ‘global pyramid’, claims Milanovic, which is responsible for the startling fall in the ranks of the world’s ‘absolute poor’ over the last 20 years.

Milanovic does not spare the hype, calling this change, ‘probably the profoundest global reshuffle of people’s economic positions since the industrial revolution’.

Have the poor inherited a bit more of the earth?

But is the hype justified? Are we in the West largely blind to the material progress that has been made in other parts of the world? One reason, however, to remain sceptical of claims of mass global enrichment is that it rests heavily on poverty reduction in one country alone – China. Home to 1/5^th of the world’s population, China has been responsible for more than three quarters of global poverty reduction. Without China, whose internal political economy is configured very differently to the market triumphalism dominant in most of the world, the World Bank’s poverty figures would look markedly less impressive.

Another reason for distrust is that world GDP statistics don’t bear out the world-bestriding optimism. “The relative stagnation of the economy since the mid-1970s is a global phenomenon,” insists US Marxist economist Andrew Kliman. He argues that slowdown in economic growth that has taken place in the US since the 1970s is “somewhat less drastic” than that of the rest of the world (advanced and developing countries alike). After 1973, says Kliman, the growth rate collapsed by more than half in Africa, Latin America and the Caribbean, as well as in Europe and Japan. Remove China and India from the mix and the Asian growth rate shows a similarly sharp contraction.

But the claim that globalisation represents ‘the greatest economic event in human history’ does not rest on development since the 1970s but since the late 1980s and, in particular, the early 2000s - when Mason’s figures show growth as particularly marked. But even here Kliman dissents, arguing that “for the period since 2000, World Bank figures indicate that growth of real GDP per capita accelerated only minimally.” According to Kliman, world GDP per capita stood at 1.3% between 1990 and 2000 and at 1.6% between 2000 and 2008. Far from earth shattering and nothing like the 3.2% global growth that occurred in the decade between 1960 and 1970.

You can balk at the notion of using GDP growth as a surrogate for people’s average incomes. GDP growth per capita (per person) does reflect the reality better than bare GDP figures, as the UK’s experience shows, but it is far from perfect. If GDP represents national income, it offers no clue as to who, within the nation, receives that income. So a country with modest GDP, could be internally egalitarian and effective at reducing poverty. Left-leaning Latin American countries such as Uruguay, Bolivia, Venezuela and Ecuador may fall into this category. But GDP still gives a broad indication of how rich a country’s inhabitants are.

You might also have suspicions about the insights of an avowed anti-capitalist like Kliman. Consider then those of Ha-Joon Chang, an ‘institutional economist’ who believes capitalism to be the “best economic system humanity has invented”. According to Chang per capita income growth in the developing world stood at 3% in the 1960s and ‘70s. But it fell by nearly half, to 1.7%, for the two decades from 1980. Income growth did rise in the 2000s, says Chang, bringing the growth rate up to 2.6% for the entire 1980 to 2009 period. This is still, though, below the pre-1980s record, and much of that growth has depended on the commodity boom which Chinese economic growth hugely stimulated. With the Chinese slowdown, the commodity boom has ebbed as well. The South African economy, the 2^nd largest in Africa, is ‘in crisis’, the government there admits.

The growth rate for particular regions illustrates a downward trend, hardly commensurate with the greatest spurt of development in human history. Latin America, notes Chang, grew 3.1% in per capita terms in the 1960s and ‘70s. But between 1980 and 2009 at a rate of barely one-third that level – 1.1%. Per capita income growth in Sub-Saharan Africa was 1.6% in the 1960s and ‘70s but only reached 0.2% between 1980 and 2009. For many years in the 1980s and ‘90s African growth, under the tutelage of destructive Structural Adjustment Programmes, was actually negative. According to the NGO, Global Justice Now, in 2008 there were 562 million people living on less than $2 a day in Sub-Saharan Africa, a figure almost double 1981’s 288 million. The overall population of Africa has also increased since the early ‘80s, “but even proportionally, there has been almost no improvement in poverty rates in sub-Saharan Africa since 1981,” the NGO says.

Paul Mason claims that during the post-war boom capitalism suppressed the development of the global south and that “unequal trade relationships forced much of Latin America, all of Africa and most of Asia to adopt development models that led to super-profits for Western companies and poverty at home.” The coming of globalisation “changed all that”.

This is only partly true. Exploitation by the West intensified in the 1980s and ‘90s, and globalisation, for most countries, has not really remedied that disadvantage. So while some large non-western countries, specifically China and India, have grown spectacularly (although poverty reduction is much more marked in China), the great ‘global reshuffle’ is much less profound for most of the world’s population.