A new year is upon us, and there are numerous stories of economic recovery across the world. However beyond basic growth rates, there is another measure which often reflects more about people’s day to day lives. I’m referring to wealth inequality and in the USA, it often feels more like the great depression rather than a booming new decade.
The depression of course took place in the 1920s and in those times, as usual the wealthy were pretty much shielded from the worse effects. In fact during that decade, the wealthiest 10% of the population owned about 84% of the total wealth. The situation evened out over the next few decades with that figure declining before starting to rise again in the 1980s. However we’re now reaching levels that are very similar to those of the 1920s with the majority of US wealth held by a small proportion of it’s citizens.
The statistics are now more accurate so in some senses a direct comparison is not always completely relevant. However the overall result is the same, the level of wealth inequality in the US is extremely high and only heading in one direction. You can see some aspects if you watch news and documentaries on the local media. It’s certainly interesting to view the different perspectives – for US readers try watching the local news from the UK – you can use this, or vice versa for European readers.
Fortunately when these inequalities are combined with a growing economy, the effects seem less severe. The US is doing pretty well, with unemployment heading to a new 6 year low and the job market consistently expanding. However when you realise that the richest 0.1 % control as much wealth as the poorest 90% you realise this is not a fair and equal society.
The rich are in fact getting even richer, while the poorer sections of society are increasingly stepping into levels of significant debt in order to simply survive. Real incomes are growing, but at a much higher rate for the wealthy than the poorer levels. In fact with under 1% income growth, it’s not getting much easier for those at the wrong end of the income ladder.
Of course capitalism has always produced such inequalities, but the argument goes that the growth in income actually is down to new businesses and opportunities for all. However the studies suggest that the growth in wealth is not coming largely from entrepreneurial spirit but merely reflects the fact that the wealth is held in shares and bonds which naturally are worth more as the economy recovers. Unfortunately this is unlikely to help bring many benefits to society at large, it will just make the rich, well richer!
The internet has brought many great changes to our lives. As a communication medium, a place for entertainment and research it’s unparalleled – most of us now even pay our bills and arrange our insurance policies. However the pontential for economic development in some of the poorer nations in the world is perhaps one of the most exciting.
In North America and Europe, the internet already has spawned many thousands of online businesses. Marketers, service industries and retail outlets can all be run either solely or partly online. A market is no longer restricted to a local geographical area, in some senses the internet has genuinely created a global market.
I know a young entrpreneur who sells coffee online. He doesn’t have a shop and merely buys in coffee from various sources and sells it from his website. He adds value by supplying lots of choice and information about the various coffee beans available. His customers are literally in all four corners of the world stretching from Japan to the Outer Hebrides. There are very few restrictions on where he can sell to – in fact local infrstructure of his customers are probably the main restrictions i.e. an unreliable postal service.
There are few reasons why this business could not be run from a developing nation. A web site can be set up very easily, distribution networks are available in most countries and a young internet entrepreneur in a poorer nation can set themselves up with minimal capital.
Unfortunately in some countries artificial obstacles are being created- check this. Despotic or backward looking governments often block and filter the internet due to a variety of reasons. Unfortunately this also stunts the economic potential for it’s citizens. Facebook is an easy place to start selling goods and services but many countries block access to this social networking site for political or religious reasons. Of course these blocks can be circumvented – there are many sites like this http://www.theninjaproxy.org/ which show how to bypass these restrictions using proxy servers and VPNs.
Hopefully this aggressive filtering of the internet will not continue, Governments need to put aside their petty blocks and embrace the incredible opportunities that the internet offers.
It is certainly well documented that one of Ireland’s biggest problems and one which largely caused it’s economic troubles was the bursting of a huge, unsustainable property bubble. The country has been in recession ever since, so any news of growth in any sector is bound to be reason for some optimism.
For those who reason that any recovery should be well balanced and across all sectors however there is still cause for concern. For example much of the rise seems to be linked with a growth in construction spending up a massive 15% this year. Obviously this is from a small base but it’s still a huge rise in a single year for an economy still technically in recession.
For example lets look at some other sectors, ones which we at cipec.org for example think should be important sectors in the majority of recovering economies. Sectors like agriculture, forestry and fishing are not the big, boom sectors of many economies but they are often the most sustainable and provide many, many jobs. These areas in Ireland fell by around 3%, if you look at other key economic sectors like distribution and transport a similar story – with falls of around 2%.
There’s no doubt that things are improving in Ireland, for example they were able to exit the bailout put in place some three years ago. They met all the economic conditions put in place by the EU, the European Central Bank and the International Monetary Fund. Unemployment although still very high has fallen about 2.5% over the last year too and has a strong downward trend which the Government is hoping to continue and accelerate.
The media is also positive, if you watch the BBC you can see many positive stories being led which is in stark contrast to the economic jokes that were streamed some years ago. Incidentally – this link will allow you to access the BBC’s broadcasts online if you are in Ireland.
The worry is still there, though is the sector that caused Ireland’s economic woe’s really the sector that should be pulling it back from the mire. Sure construction and property is a vast lucrative market but look what happened last time!
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Most observers have been rather disappointed at the changes that have happened due to the Arab spring. In Egypt it is now two years since the president was deposed, and still the riots and clashes continue. Glance over to Tunisia and Libya and you see pretty much the same thing, the dictators have gone yet the trouble goes on.
So why haven’t things changed, why don’t we see peace and prosperity throughout these Arab lands. The reality is that although the likes of Gadaffi were unpopular and responsible for many ills – the revolution was about more than just a dictator. These revolutions were also economic and environmental – they were about food and jobs.
The dictators have gone but food is still expensive, the jobs are scarce and the people still live hard and tough lives. The main trigger in Tunisia was the cost of food – hungry people have very little too lose from challenging the status quo. Climate change seems to be the cause of a lot of these problems – droughts and extreme weather across the world push up the costs of all food stuff. The world is producing less and less food – down 3% in the last three years.
Heatwaves in Russia, droughts in Africa and floods all across India and Pakistan to just mention a few. Similar extreme weather in the corn belts of the US and other events effecting the food baskets of the world.
Our total reliance on fossil fuels for the majority of our energy needs only makes the problem worse. The uprisings effect the price of oil, the price rises and further impacts the costs of food – which caused the riots in the first place. The replacement leaders are instantly faced with a bigger problem than the previous dictator ever hard.
The bad guys might have gone, some of the restrictions will have disappeared. You can surf the internet more freely in Libya nowadays – you don’t need to start hopping across the net to buy VPN and proxies to keep yourself hidden anymore. But the people are still hungry, they still need jobs, money and food for their families. Until these problems are solved freedom won’t look that appealing.
The internet provides the spark, it’s easy now to see lifestyles and how others live. Sometimes economics get’s in the way, but a family watching European TV online – like this, will realize that it’s perfectly possible for a rich country like Libya to provide the same life and services if the leaders allow.