Why don't we mind the gap?

The greatest trick capitalism has ever pulled was persuading the world its effects - jaw-dropping levels of inequality - don't exist. By Vincent Browne.

The triumph of capitalism has been not just its survival and its vast enrichment of its aristocracy but its capacity to generate consent from the peoples of capitalist societies to the huge inequalities it generates.

The scale of inequalities generated by capitalism has been underlined in a number of recently published reports, from inside capitalism’s own ideological powerhouses.

The Merrill Lynch and Capgemini World 2011 Wealth Report states that the global wealth of high net worth individuals (HNWIs) grew by 9.7% in 2010 to reach $42.7 trillion and the global population of HNWIs grew by 8.3% to 10.9 million (the report defines HNWIs as “those having investible assets of US$1 million or more, excluding primary residence, collectibles, consumables and consumer durables”). It reported: “Europe’s HNWI wealth totalled $10.2 trillion after growing 7.2% in 2010.”

The report says there are 3.1 million HNWIs in the US and in 2010 in North America HNWI wealth rose to €11.6 trillion.

In an unashamed commentary on the downside risks to the world economy to the welfare of these HNWIs, the report states: “Many developed nations will need to deal with long-term structural issues such as entitlements (eg pensions, medical care, education) as they seek to get a grip on fiscal deficits.”

According to the Boston Consulting Group (BCG): “Global wealth grew in nearly every region of the world in 2010 with assets under management (AuM) showing signs of a sustained recovery in both developed and emerging markets (BCG 2011). By the end of the year, AuM had increased by $9 trillion and was at a record high level (to a total of $47.4 trillion).”

Assets under management (AuM) are defined in the report as “cash deposits, money market fund, listed securities held directly or indirectly through managed investments and onshore and offshore assets. It excludes wealth attributed to investors’ own businesses, residences or luxury goods. Global wealth reflects total AuM across all households.”

The report states that North America had the largest gain in wealth in 2010, at a gain of $3.6 trillion, giving it a total assets under management wealth of $38.2 trillion. In Europe this was $37.1 trillion, in Asia/Pacific it was $21.7 trillion, in Latin America $3.5 trillion, Middle East and Africa $4.5 trillion and Japan $16.8 trillion.

It states the amount of offshore wealth – defined in this report as assets booked in a country where the investor has no legal residence or tax domicile – increased to $7.8 trillion in 2010. In a graphic it shows that $1.9 trillion of this was held in the UK, Channel Islands and Dublin. Dublin, along with the Channel Islands, is a major holding centre for offshore wealth. In a graphic on page 15 it shows that the origin of about 20% of the $1.9 trillion held in the UK, Channel Islands and Dublin is of UK origin and is held in the Channel Islands and Dublin.

It goes on to note that international agreements on curtailing tax fraud – such as article 26 of the OECD Model Tax Convention on Income and Capital – are likely to diminish the scale of funds held in offshore locations. It notes the willingness of financial authorities in Switzerland to adhere to the OECD model, albeit with reservations.

The report goes on to note: “The Channel Islands and Dublin recently implemented Article 26 of the OECD Model Tax Convention on Income and Capital, but tax authorities have yet to put significant pressure on these offshore centres.”

So HNWIs not only enjoy vast incomes but, for many of them, an immunity from tax laws, an immunity which Ireland’s tax-haven status continues to facilitate.

Both the Merrill Lynch and the BGC reports reveal the scale of wealth held by rich Americans. A report by the United States Census Bureau in 2010 shows that alongside the 3.1 million high net worth individuals in America, there were 46.2 million people living in poverty in 2010, up from 43.6 million in 2009.

For black people, the poverty rate increased to 27.4% in 2010, up from 25.8% in 2009. From 2009 to 2010 the poverty rate for children under 18 increased to 22% from 20.7%, while the number of children under the age of 18 in poverty increased to 16.4 million from 15.5 million.

Children accounted for 35.5% of people in poverty, but only 24.4% of the total population.

The survey on income in Ireland shows that 14.1% of the population was at risk of poverty in 2009 (ie with disposable income of €12,064 or less per individual). It further showed that the poorest 10% of the population had net disposable income of €211 per week (ie €10,952 per annum), while the richest 10% had disposable income of €881 per week (ie €45,812) on average.

It showed that the poorest 10% was dependent for all of its disposable income on social transfers. Revenue Commission figures show a far larger disparity of incomes.

But how is it that these huge inequalities in income and wealth generate no persistent demands for radical change, even when the perniciousness of such vast income inequalities seep insidiously into other arenas, most startlingly, longevity. Poor people die younger. {jathumbnailoff}

Image top: Mother Jones.