Emmanuel Saez and Gabriel Zucman calculate that in the United States, the wealth gap is already wider than at any time since the Great Depression, with 1% of households now holding almost half the country’s wealth.
In the United Kingdom, the Office for National Statistics reports that in the period from 2012 to 2014, the wealthiest 10% of households owned 45% of total aggregate household wealth. Since July 2010, the top 10% wealth has increased 300% faster than that of the bottom 50% of the population.
Alongside inequality, declining public trust fuels the revolt against globalization and democracy. Across the developed and developing worlds, many suspect that the rich are getting richer because they are not held to the same rules as everyone else.
It’s not hard to see why. As the global economy slows, breaches of trust by those at the top become more apparent. In the United Kingdom, Amazon, Starbucks, and Google attracted public outrage in 2013 for using loopholes to pay almost no tax, prompting the UK government to lead a G8 tax announcement aimed at reducing tax evasion and avoidance. In 2015, an audit of the state-owned Nigerian National Petroleum Corporation revealed that about $20 billion in revenue was never remitted to the authorities under the previous administration.
And the problem appears to be systemic. This year, the Panama Papers exposed how the global rich create secretive offshore companies, permitting them to avoid financial scrutiny and taxation. And the world’s largest banks have faced unprecedented fines in recent years for brazen violations of the law.
Governments have permitted globalization – and peripatetic wealth-holders – to outpace them. Globalization requires regulation and management. It requires responsible business leaders. And it requires deep and effective global cooperation. When governments failed to cooperate in the 1930s, globalization came to a crashing halt.
By the 1970s, wealthy countries’ leaders in both government and business had become complacent. They took on faith the promise of self-equilibrating, self-restraining markets that would deliver continued growth. By the time this new orthodoxy spread to the leveraged financial sector, the world was on a crash course. Unfortunately, many governments had already lost the capacity to manage the forces they had unleashed, and business leaders had lost their sense of responsibility for the welfare of the societies within which they were flourishing.
In 2016, we are re-learning that, politically, globalization needs to be managed not just to permit the winners to win, but also to ensure that they do not cheat or neglect their responsibilities to their societies. There is no place for corrupt politicians pandering to corrupt business leaders.