Working for the few: private power over democracy | Ricardo Fuentes-Nieva

24 Jan 2014

Children in a slum in Bangladesh According to a new UNDP report, to be launched next week, income inequality increased by 11% in developing countries between 1990 and 2010. Photo: Kibae Park/UN.

Seven out of ten people live in countries where economic inequality has increased in the last 30 years. In a paper released this week, Nick Galasso, from Oxfam America, and I explore the current growing concentration of income and political capture.

Firstly: The rich are getting richer, faster. The poorest half of the world's adults, 3.5 billion people, own a total of $1.7 trillion worth of assets. That is similar to the wealth owned by the world's richest 85 people. In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth between 2009 and 2012, while the bottom 90 percent became ever poorer.

Secondly: This growing concentration of income and wealth is closely associated with political power and influence. It sounds obvious but it's very easily forgotten. Either through lobbying, campaign finance, or avoiding regulation, the rich exert their power over how the rest of society is governed. In Working for the Few we explore the mechanism by which wealth brings political influence, which in turn breeds greater wealth for a select few.

The lopsided influence of the wealthy occurs through different channels. Take the example of Mexico and Carlos Slim. Slim is the CEO and Chairman of América Móvil, which controls nearly 80 percent of fixed line telephone services and 70 percent of mobile phone services in the country.

This near monopoly has had a significant and sustained cost for the Mexican economy and Mexican people who pay inflated prices for telecommunications. In other words, every day there is a transfer of money (a redistribution of sorts) from ordinary Mexicans to the richest man in the world.

Thirdly: A more subtle point: once both wealth and political influence are exclusively in the hands of the privileged minority, they will reap all the benefits from education and the labour market . Social mobility disappears and groups become excluded from society. There is nothing just when success is the result of a system that only benefits those with power and wealth.

I'll conclude with a warning. The large and rising concentrations of income and wealth represent a threat to stable, inclusive societies - unbalanced distribution of wealth skews institutions and erodes the social contract between citizens and the state. It has happened before and unless we pay close attention to this worrying trend, it can happen again.

Talk to us:  How can we help reduce economic inequality and break the vicious circle of wealth and power?

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