In front of an audience of 1,600 people at Lisbon’s Gulbenkian Foundation, the well known Nobel Laureate in Economics, Joseph Stiglitz, always with a smile, analysed the past and future of world economies.
After 50 years of economic growth and welfare in the post-war period, the richest 1% since 1988 got 60% more wealth at a loss to the poorest, and with increased inequality, especially in the US and the Eurozone, "in Portugal it’s all got worse since I was here 15 years ago," said Stiglitz.
Just as everything in the US must be bigger, inequality is greater worldwide. "I do not understand why some countries want to emulate a disastrous experiment," he added.
"Economic inequality brings a drop in welfare, environment, quality of life, justice, health and education".
In 40 years, 1946-1985, the US richest 1% had 9% of total income; in the following 30 years they had 24%. The 0.1% richest of 30%, increased to 45%. Therefore, the inequalities are accentuated among the richest.
The median wage, which divides in half the total number of employees, is now lower than in 1990. In 1972 a man working 40 hours a week made 55k dollars/year; in 2015 he made 52k.
Today people work longer hours than before, mainly women when adding housework hours. The problem is that newspapers do not write about things that are not sensational, like these day to day changes.
Economic inequality brings drop in welfare, environment, quality of life, justice, health and education. "In the US, the life expectancy of men fell, while it increased in other countries. This is due to the increased use of drugs, alcoholism and suicide - something only seen before when the Berlin Wall fell and there were radical changes in the communist bloc," commented Stiglitz.
"Equal justice for all? Where? Justice exists only for those who can afford to hire expensive law firms to match the experts at large corporations."
"In Europe the picture is identical and those who suffer the most are the citizens of the countries in the Eurozone where inequality is growing fastest".
When the real estate bubble burst in the US, President Bush decided to give 700billions USD to the banks, which had taken great risks in sub-prime, ignoring the caution alerts.
This was taxpayer money. Economists said it did not work in other decades and would not work now and that this amount should go to the millions of Americans who would be left without their homes, taken over by banks.
After a great battle Obama pushed through Congress a bill for only 3billion for this group.
"Who is profiting from repeated real estate bubbles? In these, the richest 1% profit and its always taxpayers who pay for the lack of caution by the banks".
In Europe the picture is identical and those who suffer most are the citizens of the Eurozone, where inequality is growing fastest. Official statistics often conceal reality. For example unemployment does not increase and even falls, but only because of the emigration of hundreds of thousands of young professionals. European politicians have even celebrated when unemployment in Spain has fallen to 23% - one quarter of the adult population!
And who loses with bubbles and inequality is always the middle class, the one that ensures democratic stability. And SMEs, which have no credit for investments and innovations.
"Unequal opportunities in education, mainly in vocational training, are a threat to the future as they despise talents that ensure future innovation and increased productivity and competitiveness."
Unlike the austerity imposed now on many countries, Roosevelt invested in roads to transport production from the US interior, and provided education for all. That's why the US Great Depression of 1930 resulted in the remarkable industrialisation and development of the post-war era. We need re-industrialisation; the welfare is not in the growth of finance within GDP, but in tangible assets.
The IMF proved in published research that greater equality improves the performance of businesses and institutions in a country. The country with the best performance in Africa are the islands of Mauritius where education and healthcare are free for everyone.
"The IMF has proven in much published research that greater equality improves the performance of companies and institutions"
The economic effects are now predictable. A more equitable distribution of income may in the short run bring a slight increase in inequality, but the long run will correct it. The current problem is not economic, but political. A US presidential candidate spends one billion. "Donations" by corporations are actually an investment, they wish for a return. Corporations profit more with rules that protect them than with productive work in competitive businesses.
"Portugal? Begin now to reduce inequalities as the effect will take ten years to be felt."
"Is there any hope? The middle class in India and China is growing and demand for food and consumer goods will outstrip that for machinery and technological materials, which may be reflected in our economy. Portugal? Begin now to reduce inequalities, since the effect will take ten years to be felt.”
Written by Jack Soifer