Ending with the unbridled wealth concentration

The trajectory to move forward towards a better world is blocked by an unbridled wealth concentration that has become a factor that is crucial to remove. In this article we analyze the dynamic and consequences of such severe concentration, the challenges to face and some options to tackle some of the most destructive aspects of the contemporary course.
The trajectory to move forward towards a better world is blocked by an unbridled wealth concentration that has become a factor that is crucial to remove. That uncontrollable concentration of resources is responsible for a set of evils and consequences, among others the following:

– Greed and the insatiable thirst for profit have already surpassed the legitimate motivation to prosper in order to improve life standards. Today the economic dynamic carelessly advances destroying the environment and entire communities. An inequality has been imposed that does not decrease but instead increases exponentially. The information presented last month by OXFAM INTERMON is an outrage to everyone: the 85 wealthiest individuals in the world accumulate as much wealth as 3570 million people, half the planet’s population.

– Of course no one can accumulate such wealth by the sweat of his brow; they do it through economic interventions that allow them to take out value others have generated. This process of value extraction uses very diverse mechanisms, some more sophisticated than others but all of them oriented to appropriating what is produced with the effort of millions of human beings. The sufferings and frustrations caused have been enormous and their consequences destructive.

– The fact is the functioning of economic systems has become structurally unstable: it installs concentrative dynamics that are reproduced over time and that are very difficult to eradicate. Capital formation concentrated in a few hands and oriented to coldblooded speculation, generates high profit margins that enlarge the capital mass itself due to which, cycle after cycle, concentration is widely reproduced. The limit of such dynamic emerges from the economic system itself by generating a growing gap between demand that is left behind because its incomes do not grow at the required rate to absorb the available supply and a production that has the technological and managerial capacity to grow at a much higher rate.

– It is not necessary for demand to stagnate for this gap to emerge; it is enough that its growth rate does not follow the supply’s growth rate for market bottlenecks to appear. When those gaps show up the outcome can be contained for a certain amount of time by replacing the relative falling behind of genuine incomes with loans. This way the increase in effective demand is attained beyond the available income until the day when indebtedness has increased to such extent that the repayment capacity is compromised and defaults in chain reactions take place. They are the ‘financial bubbles’ that give way to all kinds of bankruptcies when they burst.

– What happened was an enormous systemic implosion as a result of having chosen to keep profiting without modifying concentration but indebting those already indebted even more. Financial groups hastened to extract value by providing people and countries with credit instead of giving up some of their profit to improve the genuine incomes of families and sovereign States.

– Here there is room for all kinds of interpretations regarding the unsustainable chosen trajectory: if they did not anticipate what could happen or if each financial group was so greedily focused on profiting that the ‘rest’ (merely the life and health of millions of people, environmental care, the loss of rights and jobs, social peace, citizen security) did not matter to them. Considering the ‘bailouts’ they afterwards imposed upon governments (bailouts for them financed with public resources), it is clear that what prevailed was an irresponsible behavior sustained on the impunity they always had and on the arrogance of trusting that, if faced with difficulties, their power would allow them to stay on top at the expense of others.

– When everyone thought there was nothing left to extract from the exhausted family finances and the real economy, bailout policies aimed to extract new amounts of value from public budgets in order to maintain concentrated capital’s profit margins. Large financial groups threatened with the possibility of a generalized collapse and imposed their interests using the terror they generated in governments and stunned populations that were easy to silence and manipulate.

– The outcome of the past decades was, first, that the over indebtedness allowed them to get several accumulation cycles and, then, with the adjustment and bailouts they managed to add even more profitable cycles. The crisis they generated, which was triggered in affluent countries but ended up affecting the rest of the world, did not punish them. On the opposite, concentration was accelerated with the crisis up to the outrageous level above mentioned with less than a hundred individuals owning the same wealth as 3570 million victims.

Broad challenges

Was what happened inevitable? No way; there are very different trajectories than the ones that were imposed upon us. Every country can choose other courses and ways of functioning as long as they can mobilize all the potential it possesses.

The biggest challenge is at international level since in order to put an end to concentration it will be necessary to design a new global economic and financial architecture. However, those who have the greatest power to make those crucial decisions are precisely the forces that is necessary to dismantle; they have the capacity to condition governments and international entities in their favor by coopting politicians, ‘specialists’ and hegemonic media.

So how can we face the forces defending the prevailing international order? It will be necessary to start by choosing governments with leaderships that are committed to the transformation; governments capable of establishing regional agreements as to strengthen voices, decision power and economic integration that will enable having more significant influence on the international juncture.

This implies a political and social mobilization within the countries with the backing of a permanent effort to clarify democratic wills on main issues. We need to go from being formal democracies to being full democracies; to work on values, potentialities and new alternatives so as to restrict the despair that demobilizes. It is necessary to overcome the stunned glance and transition from lamentation to building spaces of transformation supporting those actors that can materialize it. It is a demanding work that begins with understanding what is going on and why, to then project it on creative proposals and actions that will, at the same time, extend social rights, solve needs and strengthen the capacity to transform.

It is clear that hegemonic groups will not give up their privileges voluntarily as proven by the ongoing attempts to destabilize people based governments: through political and media operations they generate economic instability and social turbulence. Taking advantage of governmental mistakes or miscalculations, they maneuver to install a feeling of insecurity, chaos, corruption and turmoil that will frighten middle sectors and take them to align with their interests. This can lead to a change of administration that is materialized through electoral manipulation or, if necessary, institutional coups of legislative, judicial or military nature.

Options to end with the unbridled wealth concentration

There are very diverse strategies to face wealth concentration, some of them are very lenient, others radical and, between those extremes, strategies of progressive changes. Each one of those strategies presents advantages and disadvantages but very different expected outcomes.

(i) Lenient strategies

These strategies aim to regulate the existing financial system so as to limit the abuses that enable the tremendous contemporary speculative movements. They presume that with those regulations they will limit excesses and prevent bottlenecks that lead to recurrent crisis. The problem is that the power the financial system has, makes it uncertain for governments and politicians to effectively regulate those who are financing and conditioning them. It is known that the financial system operates at a formal level but also through informal channels that are uncontrollable by legal regulations. In addition, and this is perhaps the most serious issue, the financial system has an incredible ductility to mutate with the circumstances it faces but without giving up profit and power. They will always find ways to avoid any regulation that might be adopted and there will be no enough law enforcement capacity to prevent it. It is very likely that lenient strategies will only introduce marginal adjustments preserving the essence of the established order.

(ii) Radical strategies

These radical strategies aim to root out unbridled wealth concentration through state control of large financial entities or dismantling them as to return to a non-concentrated and firmly regulated financial market. They assume this way they will be able to reorient vast financial flows from the speculation that extracts value towards productive activities that generate it. Thusly the main needs of the global population would be satisfied and the economic march would become stabilized by closing the gaps between supply and demand. With good management recurrent crisis would be averted while dismantling the enormous power hegemonic groups currently possess. On the other hand, the challenges these strategies face are ranging from the viability of being able to implement a transformation of such scale given the current power structure that needs to be dismantled, up to the uncertain effects -to say the least- that would stem from the proposed courses in terms of new powers, hegemonies and effectiveness.

Before considering the strategies of progressive changes it is worth admitting the simplification with which both lenient and radical strategies were presented; they would need to be much more specified so that they could be better supported or questioned with more detailed arguments.

(iii) Strategies of progressive changes

If there was a universal election to end with unbridled wealth concentration, there is no doubt an unstoppable majority would prevail in favor of dismantling it. The current type of concentration could also end by social uprisings. Given that in present times these choices do not present viability conditions, it is worth exploring other strategies of progressive changes that would over time encourage the needed transformations. The risk, certainly, is that efforts might be left half way or aborted by those who will oppose resistance to the changes; it is a legitimate argument that, as in the previous cases, can be strengthened or dismissed with appropriate reasons, some of which are presented in the following lines.

It has already been anticipated that in the international front is where the fate of the planetary course is defined and that, at that level, large financial groups operate with an extremely wide freedom of movements; it is what has been denounced as pure and plain licentiousness. They can extract value practically as they please and, with it, accumulate enormous revenues that reinforce wealth concentration with its counterpart in inequality, poverty and destitution; regulating such licentiousness is extremely difficult.

Without giving up on imposing the firmest possible regulations, it will then be necessary to choose other points of intervention to build up conditions that will lead to ending the concentration. It is worth making it explicit that internationally lead value extraction processes include local actors, due to which critical spaces to be transformed are value extraction mechanisms operating in each country.

This is a broad field of action that unfolds in very diverse fronts. There are ideas, proposals and experiences that deserve to be thoroughly analyzed. Opinion Sur has published articles and books on this matter [[[A country for all->http://opinionsur.org.ar/Un-pais-para-todos-Hacia-un]; [Los Hilos del Desorden->http://opinionsur.org.ar/Los-hilos-del-desorden-Primeras]; [Global crisis: adjustment or transformation->http://opinionsur.org.ar/Crisis-Global-Ajuste-o,1095]; [Local Businesses global opportunities->http://opinionsur.org.ar/Negocios-Locales-Oportunidades]; [The world is burning->http://opinionsur.org.ar/Arde-el-mundo?var_recherche=arde%20el%20mundo].]] but there are many other more detailed available texts. Just to conclude these lines we merely highlight some critical areas where efforts can be focused.

The economy must be responsibly lead but subordinated to the aim of giving way to a full democracy. Macroeconomic and sectorial policy instruments as well as laws, regulations, orienting national savings towards productive investments, personal and corporate values and behaviors, among many other variables, should help transform an economy marked by value extraction into an economy dedicated to generating and reinvesting value without market power abuses.

A proactive policy to decentralize revenues accumulation includes measures in several fronts. On one hand, it is necessary to eliminate the different existing mechanisms of value extraction [[[Differentiating generation, redistribution and extraction of value->http://opinionsur.org.ar/Differentiating-generation?lang=en].]] , including fierce financial speculation, pillaging of natural resources, regressive tax systems along with the enormous evasion practiced by large economic groups, the deficient improvement contributions in infrastructure programs, market power abuses punishing producers and consumers [[[Market power abuses->http://opinionsur.org.ar/Abusos-de-poder-de-mercado?var_recherche=abusos%20de%20poder%20de%20mercado].]], regulatory favoritism, drug trafficking and other organized crimes.

On the other hand, it is fundamental to transform the productive matrix to give our base of natural resources a better use adding aggregate value through well-structured value chains that fairly compensate all those who participate in it. Within this perspective it becomes of strategic importance to promote small companies and midscale ventures capable of integrating workers and small producers in innovative and efficient units. Small units make a significant contribution in terms of employment and incomes but they have to struggle with the severe restrictions that have to do with their scale. It is thus needed to provide assistance to small individual enterprises and, at the same time, to explore new associative forms such as, for example, inclusive ventures. [[[Inclusive venture developers->http://opinionsur.org.ar/Desarrolladoras-de-emprendimientos?var_recherche=emprendimientos%20inclusivos].]]. This is a crucial dimension in the effort to end with wealth concentration: forming responsible capital at the base of the productive apparatus equipped with a leadership that knows how to manage and at the same time carries values and behaviors toward the wellbeing of their communities.

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