The principal cause of the ever widening income inequality in the world is the combination of technological change and globalization. There have been many books and articles, including my last column, about this topic.
Unless governments and society decide that it is time to implement social justice and the rule of law, the gains from globalization will never be evenly distributed. In his book, GLOBAL INEQUALITY: A New Approach for the Age of Globalization, Branko Milanovic discusses this phenomenon and its future consequences. However, he also writes in his book that there are other noticeable factors that have also been “culprits” for increased inequality.
“ One of these concerns behavioural changes such as the greater prevalence of assortative mating, or homogamy; marriage between partners who both have high skills and high incomes have become more common [now] than they were in the 1950s and 1960s.” In the Philippines, children belonging to the families of tycoons and taipans tend to marry each other.
Another suggested cause involves vaguely defined changes in ethical or pay norms which allow for much wider gaps between the pay of top managers and average workers.” Even in the hiring and development of potential managers, there are biases that give graduates of the so-called “elite” schools a competitive edge. Students in these elite schools are normally members of the upper middle class and the upper class. This is true even in the so-called schools, like U.P. Dilliman which used to serve as the gateway to middle and upper class status by students from low income families. Today, this institution is dominated by scions from the middle and upper middle classes.
Rule of law in the age of globalization
There was a time when new tycoons and taipans were presumed to have an incentive to push hard for the rule of law. Even the new “robber barons’ or those who acquired their wealth through illegitimate means would demand the rule of law and property rights in order to protect their newly acquired wealth. This is the reason that economists and policy makers believed that everything would work out even if privatization of government assets were done in a lawless and non-transparent environment.
“ The view that robber barons may demand the rule of law and the protection of property rights once they have acquired property seems reasonable – as long as we assume that there is no globalization. But with globalization, it is not necessary to fight for the rule of law in one’s own country.
A much easier course of action is to take all the money and run away to London or New York [or China or Singapore or Vancouver}] where the rule of law exists and where nobody will ask where the money came from.
A number of plutocrats from Russia, and increasing numbers from China are taking this route. It makes sense from the individual point of view. And it also shows how our economic thinking has not caught up with the economic reality. In the 19th century, families like the Rockefellers championed property rights in the United States because there were few other places where they could go and squirrel away their money. “
The lesson here is that globalization has made money laundering, on a global basis, much easier and the rich can easily move their money from one jurisdiction to another – in particular to a jurisdiction where the rule of law favour the wealthy. This is especially true in the Philippines where the bank secrecy law is one of the most lenient and easy to circumvent in the world.
Global game changers
In the study of history and geopolitics, there is a theory called the “black swan.” This describes an event that comes as a major surprise with dramatic effect that was never anticipated. According to the theory, there are hard to predict and rare events in the realm of normal expectations in history, science, finance and technology. These events are so rare that they are impossible to predict using scientific method ; but, have a massive role in changing the course of world history.
Milanovic, predicted that the future would be shaped by globalization and technological change. Even Stephen Hawking, the famous physicist said that humankind would end with the age of artificial intelligence. However, Milanovic listed some “black swan” events that could change all his predictions:
• Nuclear war between the United States and Russia or China that could lead to massive destruction and long lasting radioactive contamination.
• A nuclear bomb detonation by terrorists.
• War between China and Japan.
• Political revolution and/or civil war in China, leading to breakup of the country.
• Civil war between Muslims and Hindus in India.
• Revolution in Saudi Arabia.
• Growing irrelevance of Europe as a result of decreasing population and inability to absorb migrants and refugees from the Middle East and Africa.
• Conflict between Muslims and Christians that could engulf the Middle Easst and spread to Europe.
The list does not include other possible catastrophic events like Donald Trump deciding to launch a pre-emptive nuclear strike against North Korea.
But it is still up to the people to decide whether they want a world ruled by the richest 1% or by a global middle class or by populists thriving in a world of massive inequality.
Creative writing classes for kids/teens and adults
Young Writers’ Hangout for Kids & Teens on September 9, September 23, October 7 and October 21 (1:30-3pm/independent sessions). Speculative Fiction Writing for Adults with Dean Francis Alfar on September 16, 2017 (1:30pm-4:30pm). All sessions are at Fully Booked Bonifacio High Street. For registration and fee details text 0917-6240196 or email writethingsph@gmail.com.
Email: elfrencruz@gmail.com