General · 14th September 2013
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What is a man to do with a “main palace” of 420 rooms, a customized Boeing 747 jumbo jet for his exclusive use, a private zoo and amusement park, and a stash of $700 million in jewels? This is the dilemma facing Prince Alwaleed, whose $20 billion in assets gets him ranked by Forbes magazine as the richest person in Saudi Arabia (George Monbiot, Money Just Makes the Rich Suffer, Guardian Weekly, May 17/13).
But wealth has not been easy for Prince Alwaleed. For 25 years, according to an article about him in Forbes, he has been “lobbying, cajoling and threatening when it comes to his net worth listing.” In 2006 he believed that Forbes had undervalued his worth by $7 billion. So he hounded the magazine's researcher for days, pleading with him to change the evaluation. “What do you want?”, he tearfully asked, while offering access to his Swiss banker. “Tell me what you need?”
What Prince Alwaleed needs is not wealth but status. The Forbes list of the global rich is his measure of “success” and “stature”. Or, as the American industrialist and billionaire H.L. Hunt once explained, “Money is just a way of keeping score” (Ibid.). This is why the ultra-rich aspire to get even richer. When they already have more money than they can possibly spend in a lifetime, their wealth, as Monbiot insightfully explains, takes on the value of “prestige, power, purpose”.
This is why CEOs manoeuvre hundreds of millions in compensation from corporations, banks and investment companies, even when their leadership causes financial losses. And this is why the ultra-rich lobby politicians manipulate public policy, alter taxation regimes, hide their money in offshore accounts and pressure governments to design budgets for their benefit. The effect is a gradual dismantling of the social contract, the unspoken agreement of fairness that requires the wealth in a society to raise the wellbeing of everyone, not just a few. As the rich get richer and the poor get poorer, the common understanding that once guaranteed a judicious distribution of wealth throughout society, is gradually being lost.
Dr. Christopher Ragan, a professor of macroeconomics at McGill University for 24 years, has some helpful comments to make on this subject. The logic of microeconomics that applies to individuals, he explains, does not apply to the macroeconomics that operate at national scales (Globe and Mail, July 17/13). So the argument that fiscal restraint can be economically beneficial to indebted governments is fallacious. Fiscal restraint works for individuals because their reduction in expenditures is the only variable in their calculation for austerity. Everything else in their lives remains the same: their income, job stability, assets and personal circumstances.
“But the same logic does not apply for a government or for the economy as a whole,” Dr. Ragan writes (Ibid.). Government austerity affects the “circular flow of income and expenditure.” Removing spending from the economy alters many other influential factors. Reducing salaries, firing scientists, chopping research, retiring civil servants, cutting public works spending, shrinking employment insurance benefits, and the entire economy constricts. The “multiplier” effect cascades throughout the society. Decreased employment, fewer sales, slowing growth and less economic activity shrinks the taxation which is the government's income. A reduction in this income can increase debt and raise the unfavourable debt-to-GDP ratio when the amount of money in the economy goes down faster than the debt. Austerity at the macroeconomic level can invite a disastrous downward spiral of even more austerity.
Government austerity creates other problems. As unemployment goes up, more people become poor. This increases crime rates, social problems and health costs. Thus the price of maintaining a civil society rises. Since the adverse effects of austerity on low-income people are disproportionally higher than on high-income people, this accelerates the already widening gap between the wealthy and the poor, a trend that increases social tension and civic unrest.
This widening gap between the wealthy and the poor presents more problems. Since the wealthy can't spend all their money, they have to invest it. Large amounts of available capital invites borrowers. And the more money available for borrowing, the lower the interest rates — and the greater the incentive to borrow. This is the genesis of the growing debt crisis, an economic predicament which threatens to create cycles of boom and bust, adds to economic and social instability, and creates the conditions which further increase the gap between the wealthy and the poor.
The attention of poor people is inclined to be fixed on the present. They are dealing with the reality of survival, with paycheque-to-paycheque economic concerns, and the daily domestic challenges they are barely able to meet. Don't expect them to be thinking about global warming, melting Arctic ice, ocean acidification or the future climate of the planet. Don't expect them to willingly pay a carbon tax to reduce greenhouse gas emissions. Don't expect them to support higher electricity bills for solar, wind or other renewable energies. Don't expect them to worry about conservation efforts or endangered species when their priorities are their own survival and security. The fact that economic recessions drive down the public's support for environmental issues is no coincidence. Neither is it a coincidence that the shrinking of the middle class and the growing gap between the wealthy and the poor has the same depressing effect.
Even if a few ultra-rich were to contribute vast sums of their money to environmental causes — Prince Alwaleed probably wouldn't — their generosity would have little effect if the attention of the rising ranks of the poor is only focused on day-to-day survival. Without some semblance of balance in the ecology of wealth, everyone loses.