Friday, January 8, 2010

Island of Properity in a Sea of Poverty

The following is a transcript from a segment on GDAE Podcast Episode 23 from late November 2009.

We've all heard that about 1% of Americans own about 38% of the nation's wealth.... and the bottom 40% own less than 1% of the nation's wealth. These are 2001 statistics and the disparity has certainly grown since then, during the Bush years.

On another scale, the relatively few developed Nations have accumulated a similarly disproportionate share of global wealth, in part at the expense of exploiting the natural resources of the lesser developed nations.

We've commented in the past on GDAE Podcast that this analogy between individuals and nations translates to the financial melt down. A small minority of wealthy elites in the US benefited from the financial bubble at the expense of a super majority of Americans, yet it was the majority of tax payers who bailed out the tiny financial elite when the crash was upon us a year ago.

By analogy, on a global scale, it was a small minority of countries, the Group of 7, or G-7, that created and benefited from the bubble economy; yet it is the other countries being hammered both during the go-go bubble expansion days of wealth accumulation and on the down-side of the global financial crash.

Now, with global climate change, we see the devastating legacy of this wealth disparity that has persisted over the generations: The minority of industrialized countries have accumulated their wealth, in part, by pushing a cost off onto the environment in the form of greenhouse gas emissions. Like the use of slavery, a small minority have gotten rich on the backs of others.

These are illegitimate riches. But where do we find ourselves today? These illegitimate profits have been invested to create even more riches, which have often been passed between generations (can you say "Paris Hilton?"). The wealth has been used to buy influence in all three branches of government, such as removing the Glass-Steagall Act designed to prevent speculative financial crashes from contaminating commercial financial institutions that fund small businesses, home and car loans, student loans, home improvement loans and the like. But now these super rich speculative financial institutions, and the US Government itself, are insolvent, although they won't admit it. [Now the US CAN'T pay global climate pollution reparations ... unless the US takes a loan from China to do so.]

This scenario of wealth accumulation among a tiny elite reminds me of something I recently read in an old National Geographic magazine. I came across a statement by a wise 39-year old Kuwaiti made back in 1975. When oil wealth in the Middle East was accumulating, the Kuwait fund for Economic Development pledged $16 billion to developing countries. According to National Geographic, The fund's director general, Abdlatif Al-Hamad, 39, explained the philosophy behind such generosity. He said:

"We cannot close our doors and say to hell with everyone else. Nothing is clearer than the danger of having an island of prosperity in a sea of poverty."


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