May 2011
This month it is all about scoops.
The Kangaroo Valley Voice March issue scooped The Economist with its report on the hollowing out of Australia’s economy by the mining boom; it made the front page of the latter in its April 2nd issue.
Maybe they are readers?
But there was gnashing of teeth when the rating agency S&P published its downgrade of the American economy. Because that is the subject of this month’s issue – and this being a monthly publication, they scooped me.
First, if we consider the similarities between the countries now in the midst of civil warfare and riots, effectively started from food insecurity in the Middle East, it may look something like this.
The elite 1% of the population take home 25% of the country’s income. They also control 40% of the wealth. Twenty five years ago those numbers were 12% and 13% respectively, so wealth is being hoovered up by the top 1%.
The middle class have seen their incomes fall 12% in the same period. In terms of income equality the country lags any of those in Europe.
When we look at the government, we find that nearly every member is a member of that 1% elite. They make the rules. The departments that enforce these rules are also headed by members of that top 1%.
We analyse the rules and enforcement and that shows that they continue to cement the wealth and power of that 1% rather than the general populace.
Then we look at who is paying for the countries services. 47% of people pay no taxes, and only 5% are paying 80% of all taxes. And it is not the top 1% because many use corporate structures. In 2006 the 400 top earners who did pay tax, earned $105 billion but only paid $18 billion in tax. That’s a 17% tax rate. Ten years earlier it was a 30% tax rate; so the evidence is that as they hoover up the wealth the elite’s tax contribution to the common good is less and less.
The top 1% rarely serve in the military and in most other aspects of society they pay no penalty when things go wrong.
As the elite hoover up the wealth, controlled through their ownership of the government, the rest of the economy collapses. Quality food becomes more expensive, so the poorer eat low quality processed foods [made by the giant corporations owned by the top 1%]. Their health deteriorates; the health care system is swamped. The education system for the community becomes grossly underfunded, and it shows in the workers profiles. The workers, as noted above, are earning less and less as the unions are undermined by the large corporations controlled by the top 1%.
As the difficult periods for the country cannot harm the elite they become less and less interested in paying for the common good.
Eventually as we have seen, the citizens rise up and overthrow the government and elite that have taken away their opportunities and beggared their families. The trigger may well be food insecurity.
The above profile neatly fits most of the countries now in severe conflict in the Middle East. It is also the profile of the USA today.
Gross inequality is what brings down great nations – from Rome onwards. Impoverishment of the masses is never a good strategy for the long term sustainability of nations. The USA is heading in that direction.
Disclaimer:
This is not advice. I am not licensed to give advice of any kind. Advice can be understood as individual advice to a person about their particular financial circumstances, or general advice about investing. So you cannot, and should not, rely on anything written here. You should only rely on advice from a licensed advisor. If this article has sparked interest please seek out a licensed advisor.