Sunday 23 October 2016

The rich get richer... and the poor get turned away from mainstream politics

Published 06/04/2016 | 02:30

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The Panama Papers revelations underscore again the nature of wealth inequality in our world. This is becoming one of the single biggest dilemmas facing the world economy and it is not just an issue for traditionally unequal societies such as Russia.

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All over the world, the rich have been getting ever richer and the gap between the rich and the middle, not just the very poor, is amplifying. This growing gap is one of the factors that are leading many people to feel fed up with mainstream politics.

The mainstream political message for so many years is that there is a conveyor belt to prosperity.

The vision has always been that if you do well by working hard, your children will have a better chance than you did. As the very rich rise out of sight and pull the drawbridge up behind them, many millions begin to feel disillusioned with the social contract and reject mainstream politics.

This is where Donald Trump and other demagogues such as Marine Le Pen come in. Trump is tapping into a resentment of the elites - and the Panama Papers are indicative of the elites squirrelling away their money in fake companies, usually with the explicit aim of avoiding tax. The average guy can't do that.

At the root of all this is enormous inequality, where scarce resources are hoovered up by a tiny percentage of the population, some of whom feel so entitled that they won't even pay their dues on these huge fortunes.

Don't get me wrong, I have yet to meet a person who happily pays more tax than they absolutely have to, but the fact that those at the very top are cheating on their own countries gives yet more legitimacy to would-be politicians who point out that the system is broken. In an election, you don't actually have to offer any tangible, workable solutions if the system is already broken; you just have to keep saying it.

Inequality is one of the reasons that mainstream politics all over the globe is fractured. Today, when people in Ireland are looking for reasons to explain the gradual erosion of the centre ground in Irish politics, growing inequality has to be one of the obvious reasons.

So how big is the problem?

A few months ago, I presented a programme on RTÉ documenting the great wealth divide in Ireland. One of the most fascinating aspects of inequality in Ireland was the fact that while almost everyone in Ireland knows that the spoils of the society are not divided equally, in our ideal world, the vast majority of us claim that wealth should be distributed more equally.

What the programme highlighted was the difference between what people thought the wealth divide was, and what people thought it ought to be, was wildly out of whack with what it actually is.

One of the recurring themes in all surveys taken on the issue of wealth in Ireland is the fact that most people believe in a fairer society. For the programme, we decided to revisit this conundrum.

We conducted a Red C poll to see what you thought the wealth divide was in Ireland, then, we asked you what you thought it should be, and then we revealed what it actually was.

In an ideal world, you thought that a fairer Ireland - a truly republican Ireland, where all the citizens have a chance - would be one where the top 20pc would have a little bit more than 20pc of the wealth and the poorest 20pc would have a little bit less. This is kind of what you would expect from people who live in a republic but understand that life isn't always fair. As a result, rich people have more, but not hugely more, and poor people have less, but not dramatically less. That's your ideal world.

Then we asked you what you thought was the state of play. And you thought, in contrast to your ideal Ireland, that the real picture was one whereby Ireland's richest 20pc probably had more than half of the country's wealth and the poorest 20pc had 11pc of the wealth.

Then we showed what the reality is.

The reality in Ireland, according to the latest figures for the CSO, is that the most affluent 20pc in Ireland actually own 73pc of the country's wealth, while the poorest 20pc don't own the 11pc you thought they own, but they own just 0.2pc of the country's wealth.

And as for the top 5pc, their combined wealth is nearly double that of the entire "squeezed middle" - the 60pc of Irish people in the middle. You can see all this clearly in chart 1 here.

Now, if you want to see how wealth is distributed in Ireland, check out the next two charts which go a bit deeper and reveal what the distribution of wealth is like when you break the population down into the top 10pc down to the bottom 10pc. You can see that the concentration of wealth in the top 10pc is extraordinary.

According to the latest publication by the CSO, the top 1pc in Ireland owns 14.8pc of the entire wealth of the country.

This is about the same as the bottom 50pc of the population.

So to put it another way, the top 1pc of the population own the same amount as the bottom half of the population.

These are the latest official figures, published by our government.

These developments in inequality are not unique to Ireland. In fact, all over the OECD, we are seeing similar patterns.

The Panama Papers are yet more evidence of one rule for the hyper rich and one for the average dude.

Against this background, can you blame people for turning their back on the mainstream at the ballot box?

Irish Independent

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