Economic Apartheid Kills

By Joel S. Hirschhorn

12/12/06 "Information Clearing House" --- - To be successful in overturning our elitist plutocratic system we should add economic apartheid to our semantic arsenal. Better than economic inequality, economic injustice and class warfare, because apartheid is loaded with richly deserved negative emotions. Sadly, in South Africa, economic apartheid has taken over from racial apartheid.

How ironic that the Bush administration successfully talked up the global threat from terrorism while it pursued domestic and foreign policies promoting economic apartheid, a far greater and more pervasive threat to national and global stability.

The human race on planet Earth, taken as an aggregate mass abstraction, may be getting richer. But a new report from the World Institute for Development Economics Research of the United Nations University shows that wealth creation is remarkably – one might say criminally – unequal. Follow this hierarchy at the top of the wealth pyramid: The richest 1 percent of adults alone owned 40 percent of global assets in the year 2000; the richest 2 percent owned more than half of global household wealth; and the richest 10 percent of adults accounted for 85% of the world total. That leaves very little for the remaining 90 percent of the global population. Could it be any worse? Yes, the rich are still getting richer, more millionaires are becoming billionaires.

As to the world’s lower class: the bottom half of the world adult population owned barely 1 percent of global wealth, defined as net worth: the value of physical and financial assets less debts. Over a billion poor people subsist on less than one dollar a day. Every day, according to UNICEF, 30,000 children die due to poverty – that’s over 10 million children killed by poverty every year! Global economic apartheid is killing people.

Here are data showing some of the variations among nations. Average wealth amounted to $144,000 per person in the U.S. in 2000, not as good as the $181,000 in Japan, but better than most others: $127,000 for the U.K., $70,000 for Denmark, $37,000 for New Zealand, $1,400 in Indonesia and $1,100and in India. Averages, of course, are very deceiving.

As to wealth inequality, the richest 10 percent of people in the U.S. have 70 percent of the wealth, compared to 40 percent in China. In other words, China has much more economic equality, though that is changing quickly.

To be among the richest 10 percent of adults in the world required $61,000 in net wealth, and more than $500,000 was needed to belong to the richest 1 percent, a group with 37 million members worldwide according to the study. Recall, all these data are for 2000, and would be much higher now, because of the steady trend of the rich becoming richer.

The statistical measure of inequality is the Gini value, which measures inequality on a scale from zero (total equality) to one (complete inequality). For income, it ranges from .35 to .45 in most countries. Wealth inequality is usually much greater, typically between .65 and .75. This reflects the greater difficulty in accumulating wealth (capital) than increasing income. Two high wealth economies, Japan and the United States, show very different patterns of wealth inequality, with Japan having a low wealth Gini of .55 and the U.S. having around .80. The incomes of the top fifth of the Japanese population are only about three times that of the bottom fifth, compared to more than nine times in the U.S. Japan has little economic apartheid compared to the U.S. Yet both countries have a huge number of wealthy people. Of the wealthiest 10 percent in the world, 25 percent are Americans and 20 percent are Japanese. These two countries are even stronger among the richest 1 percent of individuals in the world, with 37 percent residing in the U.S. and 27 percent in Japan. The point is that despite high numbers of very wealthy people, economic apartheid is absent in Japan and abysmal in the U.S.

We can explain the difference between Japan and the U.S. People can save and accumulate wealth for future economic security, or can borrow and spend like mad to accumulate possessions. According to a 2006 report, only 41 percent of American families save regularly, making wealth creation difficult. America’s national savings rate -- which includes corporate savings and government budget deficits -- is only about 13.6% of gross domestic product, compared to 25 percent in Japan.

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