What would an Occupy activist say to a group of 100 millionaires?
I was recently asked to speak at the Nexus Global Youth Summit in London, a gathering of the most innovative and influential young millionaires and CEOs in Europe and the Americas. The conference focused on how to make philanthropy and social enterprise work for meaningful social change. In a bid to include critical perspectives, the organisers wanted me to offer insights from the Occupy movement, with which I have been connected. The text of my talk follows here:
It’s no longer news to point out that social inequalities have been on the rise over the past couple of decades. But it’s worth illustrating exactly what this trend looks like. So let me begin with a few numbers. In the United States, the share of national income going to the top 1% has more than doubled since 1980 from 8% to 18%, restoring levels not seen since the 19th century. The same is true of Britain, with a jump from 6.5% to 13%. Meanwhile, during this same period, median household incomes have stagnated and the bottom quintile in the US have actually seen their incomes decrease by 7.4%. To add insult to injury, CEO salaries increased by an average of 400% during the 1990s alone, while the US minimum wage decreased by more than 9%. Today, the average salary of the 100 best-paid CEOs is more than 1,000 times that of the average salary of the employees in their companies.
These trends are largely the result of monetarist and supply-side economic policy and the loosening of democratic controls over the financial sector since the early 1980s, what economists call “neoliberalism” (for more on the history and effects of neoliberalism and for potential solutions to the problems it causes, see this article).
The old view was that making rich people richer would make the rest of society richer too, by stimulating investment and growth – the so-called trickle-down effect. But economists are now recognising that this model no longer holds water. While the top 1% has been raking in the dough, the rest of society in the industrialized world has seen average per capita growth rates halved during the neoliberal period. In addition, new research indicates that there is increasingly little correlation between the rate of corporate profit and the rate of economic growth.
The same thing has been happening on the global stage as neoliberalism is exported by international financial institutions through what economists call “structural adjustment programs,” which forcibly liberalise the economies of developing countries. Not only has this led to a doubling of the income gap between rich countries and poor countries since 1980, but poor countries are actually getting poorer: in Africa, per capita income has fallen at a rate of 0.7% per year during the neoliberal period, and the number of Africans living in poverty has nearly doubled. Today, the richest 358 people on earth have the same wealth as the poorest 45% of the world’s population, or 2.3 billion people. Even more shocking, the top 3 billionaires have the same wealth as all of the Lowest Developed Countries put together. The wealthiest 10% of the world’s population now controls 85% of the world’s wealth.
What we’re seeing here is a massive transfer of wealth from poor people to rich people, and from poor countries to rich ones; essentially, a global tribute system. This is a serious and rapidly worsening crisis. Inequality is worse now than it has ever been in all of human history.
Most of you are here today because you’re acutely aware of these problems and you want to find ways to solve them. You have a couple of options. The most obvious is to get involved with philanthropy. That’s a noble thing to do, but the problem is that, economically speaking, philanthropy rests on a fundamental contradiction. The basic formula is to make as much profit as you can and then give some of it away to the needy. But the problem is that the process of accumulating profit is often extremely violent. Value doesn’t come out of thin air, after all; it comes from human labor and natural resource commons. If you’re trying to boost your profits, the first thing to do is to depress the costs of your inputs: get your raw materials for cheaper and pay your workers less. For example, you might move your production facilities to a third world country where – because of forced structural adjustment – there are fewer labor laws and environmental regulations.
The point is that in most cases, the very process of accumulating wealth through the neoliberal economy is exactly what produces poverty in the first place. In other words, many philanthropists spend their lives trying to repair with one hand what they actively destroy with the other. George Soros embodies an extreme example of this. In the morning he devotes himself to making absurd amounts of money in financial speculation, and in the afternoon he gives some of it back through charity. The only problem is that the stuff he does in the morning is exactly what causes the suffering that he tries to fix in the afternoon. Consider the fact that investors like him were the very folks who caused the housing market to crash in 2008, which forced millions of people out of their homes and set off a devastating global recession.
The problem with philanthropy is that it allows us to believe that wealth is somehow not connected to poverty, that wealth and poverty are static, natural realities. It takes power relations out of the equation. This is a convenient fiction that lets us imagine that we can solve the problems of global poverty without ever questioning our own privilege and wealth and the structure of neoliberal capitalism that facilitates our accumulation. The feeling of redemption that we get from giving charity covers up the fact that our wealth often comes from enclosure and dispossession. Most importantly, philanthropy distracts us from acknowledging the true root of the problems at hand. As Oscar Wilde has put it, charity does not cure the disease, it merely prolongs it. What we should be doing is creating a world in which poverty itself will be impossible in the first place.
The other option is to get involved in social entrepreneurship, which is becoming increasingly popular. There are some great ideas out there: Ethos Water, Product Red, One Laptop Per Child, and so on. The underlying formula goes: “Buy our product, save the world.” It sounds good, but the problem here is that this model transforms an active political urge for change into a passive form of consumerism, and deceives people into believing that they can solve the problems created by consumer capitalism by just consuming more. Furthermore, we have to ask: where does the plastic for those Ethos bottles come from? Who stitches those Product Red tee shirts and shoes? And who assembles those cheap laptops for kids in Africa? Poke around down the line and you start finding sweatshops and child labor. The point here is that social business – just like philanthropy – often produces human suffering in the very act of trying to solve it.
But it doesn’t have to be this way. I recently talked to some of the organisers of the Occupy movement in London, New York, and Chicago – including the wonderful folks at Occupy Philanthropy. I asked them to give me ideas for concrete alternatives that I could pass on to you. Here are some of their thoughts:
First, dispense with the idea that your money belongs to you, recognising that it comes from the commons, the labor of other human beings, taxpayer subsidies, and so on. If your own ingenuity played a role, acknowledge that your mind did not emerge in isolation, but developed in conversation with your parents, your teachers, your friends, and the Internet – the creative commons, or what Hardt and Negri call the Multitude.
Second, move your money. If you have money in accounts with any of the world’s major banks – Citibank, Bank of America, HSBC, RBS, etc. – get it out and move it to credit unions or co-ops, which are democratically run and less likely to invest in predatory companies. Campaigns are already making strong strides toward this goal.
Third, consider where your money is invested. Most foundations aren’t good enough; even if they give away 5% a year, they generally keep the rest invested in companies that exploit workers for high returns. Instead, put your money in community funds that loan cash to local businesses. You can find ideas for this at Capital Institute, which is run by a JP Morgan defector.
Fourth, if you own or manage your own company, make sure that you have a solid triple bottom line. In addition, make sure your workers are paid a full living wage, all the way down to the very bottom of the value chain; this is crucial to the health of the economy, as it stimulates demand and therefore growth. Or, better yet, transform your company into a worker co-op and run it democratically, so that it distributes wealth to the producers of value from the very start. There are lots of innovative examples of this in the UK.
Keep in mind that these measures might mean that your rates of interest and profit go down a bit. But if that’s the price of refusing to participate in violence, then so be it. In any case, how important are profits, really? Not only is it very well documented that more money doesn’t make rich people happier, new studies in behavioral economics show that the pursuit of profit is not actually very good at driving innovation.
Fifth, avoid investing in microcredit. I used to be evangelical about microcredit, but we’re awash now with economic data that shows that microcredit drives the poor into debt peonage, and effectively extracts value from poor communities by tapping into informal economies. New research suggests that the highest-impact way to help the poor is actually – believe it or not – through direct, unconditional cash transfers.
Sixth, use your money to support social movements that actually attack the root causes of the problems at hand. Consider giving to think tanks like the Institute for Policy Studies. Or support the New Economy Network, which is coming up with viable alternatives to our existing system. You could also support peasant movements in the third world, such as the 200 million strong La Via Campesina, which are going up against the IMF, the World Bank, and the WTO. Or consider the alter-globalisation movement, or Occupy Wall Street.
Seventh, do whatever you can to protect the commons from further enclosure – not just the natural resource commons, but also the communication commons, like the Internet, the mobile network, and the broadband spectrum. Put your weight behind open-source and Copy Left.
Finally, consider becoming public critics of your own class. Following the example of Warren Buffet, you could write a collective open letter rejecting the neoliberal system that makes a few people unbelievably rich while immiserating much of humanity.
This is a difficult step to take. To illustrate, consider the South African revolution against apartheid in the 1990s. As you know, the apartheid system was designed to funnel wealth to a small white minority at the expense of the black majority, whose wages were kept artificially low and who were prevented from owning land. While most white people in South Africa supported this system, there were a few white activists who stood bravely at the forefront of the liberation struggle. Why are they important to history? Because they refused to accept the violent contradictions of their existence. They turned against the very system that had handed them their privilege, and they faced ostracism, arrest, and assassination for doing so.
It is incumbent on us to take a similar risk. In the end, the question is not whether we have the ability to change the world, but whether we have the courage.
 U.S. Census Bureau, Historical Income Tables: Families.
 Executive Excess 2006, the 13th annual CEO compensation survey from the Institute for Policy Studies and United for a Fair Economy.
 Chang, Ha-Joon. 2007. Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity. London: Random House. Pg. 26.
 United National Development Programme. 1999. Human Development Report 1999: Globalization with a Human Face. New York. P. 38.
 Chang. 2007. Pg. 28.
 World Bank. 2007. World Development Indicators.
 Milanovic, Branko. 2002. “True World Income Distribution, 1988 and 1993.” Economic Journal, 112(476).
 United Nations University. 2009. 2008 Annual Report.