Cracks in the new gilded age

WASHINGTON, DC — The past 12 years have been extremely good for the ultra-rich. The fortunes of billionaires, a group comprising the 2,640 wealthiest people on the planet, most of whom are men, has more than doubled. The wealth gap between the top 0.01 per cent and the bottom half of the world’s population has increased by 50 per cent since the 2008 global financial crisis.

The aftermath of COVID-19 and the war in Ukraine have been particularly lucrative for the ultra-wealthy as they reaped an enormous windfall from pandemic-era stimulus packages and corporate welfare, raked in record profits by raising prices and blaming inflation, and benefitted from decades of favorable policies. A recent report by Oxfam found that the combined wealth of the world’s five richest people, Elon Musk, Jeff Bezos, Bernard Arnault, Larry Ellison  and Warren Buffett, has more than doubled since 2020, to $869 billion.

At the same time, nearly five billion people, representing 60 per cent of the world’s population, have become poorer. While global income inequality declined gradually over time, primarily due to rising incomes in China, inequality between countries has increased for the first time in decades, and inequality within most countries has increased, too. Worryingly, a recent World Bank analysis has found that “the fight against poverty has stalled”. Given the current trajectory of wealth distribution, the world could have its first trillionaire within a decade, while eradicating global poverty would take 230 years.

While such statistics may no longer be surprising, they should be alarming, for the trend they capture poses a grave threat to democratic governance. While rising inequality is rightly linked to tax policies and debt, we can no longer overlook the crucial role of corporate monopolies in transferring wealth from the working and middle classes to the top 0.1 per cent. In the 12 months up to June 2023, 148 of the world’s largest firms earned nearly $1.8 trillion in profits, a 52 per cent increase from their average annual profits between 2018 and 2021.

Corporate gains have come at the expense of workers, as merely 0.4 per cent of the world’s 1,600 most influential companies have publicly committed to paying and supporting a living wage. Meanwhile, rich shareholders are receiving $82 of every $100 in profits through dividends and buybacks.

Dominant firms draw workers, consumers, and smaller businesses into their orbit, with multinationals’ share of global profits quadrupling over the past 40 years of neoliberal orthodoxy. According to a recent study by the International Monetary Fund, the increase in monopoly power accounts for 76 per cent of the decline in labor’s share of income in the US manufacturing sector over the second half of the twentieth century.

In today’s highly concentrated world economy, the “Big Three” index funds, BlackRock, Vanguard and State Street, control more than $20 trillion in assets. Even the late John Bogle, Vanguard’s founder, sounded the alarm about the Big Three’s dominance in 2018, warning of a future in which “a handful of giant institutional investors will one day hold voting control of virtually every large US corporation”.

During the original Gilded Age, monopolists like John D. Rockefeller were synonymous with economic power. In the contemporary iteration, seven of the world’s ten largest firms either have a billionaire CEO or a billionaire as a principal shareholder, giving Rockefeller’s modern-day counterparts even greater influence over our political economies.

This extreme concentration of wealth and power is reminiscent of what the late US Supreme Court Justice William Douglas called an “industrial oligarchy”, whereby people’s fortunes are “dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men”. But while this state of affairs may seem bleak, recent developments offer a glimmer of hope.

Consider the United States. Since 2020, the top 0.1 per cent of Americans, who own 13.9 per cent of the country’s wealth, have become more than $2 trillion richer than the poorest half of the population, which holds just 2.6 per cent of the country’s wealth. The racial wealth gap is nearly as large as it was in 1950, with the typical white household owning six times as much as its Black counterpart. Meanwhile, as tens of millions of Americans struggle to make ends meet, hunger has increased to its highest level in nearly a decade.

The good news, however, is that low-wage workers have experienced real-wage growth over the past three years, and the wealth of the bottom 50 per cent has slightly increased. Crucially, there has been a resurgence in labour action, with more than 460,000 workers going on strike in 2023, the second-highest number since 1986. Striking autoworkers, UPS drivers, and Hollywood screenwriters have scored major victories over the past year, showing that progress is possible.

An economic paradigm shift appears to be under way within the US government, exemplified by a reinvigorated anti-monopoly movement. Federal Trade Commission Chair Lina Khan and Jonathan Kanter, the head of the Justice Department’s antitrust division, have advanced a series of ambitious reforms, rewriting the lax merger guidelines that enabled corporations to amass unprecedented power, proposing a ban on non-compete clauses, and securing landmark victories for patients and consumers. The FTC’s antitrust lawsuit against Amazon, in particular, represents a powerful rebuke to industrial oligarchy.

To be sure, the decades-long dominance of neoliberalism, the handmaiden to America’s soaring inequality, will not be dismantled overnight. To get there, Congress must rein in outsize private power and pass legislation capping excess profits, guaranteeing living wages, and safeguarding collective bargaining rights. And the US should not act in isolation. Brazil’s G20 presidency offers a unique opportunity to establish international cooperation to combat inequality.

Reimagining public action is vital to advancing this paradigm shift. As US President Joe Biden revives industrial policy, we must ensure that tax dollars are not used to subsidise corporate dominance. Guarantees and public solutions that uphold people’s interests, such as universal family care and affordable housing, offer promising pathways from oligarchy.

Escaping the new Gilded Age may be a more daunting challenge than escaping the original one was. But, as workers, regulators and organisers are showing, the fight against inequality can be won.

Nabil Ahmed is director of Economic and Racial Justice of Oxfam America. Copyright: Project Syndicate, 2024. www.project-syndicate.org