August 30, 2024

Dear Friends,

One of the major issues of our time – wealth inequality – seldom makes the headlines. While a few politicians, even a few billionaires, continue to raise the red flags, the press, at best, glosses over it, and most in a position to do something about it simply ignore it.

I grew up in a small, prosperous, industrial town with strong labor unions. My family owned and operated a successful local retail music and appliance store. We had local associates of many occupations, but no one I knew identified as either rich or poor. To the best of my knowledge, we were all middle class.

To my mind, the economy of my hometown represented the American ideal. It was the ideal for which I later devoted my life to bringing to the rest of the world. As I traveled the world, I connected with a wide range of economic diversity. It has been stunning the extent to which some of the most caring and generous people with whom I’ve directly engaged have come from or live in extreme poverty, and some from extreme wealth—including some billionaires and their families.

Fortunately, most of the world’s people are caring and trustworthy. Among those who are not, some are poor, and some are rich. Those prone to predatory behavior who present the greatest threat to the wellbeing of Earth and its people are the obscenely rich. Far from being a measure of a person’s moral character—good or bad—wealth is a measure of the power with which people can express their moral character.

As we look at the many dimensions of our current economic failure, we must recognize that to resolve these failures, we must make significant progress toward global equality.

— David Korten

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Equality: An Essential Requirement for
Democracy, Peace, and Earth Health

David Korten | August 30, 2024

“We have sufficient for everybody’s needs, not for greed.” Gandhi

We can indeed meet everyone’s needs. But to do so, we must deal with our current greed-driven global economy. We must not only assist and build up opportunities for those at the bottom, we must also bring down the wealth of those at the top. Fortunately, there are many ways we can do that.

Oxfam’s January 2024 Inequality Inc. briefing paper sums up the extent of our problem.

According to Oxfam, just from December 2020 to January 2024 the richest five men in the world more than doubled their combined fortunes from US$405 billion to US$869 billion. One billion dollars is 1000 million dollars. These five individuals averaged $174 billion each in financial assets. For the first half of the year 2023, the world’s 500 richest people—all multi-billionaires—averaged  a  growth in their individual assets of $14 million each day.

During this same period nearly 5 billion of Earth’s people—more than half of all humans—became poorer and more desperate in their daily effort to acquire a means of living. Nearly half of the world’s people now struggle to live on an income of less than $6.85 per day. Less than the cost of one McDonald’s cheeseburger with a cup of coffee. That may be adequate for one lunch, but no breakfast. No dinner. No place to live. No family. No medical care.

Some inequality is natural and inevitable. Our current inequality is beyond obscene. Modern societies have become so focused on money that we ignore the consequences of prioritizing financial return over all other indicators of economic progress. The resulting growth of the financial assets of the already wealthy and the debts of the already indebted creates an ever-widening gap between the two. This deepens the suffering of the poor and dilutes the potential for building up the middle. The rich gain increasing temporary advantage, seemingly unaware that they are destroying Earth’s capacity to sustain life. The result is a future with no winners.

Bear in mind that much of the growth in billionaire wealth is unrelated to any contribution to the wellbeing of people and nature. Rather it comes from predatory financial games, such as the creation of derivatives and cryptocurrencies that produce nothing of real value. And private equity strategies that strip successful businesses of their assets for short-term personal gain—often at the direct expense of the less advantaged.

Eliminating extreme levels of wealth and poverty requires a radical transition from our days of rule by the kings and queens of the imperial era, for whom billionaires are modern stand-ins. As we have put kings, queens, and monarchy behind us, so too we must put billionaires and conventional profit-maximizing corporate forms behind us.

The United States defines the challenge. Since our founding, we have presented ourselves to the world as an exemplar of political democracy. We have indeed made substantial progress since our founding by white male slave owners who crafted a constitution that enshrined slavery and gave the vote only to white male property owners like themselves. After years of struggle, we have come a long way, yet remain far from our goal of a true middle-class democracy in which everyone has enough, and we each have an equal voice in decision making.

To achieve that goal, we must radically revise our tax codes and abandon economic policies grounded in neoliberal economic theory. The neoliberals promise that tax breaks for the rich will spur economic growth, create good jobs, and produce wealth that will trickle down and benefit everyone. We have tested that theory. Turns out that rather than trickle down, the wealth rushes to the top.

Most of the actions that produce the current failure are legal under current law. Legal restructuring requires being clear that our goal is a strong middle-class democracy in which everyone has secure financial assets, a good job with a living wage, and dependable retirement in return for doing productive work, including care for children, the elderly, and the incapacitated. There is no place in this future for kings, queens, or billionaires. The rules must prohibit unproductive financial games, such as growing derivatives and cryptocurrencies and engaging in private equity plunder schemes.

Here are some basics. Working out the details will require extensive public debate and experimentation.

One such basic is a global tax on all financial transactions involving short-term purchase or sale of significant financial assets—sometimes referred to as a Tobin tax. This should be followed by a global initiative to tax the profits of transnational corporations currently sequestered in international tax havens. Such a tax is currently proposed by Brazil’s President Luiz Inacio Lula da Silva in his capacity as chair of the G20. In the United States, Senator Bernie Sanders and Congresswoman Ilhan Omar have been joined by 16 congressional colleagues in signing a letter urging President Biden and Treasury Secretary Janet Yellen to support Lula’s initiative. One estimate suggests this measure could collect $4.8 trillion in otherwise lost global tax revenues over the next ten years.

Appropriate actions at the national level will be more varied and complex depending in part on distinctive local practice. In the United States, for example, it is common practice for billionaires like Jeff Bezos and Elon Musk to borrow against their vast stock holdings to fund their extravagant lifestyles. By not selling their stock holdings, they avoid capital gains taxes. U.S. tax policy must address the need to tax extreme unrealized growth in the market value of financial assets.

The U.S. based nonprofit Patriotic Millionaires has proposed some key measures to advance equity. Their publication “Crack the Code: The Internal Revenue Code of 2025,” notes that the 2017 Trump tax cuts for the ultrarich are due to expire in 2025. This creates a need and opportunity for deep rethinking of U.S national tax policy.

“Crack the Code” proposes tax policy grounded in four principles:

1. Treat all income over $1 million in the same manner regardless of how it is generated (ordinary income, capital gains, and inheritance).
2. Provide everyone a full “cost of living” exemption from all income tax up to the income required for a comfortable middle-class lifestyle.
3. Impose progressively higher marginal rates of tax on incomes above the cost-of-living exemption, rising to 90% for annual incomes over $100 million.
4.  Collect an 8% annual tax on all personal financial assets over a million times the median wealth of the national population.

Application of these various proposals will be a significant advance toward middle-class democracy. We will still have much left to do, but we will have begun to lay the foundation of an Ecological Civilization dedicated to the wellbeing of life on a finite living Earth.

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