Sun, Jun 12, 2016 - Page 9 News List

Confronting the global threat to democracy

Growing inequality and declining public trust in governments around the world are fueling a revolt against globalization and democracy

By Ngaire Woods

Illustration: Constance Chou

Across the world, populists are attracting votes with their promises to protect ordinary people from the harsh realities of globalization. The democratic establishment cannot be trusted to fulfill this purpose, as it is too busy protecting the wealthy — a habit that globalization has only intensified, they say.

For decades, globalization promised to bring benefits to all. On an international scale, it facilitated the rise of the Asian Tigers and the BRICS countries (Brazil, Russia, India, China and South Africa), produced rapid growth across Africa and facilitated the boom in developed countries through 2007.

It also created new opportunities and augmented growth within countries. However, since the 2008 global financial crash, many rich countries have been locked into austerity; the Asian economies have been slowing; the BRICS’ progress has been stalling; and many African countries have fallen back into debt.

All of this has contributed to rising inequality, which is now fueling discontent.

Emmanuel Saez and Gabriel Zucman calculate that in the US, the wealth gap is already wider than at any time since the Great Depression, with the richest 1 percent of households now holding almost half the country’s wealth.

In the UK, the Office for National Statistics reports that in the period from 2012 to 2014, the wealthiest 10 percent of households owned 45 percent of total aggregate household wealth. Since July 2010, the top decile’s wealth has increased three times faster than that of the bottom 50 percent of the population.

In Nigeria, astonishing economic growth, averaging 7 percent per year since 2000, might well have reduced poverty in the southwest of the country; but in the northeast (where the extremist group Boko Haram is most active), shocking levels of wealth inequality and poverty have emerged. Similar trends are apparent from China to Egypt to Greece.

Alongside inequality, declining public trust fuels the revolt against globalization and democracy. Across the developed and developing worlds, many suspect that the rich are getting richer because they are not held to the same rules as everyone else.

It is not hard to see why. As the global economy slows, breaches of trust by those at the top become more apparent. In the UK, Amazon.com, Starbucks Coffee Corp and Google attracted public outrage in 2013 for using loopholes to pay almost no tax, prompting the UK government to lead a G8 tax announcement aimed at reducing tax evasion and avoidance.

Last year, an audit of the state-owned Nigerian National Petroleum Corp revealed that about US$20 billion in revenue was never remitted to the authorities under the previous administration.

And the problem appears to be systemic. This year, the so-called “Panama Papers” exposed how the global rich create secretive offshore companies, permitting them to avoid financial scrutiny and taxation. And the world’s largest banks have faced unprecedented fines in recent years for brazen violations of the law.

However, despite the negative publicity generated by such cases, the public has seen virtually no one held to account. Almost a decade after the global financial crisis of 2008, only one bank executive has gone to prison. Many bankers instead followed a path similar to Fred Goodwin, former head of Britain’s Royal Bank of Scotland, who racked up £24.1 billion (US$34.35 billion) in losses, then resigned with a huge pension. Ordinary people — like the father of three who was imprisoned in the UK in September last year for accumulating £500,000 in gambling debts — do not enjoy such impunity.

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