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| Prof Joseph Stiglitz |
Nobel Laurate
economist Prof Joseph Stiglitz’s latest publication ‘The Price of Inequality’ has brought growing social inequality on to
the agenda of the 44th World Economic Forum presently going at Davos, Switzerland.
According to an analysis report prepared by Oxfam
for the Davos meeting, the 85 richest people on the planet have accumulated as
much wealth between them as the bottom half of the world’s population. The tiny
elite of multibillionaires, who could fit into a double-decker bus, have piled
up fortunes equivalent to the wealth of the world’s poorest 3.5bn people. Oxfam condemned the “pernicious” impact of
the steadily growing gap between a small group of the super-rich and hundreds
of millions of their fellow citizens, arguing it could trigger social unrest.
Stiglitz passionately describes how unrestrained
power and rampant greed are writing an epitaph for the American dream. The
promise of the US as the land of opportunity has been shattered by the modern
tyrants, who make up the 1%, while sections of the 99% across the globe are
beginning to vent their rage. The anger, seen in Occupy Wall Street and Spain's
los indignados, is given shape,
fluency, substance and authority by Stiglitz. He does so not in the name of
revolution but in order that capitalism be snatched back from free market
fundamentalism and put to the service of the many, not the few.
Stiglitz’s arguments apply mostly to the US. There is no doubt that in particular
countries globalisation has helped to reduce poverty. China and Brazil are typical examples where
governments have spread the benefits of globalisation to benefit the bottom
layers helping to extract millions out of poverty. There is an argument to be made that rather
than fighting globalisation per se, Occupy movements and Oxfam should be
fighting the social policies, or lack of them, in particular countries, the US
in particular.
Even with liberal Obama in the White House, the
social inequality in the US has continued to accentuate, showing that
politicians seem powerless to reverse the trend in spite of good intentions. The
reason may be found in the ability of the top 1% to use their huge economic
power to consolidate their ‘rent seeking’ abilities.
For roughly 30 years after the second world war,
the US top 1% had a steady share of the US cake. In the five years to 2007,
however, the top 1% seized more than 65% of the gain in US national income. In
2010, their share was 93%. This did not create greater prosperity for all. On
the contrary, much of this gain was "rent seeking", not creating new
wealth but taking it from others. The inequality gap is becoming a chasm.
Stiglitz demonstrates how, in the US, those born poor will stay poor; yet
nearly seven in 10 Americans still mistakenly believe in the American dream.
Rent seeking
comes in different forms but the ultimate aim is the same: tilting the playing ground in favour of the
top 1%. Lower tax rates for capital gains as against earned revenues; tax loop
holes such as allowing non-repatriated corporate profits go untaxed; monopolies
or market distorting incentives working against the consumer; preference to
reduce tax rates at the upper margin rather than distribute wealth through
social programmes or investment in infrastructure; explicit and implicit state
guarantees like ‘too big to fail’ tolerance for large financial institutions;
these are all living examples and
results of rent seeking lobbying.
This is leading
to accumulation of huge cash and liquidity reserves by the largest corporates
who rather than invest for organic job creating economic growth, prefer to use
the cash for job destructing mergers and acquisitions or share buy backs and
dividends that benefit the rich.
Thanks to the
social benefit net largely put together by Labour governments of the seventies
and which the PN governments of the nineties were obliged to respect and extend
under the inspiration of the great mentor the late Fr. Peter Serracino Inglott,
in Malta we do not suffer from such grave inequality problems. The size of the country is what it is. Here the rich and the poor unavoidably rub
shoulders. Inequality cannot be allowed to
grow as much as in large countries where the 1% can live secluded and blind to
the needs of the 99%. God bless Malta!
Hats off to
Judge J.R. Micallef for coming out with two judgements for the long outstanding
court cases related to National Bank of Malta saga. In so far as this Judge is concerned,
accusations of undue delay in giving judgements are out of order as since the
cases came under his tutelage he advanced them after many other Judges, for one
reason or another, washed their hands off them.
As a taxpayer I
continue to oppose any out of court settlement.
Only a court judgement in its final format will come with conviction
that government has acted in the interest of general taxpayers.
But I smile when
I hear the expectations of ex-NBM
shareholders following the judgement which confirmed that their rights under
Section 37 of the Constitution were prejudiced when “the method how their
shares were taken over infringed the basic elements of this article”.
One can agree
that the method used was deficient and that due process was not respected. But translating this into fair compensation,
something the Judge still has to do, cannot be as straight forward as some
zealots have recently expressed, because:
1.
Commercial compensation could only apply to
those shareholders who did not sign over their shares to government or who can
prove the transfer they signed was legally invalid. The zealots do not mention another case
decided concurrently by the same Judge, that threw out a case where four
shareholders who signed over their shares without compensation tried to argue for
invalidity of the transfer. Whilst arguments
and circumstances may differ from shareholder to shareholder there is no doubt
that the onus of proof to nullify a signed share transfer has been set very
high by the Courts. Careful reading of
this second judgement, which is conveniently never referred to by the zealots,
disproves and buries the myth that then Prime Minister Mintoff had actually
threatened shareholders with lifting of their limited liability to force them
in signing over their shares.
2.
Commercial compensation has to be based primarily
on the value of the shares at the time they were taken over. Judge Micallef in the second sentence upheld and
respected the Judgement passed by the Court’s Second Hall in 1973 when
authorising transfer of shares held by minors, which was based on the opinion
that at the time the shares had no commercial value.
Reading the two
judgements together the impression I form is that compensation is only due to
those who did not sign their shares or who can successfully prove in court that
the transfer was invalid for reasons at law, and that given that at the point
of takeover the shares had no commercial value, any compensation has to be
based on moral considerations.
I continue to
respect the due process of law but not the process of rent-seeking.
