Inequality, not poverty, is world’s top challenge: African leader

Huge disparities in wealth are fomenting rage to the point that narrowing inequalities within nations has becomes the most urgent development task facing the world. So says an African leader, John Githongo, most recently in an article published in the July 24 issue of the New York Times.

In that article, titled “When Wealth Breeds Rage,” Githongo, chairman of the African Institute for Governing with Integrity, draws on the recent outbursts in the Middle East and North Africa, where young protesters have toppled some of the most ruthless strongmen on the planet. “Radical and growing economic inequality animated much of what was at stake in the various Arab uprisings,” he writes, “and it will play a major role in shaping African politics for years to come.”

The resentment, he holds, has two important characteristics:

-- It is “particularly acute among members of the giant youth bulge across Africa and the Middle East.” For example, in Kenya, his native country, over 75 percent of the population is under 34 years of age.
-- It is “heightened by the tools of the information age, which remind them that they have been excluded from feeding at the trough enjoyed so blatantly by the nouveau riche – a lifestyle that is showcased by the newly minted wealthy on television, Twitter, Facebook, and the Web in infuriating detail.”

“Indeed, if the Arab revolutions have taught us anything, it is that inequality and perceptions of inequality within poor countries have now replaced poverty as the No. 1 development challenge. And consequently, the struggle to mitigate inequality…has become the most urgent task. Narrowing wealth disparities within nations rather than among them is now paramount.”

Githongo acknowledges that economic growth has brought about a huge decline in poverty, but adds:

“Across the world, as growth has spread and accelerated, so has inequality. It is clear that growth is often not enough to guarantee stable, cohesive societies. Rather than create a rising tide that lifts all boats, it can actually increase inequality in a society. And inequality, unlike poverty, is far more easily politicized, ethnicized and militarized, especially in African countries with heterogeneous populations and weak judicial and regulatory institutions. It is also far more combustible because it creates an identifiable enemy — a class that benefits disproportionately because of its unfair access to those who wield power. Mismanaging it can be catastrophic.” Read more!

The Great Turnaround: Developing Nations Outdoing the Rich Ones

“As rich economies’ prospects dim under their crushing debt burden and political paralysis, the world’s hope for economic dynamism rests with developing nations,” Dani Rodrik of Harvard points out in his weblog, and illustrates with the graph above.

“For the first time ever, developing countries as a group have been growing faster than industrial countries,” he writes. “Not only that, as the figure makes clear, the growth differential between the two groups has been widening in favor of the poor countries.”

In his July 21 posting, titled "The great divergence, the other way around," Rodrik cautions that the growth in Africa and Latin America is fragile, “much of it making up for lost time, rather than real convergence.” He is more optimistic about the durability of growth in Asia. Read more!

Religious leaders to deficit negotiators: Put ‘Circle of protection’ around the vulnerable

A delegation of religious leaders met with President Obama and congressional leaders July 20 to urge that current negotiations on the deficit and debt protect programs for the most vulnerable, including the poor and hungry.

Congress and the Administration, they said, must consider these moral criteria to guide their decisions:

1. Every budget decision should be assessed by whether it protects or threatens human life and dignity.
2. A central moral measure of any budget proposal is how it affects “the least of these” (Matthew 25). The needs of those who are hungry and homeless, without work, or in poverty should come first.
3. Government and other institutions have a shared responsibility to promote the common good of all, especially ordinary workers and families who struggle to live in dignity in difficult economic times.

Bishop Ricardo Ramirez, representing U.S. Conference of Catholic Bishops (USCC), told the President that the bishops are not advocating “a particular plan, but a fundamental moral principle: put the needs of the poor first in allocating scarce resources…The poor have no powerful lobbyists, but they have the most powerful moral claim on this process. Please do all you can to defend the poor and vulnerable in all you say and do at this moment of crisis and the hard days ahead.”

“Your Members of Congress need to hear the same message,” a USCC statement on July 22 said, and described how to reach them through the phone and Internet.

Most delegation members belong to the “Circle of Protection,” a new initiative to spare federal programs for the neediest. Read more!

Age of Greed -- and Deceit

When a friend of mine, Gerry Holmes, learned that I had bought a new book, “Age of Greed” by Jeff Madrick, he warned me that reading it could provoke a bad case of depression.

Actually, newspaper stories, especially the latest ones, have just about exhausted my capacity for depression. Madrick’s panoramic account – subtitled “The Triumph of
Finance and the Decline of America, 1970 to the Present” – lends itself more to outrage than depression.

Madrick rejects the notion that the age of greed and its recurring crises can be blamed on natural swings of the political pendulum or on an inevitable force of history. No, he insists; they were caused by human beings and their reactions to change, especially to troubling events. So he tracks the financial crises of the past 40 years largely through the words and actions of human beings – specifically, three dozen influential men.

Take, for example, Walter Wriston, son of a university professor who used his academic platform to preach against FDR and the New Deal. Disregarding his father’s advice to pursue an academic career, he joined New York’s National City Bank in 1946, when banking was far different from what it is today. Wriston changed that. A dedicated free market evangelist and vigorous opponent of government regulation, he built up a bank deemed too big for failure and thus dependent on government to save it. Citibank, its successor had to be rescued several more times.

Partly through his leadership, the whole financial industry – banks, brokers, and insurance companies, operating under much weakened government regulations –- became such a source of great personal wealth and power that eventually finance no longer played second fiddle to the great manufacturing, transportation, communications, and retail industries.

To my mind, of all the types of wrongdoings that Madrick chronicles, the worst was deception – lying – especially the systematic lying by the accounting industry, whose organizations sold the right to be called a profession. Wholesale deception enabled Wall Street firms, time after time, to misallocate fabulous amounts in bad or foolish investments.

The Supreme Court aided and abetted that vicious habit. Reversing 60 years of precedents, it ruled in 1994 that accountants, lawyers, and bankers could no longer be sued for participating in a fraud perpetrated by a client.

In his final paragraphs, Madrick writes:

“For all these endeavors, Wall Street professionals got fabulously rich. They channeled hundreds of billions of dollars into wasteful investments that could have been spent on energy, transportation, and communications infrastructure, health care and medical research, education, technical and business R&D, and new, truly innovative consumer products and business equipment. The question was not whether Wall Street bankers contributed enough to the economy to warrant their compensation, but how much they cost the economy in the damage done….

“Wall Street has continued to complain about how new regulations would undermine its profitability, and has threatened to leave those financial capitals that impose restrictions they deem damaging. America has not yet turned the page.”

To which I would add: This is the Wall Street that some respected persons would trust to “privatize” Social Security and Medicare. Read more!

Petitioning President for a summit on widening wealth gap in U.S.

“The large and growing wealth gap between a tiny fringe of super-rich Americans and most of the rest of us robs all of us. It means that people in poverty struggle to live with dignity, the middle class is eroded, and every person’s wellbeing declines. It affects our health, our children’s educational performance, incarceration rates, levels of debt and financial insecurity, participation in our economy and our government, and our sense of equal opportunity and community.”

So begins a petition to President Obama to convene a White House summit “to explore the causes and consequences of the current wealth gap in the United States, and develop a response,” adding:

“We believe that enormous wealth concentrated in the hands of the elite few is cracking the democratic foundation of our nation. It gives disproportionate political power to those who have the most economic power and weakens the ability of our government to serve the common good.“

The petition is being circulated by Network, a Washington group founded in 1971 by 47 Catholic sisters to speak out as “one voice on behalf of justice for all. “ Since then its membership has grown to include other Catholic religious congregations, as well as thousands of lay people (I am one of them).

The huge disparity in wealth is a crucial moral issue, and documented by a wide variety of authoritative sources, such as the Economic Policy Institute, which recently reported:

“Wealth, or net worth, is a measure of a family’s total assets, including real estate, bank account balances, stock holdings, and retirement funds, minus all of their liabilities such as mortgages, student loans, and credit card debt. Although economic inequality is often described in terms of income inequality, the distribution of wealth is actually more unequal than the distribution of wages and income….America’s wealthiest households in 2009 had net worth that was 225 times greater than the median family net worth.” Read more!

What’s at stake in the debt ceiling negotiations

By Heather Boushey, Senior Economist, Center for American Progress Action Fund

GUEST EDITORIAL republished from the Catholics in Alliance for the Common Good’s website at www.catholicsinalliance.org.

Washington is all a-buzz this month trying to sort out how the negotiations over the debt ceiling are going. But, you may be wondering what the big hubbub is all about. Sure, if the U.S. cannot borrow any more money, that may not be a good thing. We all understand what it means to be credit-constrained these days, after all. You, I, and everyone else cannot take out any more funds on the home equity line since the collapse of the housing bubble. But, that’s only the tip of the iceberg. What’s at stake in the negotiations over whether or not to raise the debt ceiling, and if so, at what price, is no less than your future. And this is not overblown hyperbole or an exaggeration.

Right now, the House Republican Leadership is pushing our economy to the brink. It appears – although no one who is not in the not-so-secret negotiations knows exactly – that they are forcing the White House to choose between two potentially very bad outcomes for you and me, and for the Common Good.

Here’s the issue: Congress places a limit on how much the U.S. government can borrow. In some ways, this is nonsensical: Congress has already approved spending through the regular appropriations process. But, even though Congress has already approved the spending, the debt limit forces Congress to vote a second time to approve borrowing the funds necessary for that spending.

It’s akin to going on a spending spree with your charge card. You’ve made your decisions on what to buy, you’ve made your purchases, but then you decide you’d rather not pay all your bills. Um, no, that’s not the way it works.

The White House had proposed a “clean” vote on the debt limit. That is, Congress should increase the debt limit without any additional conditions. This is exactly what has happened 6 times in the past 10 years.

Voting to raise the debt limit is urgent. Right now, the U.S. government revenues are equal to about 60 percent of what the federal government spends. That’s right, 60 percent. The problem is largely the result of lower tax revenues because of the mismanagement of the economy during the 2000s (including massive tax cuts for the wealthy alongside two unpaid-for wars), and the Great Recession and higher needs because of that same recession. That means if the debt ceiling is not lifted, government spending will be immediately reduced by 40 percent. This could take a variety of forms, from withholding Social Security checks, to furloughing massive numbers of federal workers, to not paying government contractors in Iraq and Afghanistan. It’s almost shutting down the government.

And, if the immediate drop in spending doesn’t cause a double-dip recession, the near-certainty of a financial panic, with U.S. interest rates rising sharply and likely staying high for some time to come, certainly will induce a financial panic. Markets need stability and the high-stakes political game the Republican leaders are playing is very risky.

With the near-certainty of economic disaster in one corner, the Republicans have said that they will only vote to lift the debt ceiling if there are large and immediate cuts in spending and they so far are refusing to budge on pairing these cuts with tax increases. This, too, could be bad for you and me, and for the Common Good.

Spending cuts would almost certainly come from discretionary spending. Your middle-school student can look forward to higher college prices, less student aid, and fewer teachers in the classroom. Your community may not be notified of a devastating tornado three years from now because the U.S. will not upgrade our weather satellites. Your neighbor’s toddler may get very ill – and some children even die – from a virulent strand of e.coli as the budget for food safety inspections is cut (yet again). Your brother who currently travels for business every week will see greater flight delays and more near- misses on the runways, freaking him out so much that he quits his job and moves in with you (yikes!).

Of course, there is a way out. Congress could vote for a clean debt limit increase and regroup in the fall to address the long-term budget issues. Addressing the long term issues is important, but is this the way to do it? It feels like the current negotiations are the ultimate case of cutting off America's nose to spite her face. And, why would we want to do that?

--Catholics in Alliance for the Common Good • 1612 K Street NW, Suite 400 • Washington, DC 20006 Tel/fax 202-466-1665 • www.catholicsinalliance.org • email@catholicsinalliance.org Read more!