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Q&A with Nick Galasso on “The Wealth Gap”

Nick Galasso, senior researcher for Oxfam America, leads the organization’s work on economic inequality and governance. He is the co-author of the widely discussed 2014 report, “Working For the Few: Political Capture and Economic Inequality,” which calculated the 85 richest people in the world have the same wealth as the poorest half of the world’s population.  He spoke at Furman on Oct. 25 on “The Wealth Gap: Why It Matters and How We Can Fix It.”  Furman News asked Galasso to talk about his research, the causes of inequality and what he sees happening if the trend isn’t reversed.

Q: Your research at Oxfam has shown that the scale of global inequality is quite staggering.  In the U.S., in fact, the increase in income for the top 1 per cent of families is now at the highest level since the Great Depression. Can you tell us more about that study and what other things you learned from it?

Galasso: That study, “Working for the Few,” calculated the extent of wealth inequality in the world. We determined that the richest 85 people had the same amount of wealth as the ‘poorer’ half of the human population. We update that figure annually, and this year the number shrunk to the richest 62 people. When we did that study, the richest 1 percent of the planet owned nearly half of all the world’s wealth. Since then, the richest 1 percent have gone on to own more than half. So, wealth is continuing to concentrate at the very top.

Q: What are the reasons we are seeing such economic inequality in America and the world?

Galasso: I’ll try to be brief, but this is a complicated question.  The drivers of economic inequality differ across countries. However, in many cases inequality is a symptom of how different people are treated in the eyes of the law, and their political voice compared to other groups.

Nick Galasso

Nick Galasso

For instance, in Sub-Saharan Africa and Latin America, you can’t really comprehend inequality without understanding the legacy of colonialism and the impact it still has on those societies today. In the U.S., it’s hard to make sense of the incredibly large racial wealth gap without accounting for the impact of slavery on African Americans. People have short memories and often want to divorce the past as though it has no bearing on the present. This is a monumental error.

Economic inequality also derives from contemporary practices of discrimination. For instance, in many parts of the developing world there are strong norms inhibiting young girls from receiving an education. Likewise, governments may discriminate against certain ethnicities, religious groups, or even against people living in a certain region.

Further, governments use their power to pick winners and losers among economic actors, and this contributes to inequality. For instance, powerful actors in the U.S. banking and financial sectors successfully ‘captured’ the regulatory bodies charged to oversee Wall Street throughout the 1980s and 1990s. Through greater deregulation, banks and financial firms created riskier investment products that shifted enormous wealth to workers in those sectors (but infused incredible risk across the economy that required tax payers to bail out when the crash happened in 2008). Unfortunately, teachers do not have the political muscle in Washington, D.C., that the pharmaceutical or financial sectors have. Accordingly, they make a whole lot less for doing an incredibly important job.

The global economy is also rigged toward making inequality rise. For instance, multinational corporations take advantage of loopholes to dodge taxes across many countries. Worse, they pressure poor countries to participate in a race-to-the bottom on tax rates as a means to attract them. Instead of paying tax, revenues are funneled out of countries where economic activity occurs to tax havens where they sit idle. Of course, it’s not just poor countries that suffer. The U.S. loses significant revenues from these companies by taking advantage of tax havens. The effect is robbing poor countries of the financial resources they require to fight poverty. This means less money to invest in kids’ health and education, as well as for building roads, delivering electricity and developing the infrastructure necessary for a thriving economy. The biggest corporate shareholders reap the most benefits of this system, and that contributes to global inequality.

Lastly, let’s remember that extreme inequality isn’t inevitable. It’s the outcome of making certain political choices. From the end of World War II until the late 1970s, the U.S. became very rich while inequality decreased year after year. Those at the top saw their incomes rise significantly. However, working class Americans saw their incomes rise even faster. Why did this happen? Well, the rich were taxed at high rates (though still very capable of living charmed lives), workers enjoyed dignified wages secured through labor unions, and government invested in its citizens through bold measures like the GI Bill. In the last 35 years, these ‘political choices’ were reversed. Taxes on the rich have fallen, labor unions were weakened by organized business interests, and the cost of higher education has skyrocketed. Make no mistake, inequality is a choice. The situation we’re in today was not inevitable, it’s the result of political choices. If we want to reduce inequality in the U.S., we need to recognize what we as a society value and compel our elected officials to pursue those ends.

Q:  If the U.S. economy is better, as many claim, why are some Americans still losing economic ground?

Galasso: Instead of ‘some Americans,’ the data tells us that most Americans have lost economic ground. The recent census data reveals that those in the 95th percentile saw their average household incomes increase by $100,000 over the past 50 years. Unfortunately, the median household only saw about a $10,000 increase, and the 20th percentile saw a meager increase of about $4,000 over the past half century. This is puzzling because, as you say, the economy has grown substantially since then. With the exception of the recent crisis, and some other shocks, the stock market has been on fire and the productivity of the typical American worker has increased substantially. Unfortunately, the majority of those gains are captured by the richest Americans. To some extent, the U.S. doesn’t have an inequality problem, it has a 1 percent problem. If you remove the income and wealth gains of the top 1 percent from our data on the population, the U.S. looks incredibly more equal. Fundamentally, we’ve allowed our economy to no longer work for working people. However, it works quite nicely for those already near the top. What’s changed? Over this period, we reduced taxes on the wealthiest and dismantled the power of labor unions to fight for workers’ wages. These shifts in policy were sold to the public as a means to generate wealth that would ‘trickle-down’ to workers. Today, we have the lived experience that instead of trickling down, wealth concentrated at the top while most Americans became worse off.

Q: What are ramifications if this inequality continues?

Galasso: As someone who travels frequently to high inequality countries, let me tell you, you do not want the U.S. to continue down this path. High inequality countries suffer from more problems than more equal countries. They have higher rates of violence, crime, drug abuse, imprisonment, teenage pregnancy and range of health issues. And it doesn’t matter whether your country is rich or not. For instance, the U.S. has the highest GDP on the planet and is the most unequal among rich countries. Compared to more equal rich countries, we suffer higher rates of all those issues I just mentioned. If we as a country fail to stem rising inequality, I anticipate these problems will continue worsening. High inequality societies also become segregated along class lines. In fact, we’re seeing more and more of this in the U.S. as the rich retreat from mixed neighbors to gated communities far from experiences of working class people. The danger of this is that it makes it easier to support public policies aimed only at helping people like yourselves instead of what’s good for the country as a whole.

Q: What can be done to create a more equitable society?

Galasso: Fundamentally, our politics need to change. In too many countries, there is a dangerous democratic deficit whereby politics works exclusively for elites, but excludes most citizens. So, it’s no wonder that public policies help those at the top and hinder working people. We have to rebalance the political scales so that the voices of the non-rich are on par with the rich. Only then can we pursue agendas that increase prosperity for everyone.

Q: What is the primary message you want the audience to take away from your Furman lecture?

Galasso: I hope the audience will reflect on how fortunate we are to live in the U.S. Geography matters greatly in terms of how rich we are and our standards of living. By virtue of living in the U.S., we enjoy relatively high living standards, strong rule of law, and a pretty functional government (of course, this election and Congress’ ossification in recent years are alarming). Compared to much of the world, we’re incredibly well off. I hope the audience leaves my talk more aware of this, and that this awareness increases theirs in the fight against poverty and inequality abroad and at home.

Last updated August 5, 2022
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Clinton Colmenares
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