Saturday, April 25, 2015

It's Time to Shine a Light on the Poverty Creation Industry

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A skyscraper in the City of London by night. Photograph by Adrian/acediscovery.

It's about time we called out the great myth that mass poverty just is, as if it were a natural part of some universal moral order. Such thinking is both profoundly untrue and disastrously misleading.

Poverty is human-made. It is created  knowingly and with scientific efficiency  by a vastly sophisticated industry that includes private companies, think tanks, media outlets, government policies, and more. This ‘Poverty Creation Industry’ is about the least talked about feature of our global economy and yet it is perhaps the greatest market force in the modern world. Until we acknowledge this startling truth, progress towards global prosperity and sustainability will fall far short of what is possible.

This isn’t to suggest that there’s a dark, smoky room somewhere in which a small cabal plots to cause immeasurable misery just because they can. This isn’t a conspiracy theory. In truth, it happens in big boardrooms and political conferences, where people create rules and execute strategies to ‘maximise self-interest’ as economists say, by extracting wealth from others. This is largely driven by a maniacal focus on short-term profit or advantage while ignoring one of its primary effects – the impoverishment of hundreds of millions of people. Wilful ignorance, though, as any legal scholar will tell you, is no defence in law. It’s about time we applied the same standard to our economic rules and realities.

Revealing the culprits

You don’t need to dig very deep to find the main culprits. If we apply the old Latin rubric cui bono? – literally 'who benefits?' – there are some very clear and unsurprising suspects.

The richest 0.001% of the world control 30% of the financial wealth; the wealthiest 0.1% about 81%. So the rich are indeed extremely rich. More important than their static worth, though, are trends over time.

Over the last two centuries, global inequality has steadily increased. We know this because whilst ratios of absolute poverty have been decreasing over the last two centuries, the standard measure of inequality – the Gini coefficient  has risen from 43.0 in 1820 to 70.7 in 2002. (A score of 0 means everyone has exactly the same amount and 100 means one person controls everything.) This trend has been accelerating since 1980, when the latest round of 'free market' policies was put in place. It is being exacerbated still further in most countries by both the economic crisis and climate change.

Of course, just because someone benefits from a system doesn’t automatically mean they are controlling it. To investigate who is doing that, we need to look at the industries that have been built, who has built them this way, and observe their strategies and business operations. The best place to look is the industry at the heart of it all, whose very purpose is the management of wealth: banking and finance.

The global shadow economy

What we find is a two-tier system comprised of, 1) a global mainstream economy where basic rules of fairness and transparency apply, and 2) a global shadow economy where fairness is an irrelevant concept, transparency a state to be avoided at all costs and the social contract is ignored.

This shadow economy has been steadily and systematically created through a series of very clear strategies. Its sole purpose is to provide a place above national tax laws, where profit and capital can be hoarded without limit. It is extremely popular with those who can afford to access it. It is vast. It is comprised of over 80 tax havens, innumerous trade agreements and legal frameworks, and employs a small army of people to lobby policymakers, provide legal defence, manage and buy-off elected officials.

Somewhere between $21 and $32 trillion  or 10%-15% of all privately held wealth  is hidden behind the great walls of secrecy. Of the 100 largest companies on the London Stock Exchange, 98 routinely use tax havens. Over half of all global trade flows between and within them so that profits can be siphoned off untaxed.

In other words, the shadow economy is not only immense, but it is intricately sewn into the mainstream economy. Like a parasite, it is attached to the body of its host and drains its financial lifeblood at a rate and scale that is large enough to perpetuate global inequality and poverty.

There could not be a clearer case of an industry designed to benefit through active and willful exploitation, and at the expense of the majority of the world’s people. An industry designed with rules that enrich some through the impoverishment of others: the Poverty Creation Industry.

Let there be light

This industry relies on one thing above all others: secrecy. It is only through the ‘discretion’ of tax havens and the creativity of lawyers, accountants and bankers that they can operate in the way they do.

This is where hope lies. The ability to maintain this secrecy is dependent on the public not seeing, and not using its collective power to demand change. With public pressure, rules can be enacted that shine a light onto these secret places. The gross imbalances of our current system can be corrected so that wealth is more equally shared; and advantage and profit enjoyed within reasonable bounds.

In service of this vision, we have helped create one avenue for action: /The Rules is a new global citizens movement aimed at tackling these root causes of inequality and poverty. By coming together in common purpose and with a common understanding, using smart organising and global communication networks, we believe ordinary people have the power to stand up to the Poverty Creation Industry, and bring about new rules. Our first step is to demand transparency in the global hub of the tax haven system, the City of London. It will take a massive and ongoing global effort  to paraphrase Martin Luther King, the arc of history is long, but it bends toward justice. We believe change is possible only if the citizens of the world demand change.

Click here to learn more about /TheRules.

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For further reading around the subject see:



Joe, and others,

Thank you for the article.  As always, you describe the current state in great clarity.  If everything has an equal, and opposite reaction, then, yes, the vast, secretive "wealth creation" estate is reflected in the creation of poverty.  In fact, it can be said that the depth and intractability of poverty in the world simply reflects the depth and seriousness of the wealth creation shadow economy.  

But, I am concerned that just exposing the reality of "what's going on." is not, in itself, going to do much.

The comment from 37ic is a perfect case in point.  Apparently educated, and somewhat rational, the commentor immediately throws out the learned response -- "that's communism... communism does not work!"

We are witnessing years and BILLIONS of dollars spent in positioning the public's reaction to facts, so that nothing can be improved.

The hardest thing to do is to re-frame the issue so that the key drivers in the human races coming collapse are not A problem -- like my team lost the super Bowl; but THE problem -- this is going to kill my grandchildren. 

We must remove the knee-jerk reaction as seen in this comment, burnt into people's heads over the years. 

For lack of a better word, that means advertising.  Not selling soup, but a new frame of reference.  

I am old enough to remember the '60s.  For all the excess and mis-direction, for a short time a counter message was winning.  Wealth was automatically seen as bad.  Sharing was automatically seen as good.  War bad; Peace, good; etc. etc. 

Of course, that is what scared the s*** out of the shadow world.  Why they spent TRILLIONS to buy up all the networks, poison the airwaves and get control of the universities.  

Can it be done again?  I think so.  Can it be done with real direction and follow through so it does not peter out into someone's pipe dream of "personal space"; or x, or y or z liberation (AKA me, me, me).  I hope so.

The first steip is to develop a messaging plan.  Education is fine for those who have the attention span and enough mind left to learn.  99% of everyone else has to be "sold".  Again 37 is a case in point.


D. Laghezza

An interesting article but somewhat unsatisfying for me. I was expecting more specifics on, say, how the aid agencies like to perpetuate poverty so they can remain gainfully employed. The author makes grand sweeping claims, provides scant details and ends abruptly.  By the way, for more discussion on the article go here:

That's just not the case.  Aid agencies cannot possibly make significant impact on poverty - either to end or to perpetuate it.  Here's why: Aid to poor countries = about $130 billion per year.  Meanwhile, corporations take $900 billion annually out of poor countries through trade mis-pricing (tax avoidance).  Plus, poor countries pay $600 billion annually in debt service.  In addition, trade rules imposed by rich countries costs them another $500 billion a year.  130 billion minus (900+600+500 billion) = negative $1.87 trillion.  There's tons of detailed research behind this article, but you might have to click on some of the links to find it.

Dave, where did you get those figures? I completely agree that aid is a drop in the bucket compared to the larger financial structures in place and it would be helpful to get more context on how you developed your argument.

Hi Alnoor, Joe and Martin,Great article and fantastic initiative with /TheRules!  Happy to see it!I would like to add that as long as we, as modern citizens and societies, hold the maximization of private profit to be the number one priority and central theme of business, we can’t expect much change in these issues.  If the rules of the game say that the number one goal of all businesses should be to maximize private profit, then that’s exactly what business owners and managers will do.  Unfortunately, with transparency or not, massive inequality is a result of people playing by the rules of the game. This is why the Post Growth Institute is currently developing the Not-for-Profit World model, which changes the fundamental rules and ways of doing business. Our vision is of a world economy based on not-for-profit enterprise as the primary business model.  The new generation of not-for-profit enterprises is entrepreneurial, innovative and they do make profits, but rather than privatizing those profits, they recycle them back into their work and/or projects that benefit the community.  In contrast to traditional non-profit organizations that are dependent on philanthropy and volunteers, not-for-profit enterprises are thriving businesses whose employees are paid fair wages, but profits (i.e.- money made in excess of providing for operational costs) are not privatized.   The book we’re writing, “How on Earth? Flourishing in a Not-for-Profit World by 2050”, will explain why this model is viable, sustainable and even inevitable.  To learn more, please see this article:’re talking about businesses, and an economy, fit for purpose.Thanks!Jen 

I'm sorry, but I was looking for more than a witch-hunt type article.  You name a culprit but you give no supporting evidence on how this causes poverty. Yes, there are tax havens, but how does this create poverty?

This is an excellent article and relates to a global issue that will become increasingly recognized, talked about and highlighted.

We need to make it easier fior people to avoid taxes so as to deprive income to aid US imperialism and the drug war