By Carlton Joseph

The G-7 is an informal bloc of industrialized democracies – the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom – that meets annually to discuss issues such as global economic governance, international security, and energy policy.  Interestingly, these countries were all colonial powers.  G-7 countries, whose populations own half of the world’s wealth, have implemented and enforced this unequal system to thrive by enabling the super-rich to control politics, underfunding public services and foreign aid, under taxing corporations and wealth, and fueling climate change and racism.

This group has used the IMF, World Bank and the WTO to ensure that they control the world’s economy and that weaker countries accept neoliberalism in order to be integrated into their economic system.  This cabal has forced developing countries to accept the neoliberal ethic that the accumulation of wealth for its own sake is normal and natural, and that socioeconomic inputs are irrelevant in their decision making.  For them, free-market capitalism, deregulation, and reduction in government spending is the only way to achieve economic success, people do not matter. 

These policies have resulted in global economic inequality that has become so entrenched that it’s literally killing people and destabilizing countries.  Economic disruptions and the widening of economic inequality over the past several decades have affected large segments of the population in developing and in G-7 countries.  Wages have stagnated for many, male employment has declined, and economies are more fragile as market incomes increasingly fail to lift people out of poverty.   At the same time, the cost of basic goods and services, such as energy, food, education and healthcare, has risen faster than overall inflation.

The ethic of “wealth for its own sake” has enabled employers to move production facilities from high wage to low wage countries, causing a decline in middle-wage jobs across advanced economies for the past three decades.  However, the wages paid in low wage countries are so low that the economies of these countries are not able to develop, and people, especially in Latin America countries, are flocking to the US southern border hoping to gain entry into the US.

This G-7 dominated neoliberal world order has created a world in which the richest top 10 percent of adults owns 85 percent of global wealth. Credit Suisse Research Institute (CSRI) reports that if you have a net worth of US $93,170, you are richer than 90 percent of people around the world.  If you have a net worth US $872,000 you belong to the global 1 percent, and if you have net worth US $4,210 you are richer than fifty percent of the world’s population.  This is wealth inequality on steroids and its time politicians take action to eradicate the root causes of this poverty and injustice.       

Senior economists at the International Labor Organization in Geneva report that progress of the middle class has halted in most European countries and that their situation has become more unstable. And if something happens in the household, they are more likely to go down and stay down.  Deficit reduction policies, required by the EU, have weakened social safety nets and left people vulnerable.  Also, loss of middle-income jobs, and skill mismatches, have reduced economic mobility, and widened income inequality, these factors are causing populist discontent in Europe and the rise of authoritarian leaders.

Globalization, digitization and automation are responsible for the declining labor share of income, and deepening the divide as machines increasingly replace humans.  In addition, unions have been decimated, putting employees in a weaker position in negotiating wage increases.  Inability to negotiate better wages have resulted in a rise in household indebtedness, which jumped from 87 percent of net disposable income in 1995 to 123 percent in 2017.  These downward trends in material living standards have contributed to rising discontent, because people are not feeling optimistic about the future and their own personal economic situations. 

The result is a loss of public trust in governments and other societal institutions, and rise of nationalism and fascism.  In one global survey, 60 percent of respondents believed their country was “on the wrong track.” And, almost 50 percent believed that they are worse off than they were 20 years ago.  The rich getting richer and the poor becoming destitute is unacceptable, politicians must act now to restore confidence in the system.  Politicians must stop rewarding those with influence and power at the expense of ordinary citizens. 

Over the last 30 years, wage inequality in the United States has increased substantially, with the overall level of inequality now approaching the extreme level that prevailed prior to the Great Depression.  In Canada, Latin America and the Caribbean, rising income inequality continues to be an economic, social, and political problem.  Also, the IMF reported a 7% economic contraction for Latin America and the Caribbean in 2020.

Disturbingly, over the past 20 years, 70 percent of GDP and gross surplus gains in G-20 countries have accrued to a small number of economic activities: finance, real estate, technology, pharmaceuticals and some business services.  This means that mostly the rich, especially those with real estate, technology assets, and college educated high skilled labor are benefiting from these gains, while middle-wage jobs are being lost because production has been outsourced to low wage countries, whose labor force has to survive on US $6 a day.

Interestingly, despite reports that the US middle class has been shrinking, the definition of middle class in America varies wildly.  For some, it’s a mindset, for others, it’s simply a function of how much money one makes.  This ignorance has led 70 percent of Americans to consider themselves middle class, although a Pew Research report that only 50 percent qualify as middle class based on income. 

Recent reports of rising inflation, accelerated by the war in Ukraine, should be of concern to most Americans, because inflation’s first impact is in the stock market, this means that the people in the market are the first to benefit from inflation, since stocks values rise.  If you are not invested in the market, inflation will make you poorer because essential goods and services will be more expensive.

The G-7 has arrived at a fork in the road, continue on the neoliberal economic system that pauperizes the rest of the world or adopt a more equitable system that would allow developing countries to develop and achieve their potential, thereby  benefiting the entire world.  The current ruinous policy has underdeveloped the world, and anti-workers laws have stripped American and global workers of their rights to negotiate fair wages. 

When workers lose the right to negotiate fair wages, they sink deeper and deeper into poverty.  Capitalism and neoliberalism must bear some blame, but it’s politicians and the corporate class that develop and enforce policies that are enacted for their own benefit.  All countries, especially underdeveloped and developing countries must organize and resist this continued exploitation of their resources and their people.  The transfer of wealth from poor countries to rich countries and multinationals must end immediately.

(Trinidad-born Carlton Joseph who lives in Washington DC, is a close observer of political developments in the United States.)