THE VALUE OF WEALTH

 

THE VALUE OF WEALTH

By Frances Harris

Money and wealth are likely the most talked about subjects in the world, always seeming to be delicately balanced on moving tectonic plates. So in a nutshell, the world’s success at handling money is up there with managing war strategy and global warming.

In every prosperous country there will be a core of middle class workers who toil hard to earn every dollar they make, and should be able to make a comfortable living.  Without these armies of workers, there would be little chance of a viable economy to fall back on. They pay the bulk of taxes that keep the wheels of society and government turning. The middle class provides much of the money for infrastructure, social services and the running of government and the military.

Above them are the people with money who establish the companies that produce the jobs and openings for the middle class to earn a living. These highly cashed up enterprises hire the lobbyists who influence governments to exert downward pressure on their expenses, taxes and workers’ wages, keeping entrenched the tax responsibilities of the middleclass.

Next there are the underprivileged and working poor whose wages are often at subsistence level, and some will need to do more than one job to support their family. They have little capacity to contribute additional tax. And at the bottom of the pyramid are those who require ongoing social services to survive. They are the most vulnerable and usually dependent on governments and charities. They are also most likely to become homeless.

Then, somewhere in the middle are groaning central governments trying successfully; or unsuccessfully to balance the competing needs and interests of their citizens.

Looking in from the outside, there are people from poorer nations who are understandably hoping for an opportunity to get a foothold in a more prosperous country than their own. Some enter through porous borders and others come in legally. In a functioning democracy where everything is in balance, they should be smoothly taken in and cared for until their claims for residency are established. But at this time, social and economic forces are in conflict, leading to a critical shortage of resources.

And so now we have to deal with it:  – Fallout from The Global Economic Meltdown.

Over time, in many of the successful economies, and notably the United States and to a degree various European countries, mega-companies and their offshoots have found ways to split and hide the bulk of their substantial wealth overseas, thus reducing the tax base for their home country. Add to that, middle and lower class jobs are being moved overseas to countries where workers are prepared to take lower wages, and the social, government and financial structures of the home country are becoming seriously tilted.

With a swelling pool of unemployed middle class workers, and shrinking job markets, the question is – where is the money to run the home country going to come from? Wages are too low to increase tax from low paid workers. The wealthy have rejected the suggestion that they should pay more, and those on social services can’t pay extra or survive without help. The remnants of the middle class are stressed to breaking point.

Suggestions that benefits should be timed out for the disadvantaged and unemployed means that charities, jails and hospitals will be overwhelmed by the weight of more need. Court’s will be tied up with litigation against more criminal behaviour and it stands to reason stress related illness will skyrocket tying up medical services.  Deprived people will find a way to get what they want, and resources of charities will be stretched beyond capacity. This surely means there will be more drain on government budgets to come.

If welfare is cut to the extent that huge swathes of populations are forced to live miserable lives; serious social upheaval can be expected. When citizens feel they have nothing more to lose, they will tie up society with demonstrations and often become violent.  More police and security personnel need to be hired, again stressing out government budgets. It has followed in the last few years that financial black holes have appeared in state and federal budgets of previously wealthy countries, and then defaults have followed. Just like dominos, with this mechanism one thing crashes into the other, until there is an ever decreasing downward spiral. That is what we can expect for some time, if something doesn’t change soon.

If welfare is cut to the extent that huge swathes of populations are forced to live miserable lives; serious social upheaval can be expected. When citizens feel they have nothing more to lose, they will tie up society with demonstrations and often become violent.  More police and security personnel need to be hired, again stressing out government budgets. It has followed in the last few years that financial black holes have appeared in state and federal budgets of previously wealthy countries, and then defaults have followed. Just like dominos, with this mechanism one thing crashes into the other, until there is an ever decreasing downward spiral. That is what we can expect for some time, if something doesn’t change soon.

The end result is that the growing tax burden on the ever dwindling middle class is causing resentment by citizens. There is less tax being paid at the top, less tax being paid in the middle and more dependent people needing government services at the bottom, many of them having once been in the middle class.

Adding to the mix we are seeing more and more poverty stricken refugees pouring in through borders, coming from war torn or financially struggling countries. They bring little material wealth with them and many require immediate government assistance. Medical and social services are overwhelmed, increasing the ire of the dwindling numbers of struggling taxpayers.

 In prosperous countries, elected governments tend to be conservative when countries are doing well and collectively wealth and influence is positioned at the top. Conservative governments are less inclined to support the disadvantaged. But when there are a majority of citizens, including immigrants struggling or unable to progress financially, they often vote for the government that is likely to ensure their survival, and that is generally democrat. So until something significant changes, we are likely to see more and more countries turning to democratic-style principles.  Conservative contenders are now feeling the pressure to change if they are to remain relevant.  It should be interesting to see where these transformations lead.

Countries that are unable or unwilling to tackle the loopholes created by tax havens and the shortage of jobs for their people will be the most disadvantaged in the long run. There have been tentative steps by some to tackle tax loopholes, but whether they can resist the substantial pressure from lobbyists remains to be seen. This could be a bad thing, because it is the equal push and tug of competing forces that ensures social and economic cohesion. Governments that have turned a blind eye to immigration in the past will be forced to face the huge problem that has slowly evolved.

What if we see the re-emergence of unions as happened in the past? Who knows?

- We are clearly heading for interesting times.