Russian Escape

Mixed Media, 3 -D/ 26” x 38” / $ 650
In Russia, the wealthy escape to luxurious homes on the Volga River known as Dachas on. During the communist revolution, Dachas were converted to vacation homes for workers but they have again resurfaced for the elite as exemplified by this seven-figure houseboat on the Volga and a restored traditional wood house in Plyos.

The Best of Times, The Worst of TImes

Fact Checking – In a late December interview with Prince Harry of England, President Obama touted that this is the best of times to be alive. He said that the world is more tolerant, less violent, and that people are healthier, subjects I touched upon in last week’s newsletter. I continue his optimistic statement this week by considering wealth, education, and what might be meant by being more sophisticated.

Part II

Is the world wealthier? When I hear that the world’s eight richest people collectively have the same amount of wealth as the poorest 50 percent of the world, I wonder if dangerous problems lie ahead due to the concentration of wealth among a few. Though the world as a whole might be wealthier, most people do not benefit from this boom. The bottom half struggles to survive. It is grotesque that a handful of rich people are equivalent to 3.6 billion souls living in poverty.

Bill Gates is one of many who echo Obama, agreeing that economic indicators show the world getting wealthier. Yet, when you probe further, he also says that inequality does not matter, which seems to me to be quite a bizarre assessment. The World Bank certainly does not agree with him for it reports that, “No country has successfully developed beyond middle-income status while retaining a very high level of inequality in income or consumption.” In general, those nations with great inequality have higher murder rates and lower life expectancy.

Poverty is defined as a lack of resources needed for a decent life – food and water, housing and energy, healthcare, education, and employment. It is about not having power and being unable to improve your situation. The world’s poverty line is set at $ 2.50 per day and the number of people living below that line increased by 15 percent between 1981 and 2005. So, no. . . the poor are not getting wealthier.

Not only do a handful of billionaires make an extraordinary amount of money, they employ most people. Home Depot’s Bernard Macus and Arthur Blank have over 385,000 employees, Warren Buffet at Berkshire Hathaway, 331,000, Frederick Smith of Fedex, over 400,000, and Peter Buck of Subway over 450,000. If Sam Walton of Wal-Mart were still around he would be credited with 2.3 million jobs. The number of those employed by the world’s 1,645 billionaires (according to Forbes) continues to grow. Don’t think for a minute that wealthy, mostly men, do not control our lives, for they do.

For example, government is influenced by their excessive wealth, for billionaires have the funds to lobby for tax benefits for themselves while making sure that needed government revenues will come from their employee’s taxes. US Tax Code as passed, is designed to permanently benefit corporations and protect the personal savings of the wealthiest but benefits for the middle class are set to expire in five years.

Last year’s stock market went up up by 19 percent. With a simple call to a broker, a billion dollar investment tied to an index fund returned $190,000 million. It is difficult for anyone to spend that much money for groceries, entertainment, cars or housing, so what happens to excessive gains? Will this windfall be plowed back into the economy? Will salaries increase so that those with more modest salaries also benefit?

To answer these questions we need to look at whether Reagan’s trickle-down economics could work under the right circumstances. Douglas Holtz-Eakin, president of the American Action Forum response is, “Trickle. Shmickle. You don’t need a Ph.D. in economics to see that something’s wrong with trickle-down theory. If it were true, inequality would be self-limiting. As soon as the rich started getting richer, wealth would cascade like the Niagara down to the benighted lower classes. Instead, the gap between rich and poor keeps growing.”

The International Monetary Fund concurs that trickle down economics backfires. It isn’t long before policies get instituted that hurt growth. The upper echelon pushes for deregulation of the financial system and puts the middle class at risk. Conflicts become more prevalent, social trust diminishes, and cohesion dissolves. Reasons are well documented as to why policy makers should pay more attention to low wage earners than the wealthy. When the bottom 20 percent of a nation’s population increases its share of national income, stronger growth follows on average within five years.

Among wealthier countries world-wide, poverty has risen since the 1990s. As the ranks of the poor grew, the rich get richer. In our own country, since 2000, the share of middle-class families has shriveled in all 50 states. The United States is an example of runaway inequality. Last November, Bank of America Merrill Lynch surveyed the CEOs of major corporations about how they would invest their foreign-held profits if they brought them back to the states. The majority said funds would be used for debt repayment, share repurchase, and mergers and acquisitions before capital spending. Few businesses planned to increase investments in areas that will benefit middle class Americans, concluded a Wall Street Journal article.

The tax plan that passed in December has winners and losers. The winners are Real estate and other pass through companies, energy drillers, sports team owners, major corporations, tax lawyers, those who don’t want to pay for health insurance, those who will now inherit up to $11 million tax free. The Losers are commuters, residents of high-tax states like New York, New Jersey, and California, and everyone who will now have to contribute to interest payments for a higher budget deficit. 50 Percent of Americans will see their taxes increase after 2025 and 13 million will lose health insurance. Too bad I am not a real estate billionaire like our president, for if I were, I might have had champagne to welcome in the New Year.

Are the People of the World Better Educated? Once more we have to ask ourselves, better educated than when? If we consider primitive societies where learning was passed down from parent to child and tribal member to youth, all children were educated in survival skills. In Egypt, Greece and Rome centers of learning existed since 3,500-3,000 BCE, though the opportunity for literacy were only available to a privileged male elite. It wasn’t until the Middle Ages that book production increased yet it still took centuries for literacy to become universal. Middle class children who were not farmers, were taught by parental example or in the trades in multi-year apprenticeship programs.

If we consider the last two centuries, when literacy became important, then yes, according to the dozens of articles I read, rates have risen globally. Increases are primarily due to enrollment in primary education though in sub-Saharan Africa many countries lag behind with literacy rates below 50 percent of youth. A growing body of research suggests that better education is associated with higher individual income and long-term economic growth. Throughout the world here are large generational gaps, for younger generations are progressively better educated than older ones. In the United States, even low-wage earners are better educated than they were in 1979. For example, in 1979, 39.5 percent had not gone to high school while in 2011 only 19.8 percent had not attended.

It is interesting to note that according the Economist, Immigrants to America are better educated than ever before. Half of all legal migrants have college degrees contrary to the popular belief that they are low-skilled. There is growing interest in the House of Representatives in having a points-based immigration system similar to that of Canada and Australia that gives priority to migrants with degrees, work experience, and fluency in English rather than to families as is the case in America today.

Is the world more sophisticated? I have not the slightest idea and am not sure what President Obama had in mind when he said it was.. What do you think?

Please comment below on my blog site.It will be interesting to hear your comments about these last two newsletters.

Art is always for sale. Contact me at marilynne@eichingerfineart.com

References:

1. Elliott,L. 2017. World’s eight richest people have same Wealth as poorest 50%. The Guardian. retrieved from https://www.theguardian.com/global-development/2017/jan/16/worlds-eight-richest-people-have-same-wealth-as-poorest-50

2. Social Justice Website. 2017. Myth #1: The Poor are Getting Richer. Social Justice Now. retrieved from http://www.globaljustice.org.uk/myth-1-poor-are-getting-richer

3 . Blankfqld,K. 2016. The American Billionaires Behind the Most Jobs. Forbes. retrieved from https://www.forbes.com/sites/kerenblankfeld/2016/10/18/american-billionaires-behind-the-most-jobs/#5b03e27c693f

4. Coy, P. 2017. The Best Way to Spur Growth?Help the Poor, Not the Rich. Bloomberg Business Week. retrieved from https://www.bloomberg.com/news/articles/2017-11-30/the-best-way-to-spur-growth-help-the-poor-not-the-rich

5. Picchi,A. 2015. Is Trickle-down Economics to Blame for Inequality? Money Watch. retrieved from https://www.cbsnews.com/news/the-failure-of-trickle-down-economics/

6. Boak, J. 2017. A look at some winners and losers under the GOP tax plan. ABC News, retrieved from http://abcnews.go.com/Business/wireStory/winners-losers-gop-tax-plan-51903730

7. Roser,M and Ortiz-Ospina,E. 2017, Global Rise of Education. Our World in Data. retrieved from https://ourworldindata.org/global-rise-of-education

8. Economist. 2017. Immigrants to America are better educated than ever before, The Economist Print Edition. United States. retrieved from https://www.economist.com/news/united-states/21723108-far-being-low-skilled-half-all-legal-migrants-have-college-degrees-immigrants