Yves here. We’ve pointed out regularly that income inequality has a negative health impact even on the rich Highly unequal societies are characterized by shallow social bonds (if you lose your economic standing, you lose your friends) and higher levels of anxiety, again even for the very well off. And as Kate Pickett documented in her book The Spirit Level, societies with high levels of inequality score worse on all sorts of social indicators, like teen pregnancies, than more equal ones.
Needless to say, this article provides more support for Pickett’s observation. And most Americans have no idea what really unequal societies are like. I’ve seen only some small vignettes. I recall the first time I went to Mexico City, on a McKinsey project in 1984. The McKinsey office was small and was in what looked like a suburban area by US standards. On the ride out, the driver pointed out something I’d never seen before: snipers on the roofs of two compounds, to protect the owners.
Similarly, Johannesburg has long had large parts of the city that are dangerous, to the point that visitors are told never to take a cab from the airport. I heard this not just from my client, but a colleague who was well over 6 feet tall, went to South Africa regularly physically fearless (got into bar fights, once had a guy pull a gun on him in a bad neighborhood and managed to persuade him that it would be a very bad idea to shoot him. Insinuated that anyone who dared walk on the streets as well dressed as he was had mob connections and the Mafia was diligent about retribution). He said he’d never consider anything other than pre-arranged rides anywhere in Jo’burg.
One quibble with the story: Gordon Gekko was widely seen as a cross between the arbitrageur Ivan Boesky, who gave a “greed is good” speech at his alma mater, NYU, and was successfully indicted for insider trading (as was Gekko), and the men in First Boston’s M&A department (the wardrobe and slicked back hair fit to a T). Boesky dressed like a mortician and so they needed a glitzier look for the movie character.
By Alex Henderson, whose work has appeared in the L.A. Weekly, Billboard, Spin, Creem, the Pasadena Weekly and many other publications. Follow him on Twitter @alexvhenderson. Originally published at Alternet
Asher Edelman, the former Wall Street tycoon who was the model for Gordon “Greed Is Good” Gekko in the 1987 film Wall Street, shocked the financial world earlier this year when he endorsed Democratic presidential candidate Sen. Bernie Sanders. The multi-millionaire explained that when “the average American has not had an increase in pay in over 15 years,” it is terrible for the U.S. economy because businesses need more than the top 1% to keep them afloat—they need a strong, robust middle class.
Edelman’s assertion was not groundbreaking: President Franklin D. Roosevelt made the same argument 80 years ago during the Great Depression. FDR realized that maintaining a strong middle class and reducing poverty were beneficial for the rich, even if they had to pay higher taxes, because glaring inequality is often synonymous with unrest, violence, instability and upheaval. History bears that out, from the French Revolution to WWII.
Too many Americans—and too many Republican politicians—have not learned the painful lessons of history and cling to the failed ideas of Reaganomics, neoliberalism and trickle-down economics. If they took an honest look around the world, they would realize it’s much safer to be rich in social democracies like Switzerland, Germany, the Netherlands and Sweden than in Honduras and other countries where they are surrounded by widespread desperation.
The U.S. is at an economic crossroads: does it move more in the direction of social democracy or continue to decimate its middle class and suffer all of the problems that go with severe inequality?
Below are eight countries where inequality is having violent, painful results.
Brazil, in some respects, is an economic success story, or was: the Portuguese-speaking country is the largest economy in Latin America and the sixth largest economy in the world, and it won the right to host the Summer Olympics. But that has turned out to be a looming disaster, with the country’s police telling tourists they can’t protect them.
The growing incomes at the top just never trickled down in Brazil, where the richest 10% control about 44.5% of the country’s overall income (according to the Institute of Geography and Statistics), the minimum wage for full-time workers amounts to about $287 a month in U.S. dollars, an illiteracy rate of 9% remains (according to the CIA World Factbook), and favelas (shantytown slums) are plentiful in Rio de Janeiro and other major cities. While life is hard and terrible for the poor, the rich are also affected by the country’s extreme inequality; kidnapping is common and millionaires and billionaires typically hire armed bodyguards and ride in bullet-proof vehicles in order to avoid being abducted. In fact, some plastic surgeons in Rio de Janeiro and São Paolo earn a very good living restoring the appearances of rich Brazilians who have been mutilated by kidnappers.
The Mexico City-based Center for Public Security and Criminal Justice reported that in 2015, the murder rates in Brazilian cities included around 60 per 100,000 residents in Fortaleza, Natal and Salvador. According to the U.N., Brazil had an overall homicide rate of 25.2 per 100,000 residents in 2012.
2. The Philippines
Rodrigo Duterte, the Philippines’ new right-wing president, campaigned on a get-tough-on-crime platform and has vowed to restore the death penalty. Supporters of outsourcing like to pretend that corporations are being benevolent when they open call centers in the Philippines and other developing countries, but there is nothing benevolent about paying the type of slave wages they couldn’t get away with in Germany, Switzerland or Denmark. Taking advantage of cheap labor will not encourage true economic development in the Philippines, which, like many developing countries, has an ultra-wealthy 1%, a weak middle class, widespread poverty, and an abundance of violent crime (including kidnappings and carjackings).
The harsh disparity between the haves and have-nots has also led to extremist insurgent movements, ranging from the New People’s Army (a Maoist guerrilla organization that has been active since 1969) to Abu Sayyaf (a jihadist/radical Islamist group with ties to Al-Qaeda). The Philippines does not need more low-paying dead-end jobs, sweatshops or a strongman president, it needs real economic development, which it won’t get from the Trans-Pacific Partnership.
Mexico is one of the largest economies in Latin America and the 14th largest economy in the world. Neoliberalism, however, has not served Mexico well, and so-called free trade agreements like the North American Free Trade Agreement have encouraged Mexico to be treated as a source of cheap labor rather than encouraging the growth of the country’s middle class. NAFTA was not only bad for the U.S., it was also bad for Mexico, as thousands of small farmers unable to compete with giant agribusiness lost their livelihoods. With so many campesinos unable to stay afloat financially, poverty became more widespread in rural Mexico, and drug cartels took full advantage of the desperation by offering illegal work to the poor.
Drug trafficking is nothing new in Mexico, and it has more causes than just inequality, including our own failed drug war. But violence skyrocketed when rival cartels in post-NAFTA Mexico stepped up their battle for turf: Human Rights Watch estimates that over 60,000 people were killed in cartel-related violence in Mexico between 2006 and 2012. Mexico’s affluent class lives really well; upscale areas of Mexico City resemble Manhattan’s Upper East Side. But way too many of Mexico’s poor have little or no hope for a decent life.
Uruguay, Chile and Costa Rica, all known for having a vibrant middle class, are three of Latin America’s economic success stories. The vast majority of Uruguayans are neither ultra-rich nor ultra-poor, they’re middle class. That is quite a contrast to Guatemala, which has a long history of extreme inequality as well as some of Latin America’s worst crime rates.
When Guatemala is described as the poorest country in Central America, that doesn’t mean it is devoid of millionaires or billionaires. Guatemala has an ultra-rich minority that lives very well. What Guatemala lacks is a strong middle class; about 54% of Guatemalans lived in poverty in 2011 (according to the CIA World Factbook), and in 2011, economist Branko Milanovic described Guatemala as the second most unequal country in the world. In 2012, Guatemala had a homicide rate of 39.9 per 100,000 people compared to only 3.1 per 100,000 that year in Chile. In 2013, Mexico’s Citizen Council for Public Safety and Criminal Justice analyzed crime rates and compiled a list of the most dangerous cities in the world: Guatemala City came in at #12.
5. South Africa
Economically, life remains difficult for most people in South Africa, where the homicide rate was 32 per 100,000 people in 2013, according to U.N. data. The apartheid system was an economic cancer in South Africa, and the country is still suffering from apartheid’s lingering effects. South Africa’s black middle class grew by 78% between 1991 and 1996, yet the country continues to be plagued by brutal income inequality; in 2011, 61% of economic consumption in South Africa came from the top 20% of wage earners. And about 48% of South Africa’s population, according to Statistics South Africa, has an income equivalent to about $58 per month.
Honduras has a reputation as a “business-friendly” country where it is easy to open a call center or a sweatshop. But any corporatist who believes neoliberalism is serving Honduras well should take a close look at the country’s crime rates.
In November 2013, a study Jake Johnston and Stephan Lefebvre conducted for the Center for Economic and Policy Research found that income inequality and unemployment in Honduras had increased considerably since a coup in 2009, and it is no coincidence that violent crime has also been soaring in the Central American country. According to the United Nations Office on Drugs and Crime, Honduras had a murder rate of 84 per 100,000 in 2013 compared to less than 0.9 per 100,000 that same year in Italy. In Pedro San Sula, Honduras’ second largest city, the homicide rate was 169 per 100,000 in 2012. Gang violence is pandemic in Honduras, which is a textbook example of how badly neoliberal economics can fail in Latin America.
In 2015, Charlotta Mellander, a professor of economics at the University of Jönköping International Business School in Sweden, took a look at the relationship between inequality and violence. Mellander, who analyzed U.N. data and 178 different countries, found that the world’s most unequal countries, from Mexico to South Africa, also tended to be the most violent.
Jamaica is a country where one finds a strong contrast between the haves and have-nots. According to WorldBank.org, Jamaica’s poverty rate decreased by almost 20% in recent decades only to increase by 8% during the Great Recession. The Statistical Institute of Jamaica, in October 2015, reported an overall unemployment rate of 13.5% and a youth unemployment rate of 30.3%, while the CIA World Factbook has reported that 19% of Jamaica’s population now lives below the poverty line. According to the U.N., Jamaica’s homicide rate reached 45 per 100,000 people in 2015.
8. Papua New Guinea
Papua New Guinea is one of the most unequal countries in the Asia/Pacific Region; while the rich minority prospers, 37% of its population lives on the equivalent of less than $1.25 a day and 60.3% of its population lacks access to safe drinking water. Violent crime is prevalent, and the homicide rates include 66 per 100,000 residents in Lae and 33 per 100,000 residents in the National Capital District.
In recent months, student protests calling for the resignation of Prime Minister Peter O’Toole over corruption allegations have been turning violent, and in June, a Papua New Guinea court issued an injunction barring those protests from college campuses. But in a country where illiteracy is around 37% and about half of the population of the largest city, Port Moresby, live in shantytown slums, violent crime and unrest come as no surprise.
Quote: The Philippines ” has an ultra-wealthy 1%, widespread poverty, and an abundance of violent crime.” I agree with the first two points, but not the last. The violent crime in the Philippines is much, much less than in the US, for example. Also, I don’t see how he can criticize call centers. This is something the Filipinos are naturally good at, having good English skills on the whole, and being polite and patient. Not the ultimate answer to riches for the Filipinos, but, for the time being, better than nothing.
RE: Filipinos being polite and patient and thus suited for working in call centers.
Of course, EndOfTheWorld. And this is why corporations have sent all those electronic assembly jobs to Asian countries. All that wiring and soldering of tiny parts requires teeny fingers and much manual dexterity, which Asians are naturally good at. And, ‘better than nothing,’ even when resulting in some unfortunate workers jumping from their dormitory windows.
And, why oh why, do we not label as ‘violent’ those actions performed by the powerful on the powerless? By employers on their employees, for example. Or by a dominant social group on the members of a subordinate group. Or by men on women. Or by outraged customers screaming at ‘patient’ call center representatives.
Filipinos aren’t committing suicide. They rank 150th out of 170 in WHO suicide rates for 2012, much lower than the US, UK, Canada, Japan, Denmark, etc. It’s a mistake to lump all Asian countries together. I am against globalism as well, but in the Philippines, for whatever reason, opportunities are limited. The call center beats Jollibee’s.
I knew an expat Philippino student in my High School. He was unapologetic and open about being a “rich kid,” who, unlike “rich kids” in America, had a bodyguard when at home in the Philippines. Violence, as mentioned above, does not have to be purely physical.
OK, I will admit it has an ultra-wealthy 1%—-no doubt about it. A lot of the wealthy Filipinos just leave, like your companion in high school. The writer of the piece, Alex Henderson, mentioned specifically VIOLENT CRIME. I just don’t see it, and I spend a lot of time over there. I love the weather. Of course, it would be better to spread the wealth, have land reform for the farmers, eliminate corruption, etc. But to say there is a lot of violent crime in the Philippines, compared to other countries, is a false statement.
Just curious, where exactly do you spend your time and gain your expertise? In the protected areas of the 1% or do you get away from the gated resorts and out where the other 99% exist? The mere fact that the high schooler and his peers require bodyguards speaks volumes.
I’ve been all over the country. I walk the streets at all hours, everywhere, which I would not do in the US.
Just checking quickly, the Philippines is rated #23 in violent crime, below the US, which is #14.
I would also like to rebuke Alex Henderson for his comment that the Philippines “does not need a strongman president.” Duterte beat his closest rival, Roxas, 16 million to 10 million, in what was without doubt a fairer election than the recent Democratic primary in Henderson’s state of California. He won in a massive landslide, and Henderson’s opinion is irrelevant. The Filipinos love the guy.
Don’t they also support him because he is actively making birth control available to all, which Filipinos have voted in favor of, despite opposition from the country’s RCC Bishops?
Apparently, yes, “Duterte Harry” is willing to take on the Catholic Church, which has always been very powerful in the Philippines.
so we know the effects of inequality.
what caused it? because without understanding that, a solution is unlikely, or short lived.
inequality in most cases is due to govt capture by sharp operators.
the biggest culprits in the US, FIRE, (real estate shenanigans), health care, defense industry are all in bed with the govt. To escape this incessant push on costs, the “normal” (non crony) businesses have only option left to outsource production to Asia. And no business wants to be left behind.
I doubt there is any easy solution to this. Power leads to corruption and mega countries like the US will find it impossible to control political corruption – they have redefined it to be a legal activity.
However these verbal games cannot change the socially corrosive nature of the activity.
Boil it down to rentier capital. Marx, in the posthumous third volume, pointed out that in the long run it would be better for industrial capitalists to side with the workers against rentier(finance) capitalists. But he lamented that they would be unlikely to do so until the crisis boiled over.
Regarding South Africa, the income inequality there is the result of their immediate adoption of monetarism upon the end of apartheid. Monetarism of course is the macroeconomic system of choice for consolidating wealth at the top, and its installation as South Africa’s economic system was overseen and insured by the (Bill) Clinton administration, yet one more feather in the cap of “America’s first black president”.
I get the irony of “Americas’ first black President.” I would tweak it to read, “Americas’ latest black hearted President.” That said, I wonder what happens deep down in H Clintons’ heart in the quiet watches of the night.
Do you really?
I don’t enjoy horror films or torture porn. So I have no desire to be exposed to the inner recesses of her heart. I realize it’s possible it’s sledding and hot chocolate and holding hands with Huma, but that seems unlikely.
Good article, so of course I have to criticise — but people like this author really, really, REALLY need to realize that they are, and to stop adopting the neo-lib framework for describing economies. I am talking about this:
>on the equivalent of less than $1.25 a day
You CANNOT live on $1.25 a day! You cannot survive a week — and I am ignoring the word “equivalent” which implies it’s just like trying to live in the American suburbs/cities on that.
The reason I bang on about this is that you just play into the neo-lib hands by using their framework. “Here’s a call center job that pays $8 US dollars a day! We have improved their lives massively!” But you didn’t, because to do that job they now have pretty much $8/day worth of expenses.
Before they likely lived in a farming or fishing community. All their needs, food, shelter, water could be had for basically nothing. Now – they have to pay for a sleeping place in a crowded apartment near the call center, the transportation to and from said call center, and now they have to buy food from others. Probably comes out to about $8/day and that’s before the third world city conditions send them to a doctor.
Now obviously the rural community I present is not much of a solution when you have an exploding population. And I am NOT claiming to have a solution.
I simply want to stop this “X dollars a day” crap so our heads can stay a little clearer when confronting these problems, so we don’t play into our opponents hands.
Thank you, for your post. The whole “X dollar a day” narrative always irked me, because in the the U.S. you can even get a cup of coffee for $1.25, let alone live on it.
I dont believe Amercans will get wiser. Everyone i know has had a reason for doing something evil. Heres what they forget just like death everyone faces an end of the world alone. This is a reason to do the impossible.
Brazil is different. I lived there for a while. It’s cursed and blessed by geography. The country is fabulous in natural resources. There is literally a wall between these resources and most of the population. A high rock massif cuts off the Atlantic coast where most of the people are located. The resources are west of that and most of them flow south toward the River Plate, Paraguay, Argentine and access to the sea.
This is why Brasilia was moved inland during the 1960s. Near total deforestation occurs when poor people are shipped inland out of the coast, they plus the native born local poor clear land for export crops, to and including the infamous GMO soybean farms to feed the cattle that ended up as McBurgers.
I don’t think that there is any hope for Brazil because of its demographics, barring a complete revolution and massive literacy program which still leaves the favelas and too many people for the land to support barring total destruction of the Amazon.
The article cited murder rates in four of the countries named. The rate in Baltimore, at 55 per 100,000 in 2015, is higher than in three of them.
I should add that the Baltimore figure is from the New York Times (http://www.nytimes.com/interactive/2016/01/14/us/Baltimore-homicides-record.html), which cites the Maryland State Police as the source.
But Baltimore has really strict gun laws just like Chicago.
Those numbers must be wrong…unless violence is caused by other factors like Inequality, pervasive corruption, Racism, poverty and lack of opportunity, not gun ownership by the proles.
The Prime Minister of Papua New Guinea is not the namesake of the late British star of Lawrence of Arabia. He has the somewhat more prosaic name, Peter O’Neill.
High population growth rates all. If the folks at the bottom keep breeding and having large families and splitting up what little land they have left, it is no wonder things do not go well.
I spent a few years in the interior of Honduras in the 1980s. That is where a lot of the coast mestizos went because the coast was dominated by the blacks brought in by the English and so they dominated business and jobs. In the valley I was in the population went from 2 after WW2 tosomething like 10,000. The men did not work. They would do occasional day labor for the ranchers and the women had to do all the child care, housing care and farming. They wanted tubal ligations badly because as you point out land was getting so subdivided no one could survive. The goverment provided birth control pills but the women were afraid to take them because if the man found out he would assume they were sleeping around abd they would kill them…that is why the district nurse used to beg me to start doing tubals but our government would have killed me if I dared to do it. So themigration to the US was entirely predictable. The men there werre quite similiar to the Afghans and Iraqis. 1000 years of Muslim domination in Spain left its mark even in the new world.
A direct measure of wealth is number of private helicopters, as well as helicopters per capita. Sao Paulo, Brazil, is at the top, next to NYC.
South China Morning Post (2013)
The Guardian (2008)
As the oil market stays depressed and especially as the Petrobras slush fund scandal is unraveling (or was, before the coup) it looked like this might change.
Though it’s not like HPC is kept as an standard economic indicator. But perhaps it should be.
PNG, like Brazil as per Dave’s comment above, is blessed / cursed by an abundance of natural resources and of “helpful” 3rd parties who help themselves to said resources (like Australia, Rio Tinto, etc.) Just look at Bougainville–the environmental war on which Avatar was based. (And the locals won.)
(Though now, after keeping the copper mine closed since the war began, and since the subsequent peace process, there appears to have been people talking the locals into signing all their rights away, via less-than-transparent agreements. . . )