THE BLOG
25/11/2013 06:23 GMT | Updated 25/01/2014 16:01 GMT

Dysfunctional Capitalism - Obscene Wealth and Grinding Poverty Side by Side

How does one assess the progress of the human race on our planet? To do that objectively let us imagine what an alien would see as s/he observes our development as a species from outer space. S/he would be impressed by our scientific, technological and medical achievements, but would be very disappointed with our social progress, and the sheer indifference shown by a small rich elite to the plight of billions of fellow citizens worldwide.

Research published by Merrill Lynch, quoted in the Guardian, shows that "the number of wealthy individuals in the world has reached 10.9 million - more than existed before the 2008 banking crises. Their collective wealth, $42.7 trillion (£26.6tn), has also topped the levels it reached in 2007, before the crash and recession." This elite group represents 0.15% of a world population of over 7 billion. This is at a time when ordinary people, some of whom are the poorest and most vulnerable, in the US, Europe and beyond, are being told that they must tighten their belts, and accept austerity measures that are severely blighting their lives.

A report by the consultancy firm McKinsey commissioned by the Tax Justice Network estimates that the super-rich were hiding at least $21 trillion (£12tn) in tax havens by the end of 2010. This is an underestimate and could well be as high as $32 trillion.

What exactly is a tax haven? Here is Wikipedia's definition:

"A tax haven is a state, country or territory where certain taxes are levied at a low rate or not at all. Individuals and/or corporate entities can find it attractive to establish shell subsidiaries or move themselves to areas with reduced or nil taxation levels relative to typical international taxation."

A significant part of that colossal sum has been amassed as a result of endemic corruption in the developing world where assorted dictators, kings, princes and government officials treat their countries as their own private property, plundering its wealth and keeping the population in abject poverty. The other part is a result of a corrupted capitalist system that has been siphoning wealth from the people to the top 1%, with an ever increasing gap between them and the rest. A system of rewards has been allowed to develop where the chief executives of UK's biggest corporations are earning on average £4.3 million each - 160 times the national average wage, a jump from 45 times in 1998.

The above wealth exists in a world where 870 million people were suffering from chronic undernourishment in 2010-2012, 16 million of whom were in the developed world. Poor nutrition plays a role in at least 5 million deaths of children each year. Additionally, "more than 3.4 million people die each year from water, sanitation, and hygiene-related causes."

Oxfam, working on a smaller figure, ($18.47tn) estimates that "people using tax havens are depriving the world of more than $150 billion (£100bn) in lost revenue, enough money to end extreme poverty twice over". Oxfam estimates that "over a third - $7.18 trillion (£4.7tn) - is sitting in accounts in British Overseas Territories and Crown Dependencies."

You don't have to be a Marxist to feel a sense of outrage at these statistics. I trust that most of us with an ounce of sympathy for the suffering of fellow human beings would sense that the global economic system that engineers such disparity in the way people live is dysfunctional and requires serious reforms. The love of wealth well beyond that needed for the most luxurious life imaginable is a sickness and neurosis, detrimental to the happiness and health of the individual who possesses it.

Joseph Stiglitz, the Nobel laureate economist, in a piece in VANITY FAIR puts the economic argument against the concentration of wealth and power in the hands of the very few thus:

"The rich do not exist in a vacuum. They need a functioning society around them to sustain their position. Widely unequal societies do not function efficiently and their economies are neither stable nor sustainable. The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price."

How can it be right to have a system that allows tax havens to exist which the super-rich elite and corporations use to hide their wealth and to escape taxes that pay for a functioning civilized society?