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SECTION 1 2 3 EXTREME INEQUALITY Although Latin America remains the most unequal region in the world, over the past decade inequality in most countries has begun to decrease. 274 This is the result of a concerted shift in government policy away from those policies favoured by the economic model of structural adjustment (discussed in the Busting the Inequality Myths box which follows). Women are hit hardest by market fundamentalism Structural adjustment programmes and market-oriented reforms have been strongly associated with a deterioration of women’s relative position in the labour market, due to their concentration in a few sectors of economic activity, their limited mobility and their roles in the unpaid care economy. 275 A combination of gender discrimination and the limited regulation favoured by market fundamentalism have meant that the potential for women – especially poor women – to share in the fruits of growth and prosperity and to prosper economically have been severely limited. Women remain concentrated in precarious work, earn less than men and shoulder the majority of unpaid care work. Liberalization of the agricultural sector, including the removal of subsidized inputs, like credit and fertilizer, has impacted on all poor farmers, but in many poor countries, the majority of farming is done by poor women. Many of the labour regulations that market fundamentalism has reduced or removed, like paid maternity and holiday entitlements, are disproportionately beneficial to women. Removing these regulations hits women hardest. Women, along with children, also benefit most from public services such as healthcare and education. In education, when fees are imposed, girls are often the first to be held back from school. When health services are cut, women have had to bear the burden of providing healthcare services to their family members that were previously provided by public clinics and hospitals. Equally, women are often the majority of teachers, nurses and other public servants and, as a result, any cuts to state provision of these roles means more unemployment for women than for men. A tenacious worldview Despite, in fact, being an extreme version of capitalism, market fundamentalism today permeates the architecture of the world’s social, political and economic institutions. For many the global financial crisis and the recession that followed highlighted the failures of excessive market fundamentalism. However, the push towards liberalization, deregulation and greater involvement of the markets has in many places been strengthened. Nowhere is this clearer than in Europe, where the Troika committee – the European Commission, the European Central Bank and the IMF – attached sweeping market fundamentalist reforms as pre-conditions for the financial rescue of struggling states. This has included, for example, proposing workers in Greece be forced to work six days a week. 276 The tenacity of this worldview is arguably the result of two things, which are in turn linked once more to inequality: the predominant ideology and the self‐interest of elites. 58
SECTION 1 2 3 EXTREME INEQUALITY Ideologically, dominant elites in almost every sphere are much more likely to support the market fundamentalist worldview than ordinary people. Economists, in particular, are much more likely to strongly hold this view, and this brand of economics has dominated public thought over the last 30 years. Market fundamentalism, by leading to the concentration of wealth by elites, is also in their self-interest. Elites, therefore, use their considerable power and influence to capture public debate and politics to continue to push for this market fundamentalist approach, as the next section shows. CAPTURE OF POWER AND POLITICS BY ELITES HAS FUELLED INEQUALITY The second major driver of rapidly rising economic inequality is the excessive influence over politics, policy, institutions and the public debate, which elites are able to employ to ensure outcomes that reflect their narrow interests rather than the interests of society at large. This has all too often led to governments failing their citizens, whether over financial regulation in the USA or tax rates in Pakistan. Elites are those at the top of social, economic or political hierarchies – based on wealth, political influence, gender, ethnicity, caste, geography, class, and other social identities. They may be the richest members of society, but they can also be individuals or groups with political influence, or corporate actors. Economic elites often use their wealth and power to influence government policies, political decisions and public debate in ways that lead to an even greater concentration of wealth. Money buys political clout, which the richest and most powerful use to further entrench their influence and advantages. Other non-economic elites, such as politicians or senior civil servants, use access to power and influence to enrich themselves and protect their interests. In many countries it is not uncommon for politicians to leave government having amassed great personal wealth. Political elites sometimes use the state to enrich themselves in order to keep in power and make huge fortunes while they govern. They use the national budget as if it was their own to make individual profit. Non-economic elites also often collude with other elites to the enrichment of both. For instance, today’s lopsided tax policies, lax regulatory regimes and unrepresentative institutions in countries around the world are a result of this elite capture of politics. 277 Elites in rich and poor countries alike use their heightened political influence to benefit from government decisions, including tax exemptions, sweetheart contracts, land concessions and subsidies, while pressuring administrations to block policies that may strengthen the hand of workers or smallholder food producers, or that increase taxation to make it more progressive. In many countries, access to justice is often for sale, legally or illegally, with access to the best lawyers or the ability to cover court costs only available to a privileged few. In Pakistan, the average net worth of a parliamentarian is $900,000, yet few of them pay taxes. Instead, elites in parliament exploit their positions to strengthen tax loopholes. 278 The dearth of tax revenue limits government 59
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JEFFREY SACHS Director of the Earth
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ACKNOWLEDGEMENTS The paper was writ
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