Vol.2 No.33, 20 November 2002

If the World is so Rich, why the Scarcity?

By Margaret Legum

A woman I know 'composts' her garden by burying kitchen waste. From these sites spring crops of potatoes, tomatoes, peppers even pawpaws. It is not a tidy vegetable garden; but it is abundant - because nature is abundant.

In this century humankind has invented technology that produces everything we need in mind-boggling quantities. The computer industry alone is over 70% 'over-produced. Much the same for cars, clothing, fruit you name it. Hence, the need for constant disposability, updating, throwing away, rubbishing - otherwise the economy crashes. Of course all this is unsustainable because it gobbles non-renewable energy, natural stocks of timber, fish, ground water, clean air and all other God-given resources.

We are beginning to take that on board, and the re-cycling industry, part of the Green movement, is only one product of that recognition.

Less often focussed is the question how on earth humans have devised an economic system that turns that amazing abundance into so much scarcity. How come millions more than ever before live at starvation levels? Ineffective governments in poor countries? Then how come the numbers of poor people have risen in every G8 country in the last 30 years? How come average education and health standards have fallen in the developed countries? How come that trend is most marked in the richest of all, the US?

The average US household earns less, works longer hours and has more debt than it did 30 years ago. A quarter of New York's population lives below the official poverty line, meaning they cannot find housing and keep a family in health. One in seven Americans is functionally illiterate and innumerate. Household debt in the UK is over 800bn. There is TB and rickets again in British slums - not seen since the 1930s. Even the egalitarian Scandinavians experience homelessness.

And those of us who keep out of poverty do so by working longer hours and in more stressfully competitive insecurity than ever before. Those at the top believe they must earn and save huge incomes against the ever-present possibility of failure and unemployment. Twenty million dollars, a New York real estate salesperson told writer David Cohen, is what he would need to feel secure.

And how is it that a country like Argentina, which until the 1980s supported prosperous farmers, flourishing cities, a sophisticated and creative middle class, and attracted millions of Europeans to its shores now displays a population of competing rubbish-scavengers and a desperate middle-class clamouring at the doors of banks that have gone out of business? Not to mention China in which factory closures render literally millions unemployed and without state benefits, while the rich stash away fortunes. Or Russia, where the economy supports few outside the Mafia.

How do we explain all this? How do we explain that new enterprise generally pays workers less than the same industry two and three decades ago? The conventional answer is that the global market forces producers to compete internationally, and this reduction in living standards is the price of competitiveness - to which we are all required to aspire. If that results in poverty, well that's the way the cookie crumbles in this hard old world.

Well, that is one part of the answer. And, as a response to human suffering, it is a pretty callous one. But there is more to it.

First, the global market has drastically skewed the power relationship between capital and labour, in favour of capital. The relative rewards to labour fall all the time. Wealth siphons up through a narrowing filter, giving people with money - banks, investment houses and rich individuals - a burgeoning slice of the product of all enterprise. This is due to the mobility of capital, which can make conditions for its presence, over-riding the democratic accountability of governments.

Second, those top incomes are so huge that they cannot all be spent on goods and services. Money is being used increasingly for gambling. Over 95% of all the money travelling between countries is now purely speculative - never engages with the real world of goods and services.

Third, this has the effect of removing money from the reach of consumers of those goods and services. It has the same effect as hoarding. Money is hoarded in other ways too, because of the global market. The punishment for government debt, especially in poor countries, is so severe that governments try to build reserves, both internally and externally. Governments hoard money against a rainy day, otherwise they risk being clobbered by 'the markets' - often by a run on the currency. Money becomes scarce when it is hoarded.

All this suits the owners of capital, because scarce money keeps its value. They have created an artificial scarcity of investment capital by keeping much of it outside of real economies and getting its profit by speculation. This prevents the rest of us developing our economies and ending scarcity. Make no mistake that is what is going on.

Back to previous

© South African New Economics Network 2006. Page generated at 17:18; 24 September 2006