An Economy of the 1%: New Oxfam Briefing Paper

In coffee shop talk, a false duality crops between capitalism and socialism. It’s capitalism, man! Well, maybe it is. But to be more precise, what everyone is trying and failing to describe is corruption, or a specific kind of capitalism: the crony sort. George Soros, in The Crisis of Global Capitalism (1998), said that inequality was predicated on a belief in laissez-faire markets.  This peculiar outlook he deemed ‘market fundamentalism.’

“Market fundamentalists recognize that the role of the state in the economy is always disruptive, inefficient, and generally has negative connotations.  This leads them to believe that the market mechanism can take care of all the problems.”

As with any great leap into an institutionalized personal-gain-focused belief system, turning a blind eye toward actual practices is an important step.  Crony capitalism and corruption – enabled by fantasies of free and fair competition – is a synergy of political and economic elite decision making. A far cry from the mythic ‘laissez-faire’ of letting things be, inequality is produced out of a specific regulatory dynamic.  This dynamic, (purportedly hands off, but ironically regulatory?) creates markets that end up favoring the rich, where the gain of individual capital holders far outstrips that of labor.  The economy becomes jury rigged to support, and in some cases only allow for, the existence of MNCs in certain sectors of the economy.

Oxfam’s latest briefing paper An Economy for the 1%: How privilege and power in the economy drive extreme inequality and how this can be stopped charts other aspects of a dynamic broadening the gulf between the ultra rich and the overwhelming majority.  The statistical absurdity in which 62 people have the same wealth as 3.6 billion people results from a capitalist system jury rigged by political capture.

According to the report, market fundamentalism assumes a a ‘perfectly competitive’ economy, in which…Everyone knows everyone else’s business and anyone can participate, an assumption that clearly does not hold true in real life.Here is a key point that fleshes out the discussion people are trying to have when they talk about capitalism while also revealing the faith-based foundations of current regulatory dynamics.

“Technological and organizational innovation, new products or services and new ways of delivering can give sellers and advantage, but this advantage can also be gained through entrenched relationships with people in power, the distortion of regulations and laws in their favour and the exploitation of market failures to their advantage.”

Maybe if markets were regulated to allow for fair competition of everyone, then they would be truly, mythically free as the laissez-faire economy that never really was.  However in reality: The relationship between economic and political power and inequality creates a cycle which affects the design of institutions established to govern economies. An observation that takes a boat load of faith to deny.


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