Category: Economy
Wall Street banks ditch $19 billion of stocks in ‘unprecedented’ block trade selloff – media
worker | March 28, 2021 | 8:09 pm | Economy, Political Pandemonium | Comments closed

Wall Street banks ditch $19 billion of stocks in ‘unprecedented’ block trade selloff – media

Wall Street banks ditch $19 billion of stocks in ‘unprecedented’ block trade selloff – media
Goldman Sachs and Morgan Stanley have reportedly sold $19 billion worth of shares in Chinese tech and US media companies. Traders are now wondering what caused the unusually massive move and whether it will continue next week.

Goldman Sachs alone liquidated $10.5 billion worth of stocks in block trades on Friday, Bloomberg reported citing the investment bank’s email to clients. The first batch, that included $6.6 billion worth of shares of Baidu, Tencent Music Entertainment Group and Vipshop Holdings, was sold before the market opened on Friday. Later that day, the bank reportedly managed the sale of $3.9 billion worth of shares in American media conglomerates ViacomCBS and Discovery, as well some other companies, such as Farfetch, iQiyi and GSX Techedu.

ALSO ON RT.COMPandemic profiteer: Morgan Stanley makes a killing during coronavirus crisisAnother US investment bank involved in the block trades, which are believed to have wiped $35 billion off affected firms’ valuations in just one day, was Morgan Stanley. The investment bank offered two batches of shares worth $4 billion each on Friday, according to the Financial Times.

While block trades, when sellers are looking for buyers for large volumes of securities at a price sometimes negotiated privately between the two parties, are a common thing, the scale of Friday’s moves raised eyebrows.

“I’ve never seen something of this magnitude in my 25-year career,” portfolio manager at Swiss-based Bellevue Asset Management AG, Michel Keusch, told Bloomberg.

Senior vice president at Wealthspire Advisors, Oliver Pursche, called the move “highly unusual,” adding that the market participants are now wondering if another wave of block trades could hit the market on Monday and Tuesday, causing wild price swings in the affected stocks.

Another issue is the unclear nature of those trades. Goldman Sachs explained the sales with “forced deleveraging,” the Financial Times wrote citing people with knowledge of the matter. The outlet also said that the move could indicate that a big hedge fund or family office faced some serious problems.

Meanwhile, CNBC reported the selling pressure in some US media and Chinese stocks was linked to the forced liquidation of positions held by family investment office Archegos Capital Management. The lack of details about the move makes the situation worrisome, Pursche said, as investors don’t know “whether this was the liquidation of just one fund or more than a fund, or whether it was a fund liquidation to begin with and the reason behind it.”

For more stories on economy & finance visit RT’s business section

Capitalism Run Amok Is Just Plain Capitalism
worker | April 22, 2018 | 8:25 pm | Analysis, Armenia, Economy | Comments closed

Capitalism Run Amok Is Just Plain Capitalism


16:37, January 17, 2015
By Markar Melkonian

The source of Armenia’s misery and humiliation, we often hear, is not capitalism per se, but rather “gangster capitalism,” “a broken system,” “capitalism run amok.”

The goal for the future, then, is to “fix the system,” to reform capitalism, to make it more like regular, pure, genuine Free Enterprise, the kind of capitalism that works.  But what if Armenia’s actually existing capitalism already is genuine capitalism?

An economist once observed that the only existential meaning of “enterprise” in the term free enterprise is “whatever capitalists happen to be doing at the time”–and “free” is the accompanying demand that they be allowed to do it.

In Armenia, successive presidents, legislators, ministers, and mayorshave certainly allowed them to “do it.”Post-Soviet cliques have privatized public land, seized factories, and plundered resources.  They have shredded the social safety net,unleashed the “job creators” on child labor; eliminated overtime pay; dispensed with job safety standards, trashed even the most minimal environmentalregulations, and generally done everything they can toenrich themselves and their cronies, seemingly without a thought to the welfare of the vastmajority.  Over the years, has done a truly admirable job of reporting the daily pillage.

Armenia’s plutocrats justify their actions in the name of free enterprise, and their point is well taken.  After all, a law prohibitingthe exploitation of child labor or the poisoning of drinking water is nothing if it is not state regulation of the market.  Building public schools and enacting laws that protect forestsmake markets less free.So if Free Enterprise really were as important as the IMF and the advisors from Chicago say it is, then Armenia’s oligarchs really are the national heroes they think they are.

One of the Ronald Reagan admirers who led Armenia’s charge down the road to ruinexemplified the wisdom of Yerevan’s Free Marketeers: “free market reform,” he wrote, is the path “which has been traveled by many other nations and which leads to happiness.”(Vazgen Manukian, quoted in Jirair Libaridian (ed.), Armenia at the Crossroads, 1991, p. 52.)  In the years since he made this announcement, we have beheld the happiness that free market reform has wrought in many other nations, from Mexico to Greece, and from Iceland to India, where in recent yearsa quarter of a million farmers have committed suicide.

The oligarchs and their IMF advisors, of course,are willing to pay this price for the sake of their Free Market utopia.  Or rather, they are willing to make the poor pay this price.  For decades, sensitive commentatorsin the West excoriated Joseph Stalin for his “blood-curdling” suggestion that the end justifies the means.  These days, those same commentatorsdo not give a passing thought to the hundreds of millions of lives consigned to displacement,drudgery, fear,and early death in the name of free market reform.

A quarter century ago, the Ter Petrosyan administration set Armenia off on the path to happiness by doling out state property to cronies and racketeers,guttingthe industrial infrastructure, and shredding the social safety net.  Hundreds of thousands of workers lost their jobs, anduntold thousands of Armenians, especially the elderly and the very young, have died of exposure, food poisoning, preventable accidents, and lack of access to basic healthcare.

Since then, aparade of alternating opposition figures and national saviors have come into office, enriched themselves and their cronies, and then left the scene with the loot, one after another.  Despite the personnel changes, though, economic policy has continued to benefit the rich few, at the expense of the poor majority.

Armenia has undergone twenty-five years of foreign-directed reform:  privatization, shock therapy, conditionalities, and so on.  Every time we turn around, it seems that more “reform” is needed.  And the reform always seems to require further wage cuts, further cuts to social programs, further deregulation, and ever more sacrifice from the have-nots.  Consider the much-ballyhooed Structural Adjustment Policies (SAPs) of earlier years:  for Armenia, as for other poor debtor countries, SAPs required:

  •  selling off state enterprises to the private sector;
  • eliminating price controls and producer and consumer subsidies for agricultural goods;
  • devaluing the local currency;
  • cutting consumer subsidies and charging user fees for social services such as health care and education;
  • dropping protectionist measures and reducing regulation of the private sector;
  • providing guarantees, state-funded infrastructure, tax breaks, and wage restraints as incentives for investment;
  • dismantling foreign exchange restrictions (which has allowed wealthy locals to export funds overseas, as capital flight, worsening balance-of-payment deficits).

As a result of these policies, Armenia today can boast of Enterprise that is as Free as anywhere on Earth.  Readers of are aware of the consequences:  sky-high unemployment; proliferating poverty; the depopulation of the countryside; deforestation; plummeting birth rates; falling life expectancies, and, of course, the catastrophic outmigration of one third of Armenia’s population.  Successive plutocrats have lengthened the work week, lowered the legal work age, evicted families from their homes in order to build “elite homes for elite guys,” demanded ever-higher bus fares for a privatized transport system; raised university fees far beyond the means of most families, attempted to privatize social security, and so on and so forth, ad nauseam.

It is a sad commentary on the state of intellectuals in Armenia today that few of them are even aware of the work of the great social geographer David Harvey, who has so accurately described the process of “capital accumulation by dispossession” that characterizes scores of countries like Armenia.  When is someone going to translate Harvey’s book, The New Imperialism, into Armenian?

In Armenia, as we know, “free market reform” has taken place against the background of official impunity, the jailing of dissidents, electoral manipulation, and fraud so pervasive that it would have astonished even the most cynical Armenians of the Soviet period.

Let us remind ourselves that these measures were undertaken under the tutelage of the IMF and the World Bank, in strict adherence to Free Market doctrines.  All the while, Western agencies and bureaucracies have heartily congratulated their Armenian followersfor rapidly privatizing state property, “making hard choices,” and faithfully carrying out Washington’s directives.

David Brooks, one of the more thoughtful American Free Market columnists, recently acknowledged that, curiously, post-Soviet success stories are rare.  (“The Legacy of Fear,” New York Times, November 10, 2014.)  Despite the generalized “wreckage,” however, he was able to identify several success stories, including none other than Azerbaijan and Armenia! That’s right:  according to Brooks, Armenia today counts as one of “only five countries that have emerged as successful capitalist economies” from the former Soviet bloc.

This should surprise the Free Market faithful in Yerevan, who were hoping that ultimate success lay in the bright future, not in the dark present. If this is what a successful capitalist economy looks like, then the question naturally arises:  What was the point of letting capitalists take over the country in the first place?

The Free Market coercion and rhetoric has come full circle:  right-wing politicians in the USA, exemplified by Scott Walker, the governor of the state of Wisconsin, have tried to enact many of the same policies in the USA that the IMF, the CIA, and the economists from Chicago have foisted on vulnerable countries like Pinochet’s Chile and today’s Armenia.  In their arguments for, say, privatization of social security, the Scott Walkers have pointed to policies in Latin America, Eastern Europe, and the former Soviet republics as examples of an irresistible global trend that America must follow.

When the Scott Walkers have failed to achieve their maximal demands, it is because traditional constituencies in the United States with independent organizational presence—notably labor unions—have fought against free market “solutions.”  Here, ironically, America does provide a valuable lesson to Armenia:  resistance to Free Market reform must be organized, sustained, and based in the working class.

The tide of misery rises ever higher, and there is no good reason to hope that further reforms along the same lines will change the trajectory. And yet capitalism still escapes blame for the disasters it has created.  Instead, we are told that “capitalism run amok” is to blame, and that the only antidote is—more capitalism!  This has happened over and over again.

At what point will skepticism kick in?

Free Marketeers love to sermonize about accountability and the responsiveness of the market.  But the Free Marketeers escape all responsibility for their policies and get to prescribe more of the same poison to the patient.

As long as we are unable to describe the problem accurately, we will not even begin to address it in an effective manner. The first step is to start calling the thing by its name:  the main source of Armenia’s devastation in the past twenty-five years is not “capitalism gone amok”; rather, it is capitalist rule.

(MarkarMelkonian is a nonfiction writer and a philosophy instructor.  His books include Richard Rorty’s Politics:  Liberalism at the End of the American Century (Humanities Press, 1999), Marxism: A Post-Cold War Primer (Westview Press, 1996), and My Brother’s Road (I.B. Tauris, 2005, 2007), a memoir/biography about Monte Melkonian, co-written with Seta Melkonian)

Photo by Sara Anjargolian

Africa/Global: Charting Where They Hide the Money, 1
worker | March 12, 2018 | 7:31 pm | Africa, Economy | Comments closed

Africa/Global: Charting Where They Hide the Money, 1

AfricaFocus Bulletin March 12, 2018 (180312) (Reposted from sources cited below)

Editor’s Note

“Switzerland, the United States and the Cayman Islands are the world’s biggest contributors to financial secrecy, according to the latest edition of the Tax Justice Network’s Financial Secrecy Index (FSI). … Kenya, which this year set up its own tax haven in the form of the Nairobi International Financial Centre, is an example of how interests of western financial service lobbyists have successfully lured governments into a race to the bottom. Kenya, which has been assessed for the first time in the 2018 FSI, has an extremely high secrecy score of 80/100.” – Tax Justice Network

The FSI for 2018, released by the Tax Justice Network on January 31, is far more than a simple index. It is an in-depth survey as well as ranking of the countries most deeply involved in concealing wealth through offshore financial services. Based on a quantitative measure of the share of such cross-border financial services based in each country, and an in-depth qualitative evaluation of national laws and regulations affecting transparency and secrecy, the FSI provides the indispensable context for investigative journalism exposes of specific cases and advocacy by civil society groups at both national and international levels.

In striking contrast to Transparency International “Corruption Perceptions Index (CPI) (, which rates countries on the basis of observers’ perceptions of the extent of corruption, the FSI focuses on the mechanisms which permit the fruits of corruption and other hidden assets to be concealed. Ironically, Switzerland, Luxembourg, and the Netherlands are ranked as among the least corrupt on the CPI, but they also lead on the FSI as the best places to hide the fruits of corruption, tax evasion, and other crimes.

The system that allows this to happen is in fact global, and its distribution by country, by intention, is hard to track. This two-part AfricaFocus contains substantive excerpts from the Financial Secrecy Index reports. This first part (sent out by email and available on-line at excerpts overview analyses from the authors covering the global picture and the African continent. The second part, not sent out by email but available at , provides excerpts from country reports on the United Kingdom, the United States, Kenya, Liberia, South Africa, and Mauritius.

Much more extensive data in narrative, database, and graphic formats, is available at

For previous AfricaFocus Bulletins on illicit financial flows, tax evasion, and related topics, visit

++++++++++++++++++++++end editor’s note+++++++++++++++++

Financial Secrecy Index 2018


The Financial Secrecy Index ranks jurisdictions according to their secrecy and the scale of their offshore financial activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight.

An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Secrecy jurisdictions – a term we often use as an alternative to the more widely used term tax havens – use secrecy to attract illicit and illegitimate or abusive financial flows.

Illicit cross-border financial flows have been estimated at $1-1.6 trillion per year: dwarfing the US$135 billion or so in global foreign aid. Since the 1970s African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion. So Africa is a major net creditor to the world Рbut its assets are in the hands of a wealthy ̩lite, protected by offshore secrecy; while the debts are shouldered by broad African populations.

Yet all rich countries suffer too. For example, European countries like Greece, Italy and Portugal have been brought to their knees partly by decades of tax evasion and state looting via offshore secrecy.

A global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients. ‘Competition’ between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalisation really took off in the 1980s, become a central feature of global financial markets.

The problems go far beyond tax. In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency. The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more. It provides multiple ways for insiders to extract wealth at the expense of societies, creating political impunity and undermining the healthy ‘no taxation without representation’ bargain that has underpinned the growth of accountable modern nation states. Many poorer countries, deprived of tax and haemorrhaging capital into secrecy jurisdictions, rely on foreign aid handouts.

This hurts citizens of rich and poor countries alike.

Switzerland, USA and Cayman top the 2018 Financial Secrecy Index

by George Turner

Tax Justice Network, January 30, 2018

Switzerland, the United States and the Cayman Islands are the world’s biggest contributors to financial secrecy, according to the latest edition of the Tax Justice Network’s Financial Secrecy Index (FSI).

The full financial secrecy index can be found online at There you can find interactive tables and maps of the FSI, as well as download reports on specific countries. A direct link to the table of rankings by country is at

Financial secrecy is a key facilitator of financial crime, and illicit financial flows including money laundering, corruption and tax evasion. Jurisdictions who fail to contain it deny citizens elsewhere their human rights and exacerbate global inequality.

The table below shows the top-ranked 54 countries on the FSI. The full interactive table is available here.

Switzerland, the global capital of bank secrecy, retains the worst ranking, and the US has moved up to second. With Bahrain and Lebanon dropping out of the top ten, Guernsey and a new entry in Taiwan has replaced them.

The US’ rise in the FSI 2018 rankings is part of a worrying trend. This is the second time in succession that the USA has risen up the Financial Secrecy Index. In 2013 the States was in 6th place, and in 2015 it took 3rd. In 2015 the country was one of the few to increase its secrecy score. This time the increase in ranking is driven by a huge rise in their share of the market in offshore financial services that wasn’t neutralised by a significant reduction in their secrecy. In total, the share of global offshore financial services taken by the United States rose by 14% between the 2015 and 2018 index from 19.6% to 22.3%.

The United States remains a secrecy jurisdiction as it refuses to take part in international initiatives to share tax information with other countries, and has failed to end anonymous companies and trusts aggressively marketed by some US states. There is now real concern about the damage this promotion of illicit financial flows is doing to the global economy.

Slow progress in the global fight against financial secrecy

The 2015 Index noted several improvements towards global financial transparency following the 2008 financial crisis and the huge budget deficits that it created, where governments around the world sought to reign in tax abuse by its citizens, and by multinational corporations.

Some of those efforts are now starting to bear fruit. Most importantly, countries have now started to exchange information on bank accounts held by foreign citizens in their jurisdictions on an automatic basis.

But this Financial Secrecy Index demonstrates how ten years on from the financial crisis all countries still have a long road ahead of them to improve their performance on financial secrecy. The most transparent country – Slovenia – has a secrecy score of 41.8, out of a total possible score of 100. A score of 0 would represent ideal, competition and market friendly transparency. In other words, if the Financial Secrecy Index were a school exam, Slovenia (the best student) would have barely passed, with less than 60% of the correct “transparency” answers. The worst countries only got close to 10% of the “transparency” questions right (a secrecy score close to 90). Following this analogy, practically all countries would have to repeat the school year.

The top two countries in this year’s FSI are the two that have been most resistant to the key policy of automatic information exchange between tax authorities. The US refuses to take part altogether. Instead, it has set up its own parallel system (FATCA) which seeks information on US citizens abroad, but provides little, if any, data to foreign countries.

The global capital of banking secrecy, Switzerland has delayed the implementation of automatic information exchange, and in 2017 lawmakers attempted to stop it altogether with countries they deemed ‘corrupt’. As the FSI demonstrates, countries like Switzerland are fundamental to the flow of illicit financial funds, such as the proceeds of corruption. Switzerland’s attempts to stop transparency for funds they receive from countries with perceived high levels of corruption will simply make tackling corruption in those countries harder.

After the financial crash further scandals have led to a greater push for more transparency, such as the demand for public registers of company owners. Yet this progress has been difficult, as powerful vested interests working with friendly governments seek to frustrate change. The UK government for example continues to insist on the right of its satellite tax havens to maintain the secrecy of company ownership, and the German government, with others, have sought to impede attempts to make progress on the beneficial ownership issue within the European Union.

Financial secrecy’s impact on human rights

Six out of the Top 10 FSI 2018 countries are either members of the OECD or their dependencies. Another three are Asian tax havens, demonstrating how major economies are driving the market for financial secrecy.

Secrecy jurisdictions are found all over the world. On this map the top ten are shown in blue. An interactive version of the map is available here.

Kenya, which this year set up its own tax haven in the form of the Nairobi International Financial Centre, is an example of how interests of western financial service lobbyists have successfully lured governments into a race to the bottom. Kenya, which has been assessed for the first time in the 2018 FSI, has an extremely high secrecy score of 80/100.

By harboring the ill-gotten gains of kleptocrats and tax evaders, secrecy jurisdictions deprive governments of the resources needed to provide basic social protection, and encourage the looting of natural resources.

This impact of financial secrecy on the abuse of human rights is increasingly recognised globally. Switzerland has been sharply criticised by the United Nations for the damage that its financial secrecy causes to human rights around the world, while a recent statement by the UN Special Rapporteur on Extreme Poverty and Human Rights, highlighted the poverty and inequality suffered by citizens of the United States, in part driven by their government’s desire to become a tax haven. This statement comes at a time when our index shows the country undermining rights elsewhere through its promotion of financial secrecy.

How we created the world’s leading study of financial secrecy

The Financial Secrecy Index is the world’s most comprehensive assessment of the secrecy of financial centres and the impact of that secrecy on global financial flows. The European Commission’s Joint Research Centre provided methodological support for the construction of the index. The study is published every two years and is founded on published, independently verifiable data. In contrast to some so called ‘blacklists’ of tax havens, inclusion in the FSI is not based on political decision making.

Countries are assessed against criteria which include whether companies, trusts and foundations are required to reveal their true owners, whether annual accounts are made available online in open data format, or the extent to which jurisdictions’ rules comply with anti-money laundering standards (FATF’s 40 recommendations).

This year several new indicators have been added to the FSI and existing indicators have been substantially revised to drill deeper into questions around ownership registration and disclosure. A total of 20 Key Financial Secrecy Indicators (KFSI) is used for the measurement of the secrecy score.

In order to create the index, a secrecy score is combined with a figure representing the size of the offshore financial services industry in each country. This is expressed as a percentage of global exports of financial services. The bigger player you are, the more responsibility you have to be transparent.

Beyond of what has been achieved so far by academic or regulatory institutions, the new FSI is the most comprehensive and rigorous assessment of financial secrecy worldwide.

New criteria include checking if a jurisdiction provides for

  • A public register of ownership and annual accounts of limited partnerships (KFSI 5);
  • A public register of ownership of real estate and a central register of users of freeports for the storage of high value assets (KFSI 4);
  • Banking secrecy rules protected by criminal law (risk of prison terms for banking whistleblowers; KFSI 1);
  • Public access to tax court verdicts and proceedings, both in criminal and civil tax matters (KFSI 14);
  • Mandatory Legal Entity Identifiers for companies created in its territory (KFSI 10);
  • Harmful tax residency and citizenship rules (KFSI 12);
  • Public access to unilateral tax rulings and robust local filing requirements for Country-By-Country Reports (KFSI 9);
  • Unregistered bearer shares for companies & large banknotes (KFSI 15);
  • Public statistics on its cross-border financial and economic activities (KFSI 16);
  • Mandatory reporting obligations of tax avoidance schemes (KFSI 11).

Africa’s battle against financial secrecy: Financial Secrecy Index

by Rachel Etter-Phoya

Tax Justice Network, February 14, 2018 – direct URL:

How are Switzerland, the United States, and the Caymans working against African efforts to stem the tide of illicit financial flows? They’re among the worst offenders in the Tax Justice Network’s 2018 Financial Secrecy Index.

The index was launched at the end of January 2018 and weights a country’s secrecy score against its global share of financial services. This means that countries that top the rankings have a far higher risk for illicit financial flows running through their systems than countries that may have a higher level of secrecy, but have much smaller-scale financial services. 20 key indicators are used to assess secrecy levels, including banking and tax court secrecy, country-by-country reporting compliance, ownership disclosure rules, and tax administration capacity.

The problem for Africa

Africa remains a net creditor to the world because of illicit financial flows. These flows include money from criminal activity and corruption, tax evasion, avoidance and planning, as well as hidden wealth. So-called foreign aid is dwarfed by the amounts that are leaving the continent. Sub-Saharan African countries lost over USD 1 trillion in capital flight between the 1970s and 2010; external debt was less than one-fifth of this. Financial secrecy is the enabler.

The Paradise Papers was a disturbing reminder of the scale of the problem. 13.4 million documents were leaked from Appleby, a leading British offshore law firm, and Asiaciti, a family-owned trust company, which were investigated by over 90 media partners with the International Consortium of Investigative Journalists.

We learned that Namibians lost potential tax revenues from its fishery resources through a complex corporate arrangement that exploited a double tax treaty signed with Mauritius. Angolans’ sovereign wealth fund was tapped into by a financier who incorporated companies in secrecy jurisdictions for investment projects in which he had a stake. And mining giant Glencore’s nefarious practices in the Democratic Republic of the Congo and in Burkina Faso have also likely reduced the revenue these governments have to spend on vital public services.

South Africa has also had its fair share of challenges with secrecy jurisdictions. The notorious Gupta family along with their politically-exposed associates have been able to hide behind opaque companies to gain questionable access to government contracts. For example, the family is reported to have used shell companies in the United Arab Emirates to move ‘the dubious proceeds of state tenders in South Africa to their collection of shell companies in and around Dubai’. The United Arab Emirates is ranked number nine in the Financial Secrecy Index 2018, with an ‘”ask-noquestions, see-no-evil” approach to commercial transactions, financial regulation and crimes’.

African secrecy jurisdictions on the rise

Financial secrecy has also reared its ugly head on the continent itself. Nine African countries are included in this year’s Financial Secrecy Index:

Kenya found itself in the top 30 countries worldwide with a very high secrecy score (80 out of 100). This may not come as a surprise. The country’s Vision 2030 includes the establishment of the Nairobi International Financial Centre as one of its commitments. Legislation entered into force in September last year to encourage foreign direct investment to be channelled through the East African nation to other countries in the region. Kenya has adopted a model similar to the City of London (the UK having experienced the Finance Curse phenomenon as a result) and continues to increase its network of double tax agreements.

Double tax agreements aim to prevent income being taxed twice. Yet a number of associated risks undermine the collection of tax. The treaties restrict the rights of states to tax foreign investors and owned companies and often do not include adequate automatic exchange of information provisions. Multinationals and sometimes domestic companies may set up an entity in an intermediary country, even when they have no substantive economic activities, to exploit tax treaties in place. This ‘treaty shopping’ enables companies and individuals to pay lower taxes in conduit countries and avoid taxes all together in the countries where activities are taking place.

However, with just 15 tax treaties in force, Kenya has some way to go if it is to compete with one of Africa’s oldest secrecy jurisdictions, Mauritius. In a bid to reduce its reliance on sugar back in the 1970s, this island nation started offering preferential tax terms and exemptions to foreign investors, and similar ones exist today. The country has entered double tax agreements with 43 nations, 16 of which are with African states. Zero-percent capital gains tax has lured many companies to set up shop – with no genuine economic activity – on the island, significantly reducing their tax burden at the expense of other countries, often not paying capital gains tax anywhere. South Africa and India have successfully renegotiated their agreements with Mauritius to be able to collect capital gains and withholding tax. Other African nations, including Lesotho and Zambia, are following suit and renegotiating treaties.

Ghana toyed with setting up an International Financial Services Centre (IFSC) and went as far as granting Barclays Bank Ghana Limited an offshore banking licence in the early 2000s although President John Atta Mills revoked the licence in 2011 to avoid OECD blacklisting. Worringly, it appears the country has plans to revive the IFSC.

Much more can be said about secrecy on the continent. We have prepared narrative reports for eight of the nine African countries included in the Index. Take a look here. Our partner Tax Justice Network Africa also has a blog series on financial secrecy. Part 1 is available here.

Global solutions

Some changes have been made to the global infrastructure to tackle secrecy since TJN launched the first Index in 2009. For example, the OECD is mandated by the G20 to roll out the automatic exchange of information on taxation, but coverage is patchy and some countries, particularly African ones, are missing from the arrangement.

Reform is needed now. Besides individual countries addressing laws and regulations to improve transparency, TJN has identified three major policy responses considering the latest Financial Secrecy Index:

  1. Take counter-measures against tax haven USA: the USA ranks second in the Index this year because it has not improved transparency while other countries have acted. The global scale of its financial services has also increased. The USA needs to make it illegal to establish anonymous companies within its borders and it must comply with the standard for automatic exchange of tax information. We have a policy proposal for how to incentive the USA, here.
  2. Adopt the Tax Justice Network’s ABCs of tax transparency: all countries must be included in the Automatic exchange of information and aggregate statistics published, all entities must disclose their Beneficial owners and data should be online, free and in open data format for companies, trusts and foundations, and all multinational companies must comply with public Country-by-country reporting.
  3. Introduce a UN global convention on tax transparency: ambitious standards should be set, with the ABCs of tax transparency at a minimum, through a global, inclusive process that outlines meaningful sanctions for non-cooperation.

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AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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This is Capitalism #5 – The world’s richest 1% took home 82% of the wealth produced by workers in 2017
worker | January 22, 2018 | 8:24 pm | Analysis, class struggle, Economy | Comments closed

Monday, January 22, 2018

This is Capitalism #5 – The world’s richest 1% took home 82% of the wealth produced by workers in 2017
Eighty two percent (82%) of the wealth generated last year went to the richest one percent of the global population, while the 3.7 billion people who make up the poorest half of the world saw no increase in their wealth, according to a new Oxfam report released today. The report is being launched as political and business elites gather for the World Economic Forum in Davos, Switzerland.
According to Oxfam,
  • Billionaire wealth has risen by an annual average of 13 percent since 2010 – six times faster than the wages of ordinary workers, which have risen by a yearly average of just 2 percent. The number of billionaires rose at an unprecedented rate of one every two days between March 2016 and March 2017.
  • It takes just four days for a CEO from one of the top five global fashion brands to earn what a Bangladeshi garment worker will earn in her lifetime. In the US, it takes slightly over one working day for a CEO to earn what an ordinary worker makes in a year.
  • It would cost $2.2 billion a year to increase the wages of all 2.5 million Vietnamese garment workers to a living wage. This is about a third of the amount paid out to wealthy shareholders by the top 5 companies in the garment sector in 2016.
South Africa/USA: Inequality Extreme and Rising
worker | January 17, 2018 | 8:38 am | Africa, Economy | Comments closed

South Africa/USA: Inequality is Extreme and Still Rising

AfricaFocus Bulletin January 15, 2018 (180115) (Reposted from sources cited below)

Editor’s Note

“I came here because of my deep interest and affection for a land settled by the Dutch in the mid-seventeenth century, then taken over by the British, and at last independent; a land in which the native inhabitants were at first subdued, but relations with whom remain a problem to this day; a land which defined itself on a hostile frontier; a land which has tamed rich natural resources through the energetic application of modern technology; a land which once imported slaves, and now must struggle to wipe out the last traces of that former bondage. I refer, of course, to the United States of America.” – Robert F. Kennedy, University of Cape Town, June 6, 1966

More than 50 years after Robert Kennedy’s speech in Cape Town, there have been many victories in the fight for political rights and against racial discrimination in both South Africa and the United States. The sacrifices and victories of those decades should not be discounted.

Nevertheless, despite tha advance of many African Americans and Black South Africans into positions of power and wealth, the inequality inherited from that history remains deeply imprinted in the society and the economy. Its effects are felt not only in the explicit racial inequalities that still exist, but also in the ideologies rationalizing inequality more generally and legitimizing structural inequalities as the allegedly deserved outcome of individual achievement.

The World Inequality Report, just released, documents with the best data available on the trends of inequality at global and national levels, a necessary but of course insufficient step in finding remedies to reverse the trend of increasing inequality and to repair the damages still felt from historical inequities.

This AfricaFocus Bulletin contains excerpts from the chapters on South Africa and the United States from the new World Inquality Report. Excerpts from the executive summary of the report appear in another AfricaFocus Bulletin sent out today and available at

For previous AfricaFocus Bulletins on South Africa, visit

++++++++++++++++++++++end editor’s note+++++++++++++++++

World Inequality Report 2018

Trends in global income inequality

For the full report, database, and extensive additional background information, visit

Robert F. Kennedy in Soweto, June 8, 1966. Credit: Photo taken by Alf Kumalo

2.12: Income inequality in South Africa

  • South Africa stands out as one of the most unequal countries in the world. In 2014, the top 10% received 2/3 of national income, while the top 1% received 20% of national income.
  • During the twentieth century, the top 1% income share was halved between 1914 and 1993, falling from 20% to 10%. Even if these numbers must be qualified, as they are surrounded by a number of uncertainties, the trajectory is similar to that of other former dominions of the British Empire, and is partly explained by the country’s economic and political instability during the 1970s and 1980s.
  • During the early 1970s the previously constant racial shares of income started to change in favor of the blacks, at the expense of the whites, in a context of declining per capita incomes. But while interracial inequality fell throughout the eighties and nineties, inequality within race groups increased.
  • Rising black per capita incomes over the past three decades have narrowed the interracial income gap, although increasing inequality within the black and Asian/Indian population seems to have prevented any decline in total inequality.
  • Since the end of Apartheid in 1994, top-income shares have increased considerably. In spite of several reforms targeting the poorest and fighting the segregationist heritage, race is still a key determinant of differences in income levels, educational attainment, job opportunities and wealth.

South Africa’s dual economy is among the most unequal in the world

South Africa is one of the most unequal countries in the world. In 2014, the top 10% of earners captured two thirds of total income. This contrasts with other high-income inequality countries such as Brazil, the United States and India where the top 10% is closer to 50–55% of national income. However, unlike other highly unequal countries, the divide between the top 1% and the following 9% in South Africa is much less pronounced than the gap between the top 10% and the bottom 90%. Otherwise said, in terms of top income shares, South Africa ranks with the most unequal Anglo-Saxon countries, but, at the same time, there is less concentration within the upper income groups, mostly composed by the white population. The average income among the top 1% was about four times greater than that of the following 9% in 2014 (for comparative purposes, the top 1% in the United States earn seven times more than the following 9%), while average income among the top 10% was more than seventeen times greater than the average income of the bottom 90% (it is eight times more in the United States). It is then only logical that the income share of the top 1% is high, capturing 20% of national income, though this is not the largest share in the world.

The South African “dual economy” can be further illustrated by comparing South African income levels to that of European countries. In 2014, the average national income per adult among the richest 10% was €94 600, at purchasing power parity, that is, comparable to the average for the same group in France, Spain or Italy. But average national income of the bottom 90% in South Africa is close to the average national income of the bottom 16% in France. In light of these statistics, the recently debated emergence of a so-called middle class is still very elusive. Rather, two societies seem to coexist in South Africa, one enjoying living standards close to the rich or upper middle class in advanced economies, the other left behind.

Inequality has decreased from the unification of South Africa to the end of apartheid

South Africa is an exception in terms of data availability in comparison with other African countries. The period for which fiscal data are available starts in 1903 for the Cape Colony, seven years before the Union of South Africa was established as a dominion of the British Empire, and ends in 2014, with some years sporadically missing, and noticeably an eight- year interruption following the end of apartheid in 1994. As is often the case with historical tax data series, only a very small share of the total adult population was eligible to pay tax in the first half of the twentieth century. Therefore, the fiscal data from which we can estimate top-income shares allows us to track the top 1% income share since 1913, but only cover the top 10% of the population from 1963 (with a long interruption between 1971 and 2008).

With important short run variations, the evolution of income concentration over the 1913–1993 period seems to follow a very clear long-term trend. The income share of the richest 1% was more than halved between 1913 and 1993, falling from 22% to approximately 10%. Not only did the income share attributable to the top 1% decrease, but inequality within this upper group was also reduced. Indeed, the share of the top 0.5% fell more quickly than the share of the next 0.5% (from percentile 99 to percentile 99.5). Consequently, while the top 0.5% represented about 75% of the top 1% in 1914, by the end of the 1980s, their representative proportion fell to 60%.

Despite the extreme social implications of the first segregationist measures that were implemented in the early 1910s, these policies did not lead to large increases in income concentration among the top 1%. This was also a time in which South Africa progressively developed its industrial and manufacturing sector, enjoying notable accelerations in the 1930s that were to the benefit of the large majority of the population. Aside from a brief fall during the Great Depression, average real income per adult then increased steadily. Following a trend similar to other former Dominions of the British Empire (Australia, Canada and New Zealand) inequality decreased significantly in South Africa from 1914 to the beginning of the the Second World War, despite some short-run variations in the late 1910s: the income share of the top 1% fell from 22% to 16%.

During the Second World War, national average continued to follow its previous trend, but the average real income of the richest 1% took off. As a consequence of the demand shock during the war, the agricultural export prices boomed, the manufacturing sector more than doubled its output between 1939 and 1945, and profits for the foundry and engineering industries increased by more than 400%. However, the wage differential between skilled/white and unskilled/black workers remained extremely large. As C.H. Feinstein described, “black workers [were] denied any share of the growing income in the new economy they were creating.” The fact that the peak in the income share of the top 1%–as high as 23% in 1946–was concomitant with the war effort thus seems essentially due to a brief enrichment of the upper class.

In contrast, income growth in the 1950s was more inclusive, as average real income per adult increased by 29% between 1949 and 1961, while the average real income of the top 1% slightly decreased. By 1961 the income share of the top 1% had fallen to around 14%. In the 1960s, both averages grew approximately at the same rate such that inequality remained relatively constant. Following 60 years of successive increases, national average income was almost four times greater by the early 1970s than in 1913. Inequality resumed its downward sloping trend from 1973, but this also marked a period of overall income growth stagnation in South Africa until 1990 that culminated in a three-year recession.

For the first time in the previous 90 years, gold output started falling. Richer seams were exhausted and extraction costs increased rapidly. The industry that was once the engine of the economy started to weaken. Increases in oil prices and other commodities accelerated inflation dramatically, averaging about 14% per year between 1975 and 1992. In the 1980s, international sanctions and boycotts were placed on South African trade as a response to the apartheid regime, adding further pressure to that created by domestic protests and revolts, and contributed to the destabilization of the regime in place. White dominance was challenged on both economic and political grounds, to which the ruling government progressively made concessions, recognizing trade unions and the right to bargain for wages and conditions; this could partly explain why the average real income per adult of the top 1% decreased faster than the national average.

The progressive policies implemented after apartheid were not sufficient to counter a profoundly unequal socio-economic structure

There are no fiscal data to estimate top-income shares for the eight years that followed 1993. However, joining up the data points to the next available figure in 2002 suggests that income inequality has increased sharply between the end of apartheid and the present, even if the magnitude of the increase must be taken with caution, as the estimates in these two periods may not be totally comparable. The income share of the top 1% increased by 11 percentage points from 1993 to 2014. Part of the increase from 1993 to 2002 should come from changes in the tax code. In particular, before 2002, capital gains were totally excluded, which is very likely to downward bias the share of top-income groups. Also, the tax collection capabilities seem to have increased substantially in the last years. That being said, household survey data for the years 1993, 2000 and 2008 research has demonstrated that inequality increased significantly during the period for which we have no fiscal data.

At first, it might seem puzzling that the abolishment of a segregationist regime was followed by an aggravation of economic inequality. The establishment of a multiracial democracy, with a new constitution and a president of the same ethnic origin as the majority of the population, did not automatically transform the inherited socio-economic structure of a profoundly unequal country. Interracial inequality did fall throughout the eighties and nineties, but inequality within race groups increased: rising black per capita incomes over the past three decades have narrowed the black-white income gap, although increasing inequality within the black and Asian/Indian population seems to have prevented any decline in aggregate inequality. In explaining these changes scholars agree in that the labor market played a dominant role, where a rise in the number of blacks employed in skilled jobs (including civil service and other high-paying government positions) coupled with increasing mean wages for this group of workers.

Since 1994, several redistributive social policies have been implemented and/or extended, among which important unconditional cash transfers targeting the most exposed groups (children, disabled and the elderly). At the same time, top marginal tax rates on personal income were kept relatively high and recently increased to 45%. However, in spite of these redistributive policy efforts, surveys consistently show that top-income groups are still overwhelmingly white. Other studies further demonstrate that such dualism is itself salient along other key dimensions such as unemployment and education. Furthermore wealth, and in particular land, is still very unequally distributed. In 1913, the South African parliament passed the Natives Land Act which restricted land ownership for Africans to specified area, amounting to only 8% of the country’s total land area, and by the early 1990s, less than 70 000 white farmers owned about 85% of agriculture land. Some land reforms have been implemented, but with seemingly poor results, and it is likely that the situation has not improved much since, although precise data about the recent distribution of land still needs to be collected.

Given this socio-economic structure, the interruption of the international boycotts in 1993 might have more directly favored a minority of high skilled and/or richer individuals who were able to benefit from the international markets, which therefore contributed to increase inequality. This hypothesis would also explain the fact that income inequality in South Africa did not increase in the 1980s, while boycotts were put in place, contrary to other former Dominions (New Zealand, Canada and Australia) despite the country having so far followed a similar trend. Furthermore, the implementation of the Growth, Employment and Redistribution (GEAR) program in 1996, which consisted of removing trade barriers, liberalizing capital flows and reducing fiscal deficit might also have contributed, at least in the short run, to enrich the most well off while exposing the most vulnerable, in part by increasing returns to capital over labor and to skilled workers over unskilled workers.

The rapid growth experienced from the early 2000s until the mid-2010s was essentially driven by the rise in commodity prices and was not accompanied with significant job creation as the government hoped it would. The income share of the top 1% grew from just less than 18% in 2002 to over 21% in 2007, then decreased by about 1.5 percentage points and increased again in 2012–2013 as prices reached a second peak. The fact that these variations closely mirror the fluctuation in commodity prices suggest that a minority benefiting from resource rents could have granted themselves a more than proportional share of growth.

Lastly, it should be stressed that the top 1% only represents a small part of the broader top 10% elite which is mostly white. While the share of income held by the top 1% is relatively low as compared to other high inequality regions such as Brazil or the Middle East, the income share of the top 10% group is extreme in South Africa. The historical trajectory of the top 10% group may be different to that of the top 1%–potentially with less ups and downs throughout the 20th century. Unfortunately at this stage, historical data on the top 10% group does not go as far back in time as for the top 1% group.”

2.4 Income inequality in the United States

  • Income inequality in the United States is among the highest of all rich countries. The share of national income earned by the top 1% of adults in 2014 (20.2%) is much larger than the share earned by the bottom 50% of the adult population (12.5%).
  • Average pre-tax real national income per adult has increased 60% since 1980, but it has stagnated for the bottom 50% at around $16 500. While post-tax cash incomes of the bottom 50% have also stagnated, a large part of the modest post-tax income growth of this group has been eaten up by increased health spending.
  • Income has boomed at the top. While the upsurge of top incomes was first a laborincome phenomenon in 1980s and 1990s, it has mostly been a capital- income phenomenon since 2000.
  • The combination of an increasingly less progressive tax regime and a transfer system that favors the middle class implies that, even after taxes and all transfers, bottom 50% income growth has lagged behind average income growth since 1980.
  • Increased female participation in the labor market has been a counterforce to rising inequality, but the glass ceiling remains firmly in place. Men make up 85% of the top 1% of the labor income distribution.

Income inequality in the United States is among the highest of rich countries

In 2014, the distribution of US national income exhibited extremely high inequalities. The average income of an adult in the United States before accounting for taxes and transfers was $66 100, but this figure masks huge differences in the distribution of incomes. The approximately 117 million adults that make up the bottom 50% in the United States earned $16 600 on average per year, representing just onefourth of the average US income. As illustrated by table 2.4.1, their collective incomes amounted to a 13% share of pre-tax national income. The average pre-tax income of the middle 40%–the group of adults with incomes above the median and below the richest 10%, which can be loosely described as the “middle class”–was roughly similar to the national average, at $66 900, so that their income share (41%) broadly reflected their relative size in the population. The remaining income share for the top 10% was therefore 47%, with average pre-tax earnings of $311 000. This average annual income of the top 10% is almost five times the national average, and nineteen times larger than the average for the bottom 50%. …

Income is very concentrated, even among the top 10%. For example, the share of national income going to the top 1%, a group of approximately 2.3 million adults who earn $1.3 million on average per annum, is over 20%–that is, 1.6 times larger than the share of the entire bottom 50%, a group fifty times more populous. The incomes of those in the top 0.1%, top 0.01%, and top 0.001% average $6 million, $29 million, and $125 million per year, respectively, before personal taxes and transfers.

As shown by Table 2.4.1 , the distribution of national income in the United States in 2014 was generally made slightly more equitable by the country’s taxes and transfer system. Taxes and transfers reduce the share of national income for the top 10% from 47% to 39%, which is split between a one percentage point rise in the post-tax income share of the middle 40% (from 40.5% to 41.6%) and a seven percentage point increase in the post-tax income share of the bottom 50% (from 12.5% to 19.4%). …

National income grew by 61% from 1980 to 2014 but the bottom 50% was shut off from it

Income inequality in the United States in 2014 was vastly different from the levels seen at the end of the Second World War. Indeed, changes in inequality since the end of that war can be split into two phases, as illustrated by Table 2.4.2 . From 1946 to 1980, real national income growth per adult was strong–with average income per adult almost doubling– and moreover, was more than equally distributed as the incomes of the bottom 90% grew faster (102%) than those of the top 10% (79%). However, in the following thirty-four-year period, from 1980 to 2014, total growth slowed from 95% to 61% and became much more skewed.

The pre-tax incomes of the bottom 50% stagnated, increasing by only $200 from $16 400 in 1980 to $16 600 in 2014, a minuscule growth of just 1% over a thirty-four-year period. The total growth of post-tax income for the bottom 50% was substantially larger, at 21% over the full period 1980–2014 (averaging 0.6% a year), but this was still only one-third of the national average. Growth for the middle 40% was weak, with a pre-tax increase in income of 42% since 1980 and a post-tax rise of 49% (an average of 1.4% a year). By contrast, the average income of the top 10% doubled over this period, and for the top 1% it tripled, even on a post-tax basis. The rates of growth further increase as one moves up the income ladder, culminating in an increase of 636% for the top 0.001% between 1980 and 2014, ten times the national income growth rate for the full population.

The rise of the top 1% mirrors the fall of the bottom 50%

This stagnation of incomes of the bottom 50%, relative to the upsurge in incomes experienced by the top 1% has been perhaps the most striking development in the United States economy over the last four decades. As shown by Figure 2.4.1a , the groups have seen their shares of total US income reverse between 1980 and 2014. The incomes of the top 1% collectively made up 11% of national income in 1980, but now constitute above 20% of national income, while the 20% of US national income that was attributable to the bottom 50% in 1980 has fallen to just 12% today. Effectively, eight points of national income have been transferred from the bottom 50% to the top 1%. … This has increased the average earnings differential between the top 1% and the bottom 50% from twenty-seven times in 1980 to eighty-one times today.

Excluding health transfers, average post-tax income of the bottom 50% stagnated at $20,500

The stagnation of incomes among the bottom 50% was not the case throughout the postwar period, however. The pre-tax share of income owned by this chapter of the population increased in the 1960s as the wage distribution became more equal, in part as a consequence of the significant rise in the real federal minimum wage in the 1960s, and reached its historical peak in 1969. These improvements were supported by President Johnson’s “war on poverty,” whose social policy provided the Food Stamp Act of 1964 and the creation of the Medicaid healthcare program in 1965.

However, the share of both pre-tax and post-tax US income accruing to the bottom 50% began to fall notably from the beginning of the 1980s, and the gap between pre-tax and post-tax incomes also diverged significantly from this point onwards. Indeed, the data indicate that virtually all of the meager growth in the real post-tax income of the bottom 50% since the 1970s has come from Medicare and Medicaid. Excluding these two health care transfers, the average post-tax income of the bottom 50% would have stagnated since the late 1970s at just below $20 500. The bottom half of the US adult population has therefore been effectively shut off from pre-tax economic growth for over forty years, and the increase in their post-tax income of approximately $5,000 has been almost entirely absorbed by greater health-care spending, in part as a result of increases in the cost of healthcare provision.

Taxes have become less progressive over the last decades

The progressivity of the US tax system has declined significantly over the last few decades, as illustrated in Figure 2.4.6 . The country’s macroeconomic tax rate (that is, the share of total taxes in national income including federal, state, and local taxes) increased from 8% in 1913 to 30% in the late 1960s, and has remained at the latter level since. Effective tax rates have become more compressed, however, across the income distribution. In the 1950s, the top 1% of income earners paid 40%–45% of their pre-tax income in taxes, while the bottom 50% earners paid 15–20%. The gap in 2014 was much smaller. In 2014, top earners paid approximately 30%–35% of their income in taxes, while the bottom 50% of earners paid around 25%.

In contrast to the overall fall in tax rates for top earners since the 1940s, taxes on the bottom 50% have risen from 15% to 25% between 1940 and 2014. This has been largely due to the rise of payroll taxes paid by the bottom 50%, which have risen from below 5% in the 1960s to more than 10% in 2014.

Transfers essentially target the middle class, leaving the bottom 50% with little support in managing the collapse in their pre-tax incomes

While taxes have steadily become less progressive since the 1960s, one major evolution in the US economy over the last fifty years has been the rise of individualized transfers, both monetary and in-kind. Public-goods spending has remained constant, at around 18% of national income, but transfers–other than Social Security, disability, and unemployment insurance, which are already included in calculations of pre-tax income–increased from around 2% of national income in 1960 to 11% in 2014. The two largest transfers were Medicaid and Medicare, representing 4% and 3%, respectively, of national income in 2014. Other important transfers include refundable tax credits (0.8% of national income), veterans’ benefits (0.6%), and food stamps (0.5%).

Perhaps surprisingly, individualized transfers tend to target the middle class. Despite Medicaid and other means-tested programs which go entirely to the bottom 50%, the middle 40% received larger transfers in 2014 (totaling 16% of per-adult national income) than the bottom 50% of Americans (10% of per-adult national income). … These transfers have been key to enabling middle-class incomes to grow, as without them, average income for the middle 40% would not have grown at all between 1999 in 2014. By contrast, transfers have not been sufficient to enable the incomes of the bottom 50% to grow significantly and counterbalance the collapse in their pre-tax income.

The reduction in the gender wage gap has been an important counterforce to rising US inequality

The reduction in the gender gap has been an important force in mitigating the rise in inequality that has largely taken place after 1980. …The overall gender gap has been almost halved over the last half-century, but it has far from disappeared. …

Still, considerable gender inequalities persist, particularly at the top of the labor income distribution, as illustrated by Figure 2.4.9 . In 2014, women accounted for close to 27% of the individuals in the top 10% of the income distribution, up 22 percentage points from 1960. Their representation, however, grows smaller at each higher step along the distribution of income. Women make up only 16% of the top 1% of labor income earners (a 13 percentage point rise from the 1960s), and only 11% of the top 0.1% (an increase of 9 percentage points). There has been only a modest increase in the share of women in top labor income groups since 1999. The glass ceiling is still far from being shattered.

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Africa/Global: World Trends in Inequality
worker | January 17, 2018 | 8:36 am | Africa, Economy | Comments closed

Africa/Global: World Trends in Inequality

AfricaFocus Bulletin January 15, 2018 (180115) (Reposted from sources cited below)

Editor’s Note

“The divergence in inequality levels has been particularly extreme between Western Europe and the United States, which had similar levels of inequality in 1980 but today are in radically different situations. While the top 1% income share was close to 10% in both regions in 1980, it rose only slightly to 12% in 2016 in Western Europe while it shot up to 20% in the United States. Meanwhile, in the United States, the bottom 50% income share decreased from more than 20% in 1980 to 13% in 2016.” – World Inequality Report, 2018

The first World Inequality Report, just released, represents sustained work by over 100 researchers to collect the best data available from multiple sources on income and wealth inequality both within and between countries. The project is ongoing, and the availability of data for different countries is very uneven. But for the first time there is a common basis for comparison, and both data and analysis are available to the public.

Notably, the project is also stressing the implications of the research for policy, and exploring ways of presenting the data in user-friendly graphic formats. The measures most often used are the percentage of national income (or wealth) held by different percentile groups of the population. A striking regional comparison (see graph below) highlights the percentage of national income received by the top 10% in 2016, from 37% in Europe to 61% in the Middle East. The percentage held by the top 10% is 47% in North America, and around 55% in Brazil, India, and sub-Saharan Africa. Not shown in this graph, but noted in a separate chapter and available in the on-line database (, the top 10% in South Africa received 65% of national income in 2012.

The report stresses that the levels of inequality are highly dependent on the progressivity of tax policy, with the obvious implication that the Trump/Republican tax bill will undoubtedly make inequality in the United States even more extreme.

The full database is available to access on-line or to download at

This AfricaFocus Bulletin contains excerpts from the executive summary of the report. Another AfricaFocus Bulletin sent out today, and available at contains excerpts from the chapters on South Africa and the United States.

For previous AfricaFocus Bulletins on inequality, tax evasion, and related issues, visit

Recent articles on closely related topics include:

Amanda Erickson, “The world’s 500 wealthiest people got $1 trillion richer in 2017,” Washington Post, December 27, 2017, and Gabriel Zucman, “Nearly 10% of the world’s wealth is held offshore by a few individuals. The rest of us pay the price for this theft.” Guardian, 8 Nov. 2017 editor’s note+++++++++++++++++

World Inequality Report

Executive Summary

Full report and abundant additional information available at

II. #What are our new findings on global income inequality?

We show that income inequality has increased in nearly all world regions in recent decades, but at different speeds. The fact that inequality levels are so different among countries, even when countries share similar levels of development, highlights the important roles that national policies and institutions play in shaping inequality.

Income inequality varies greatly across world regions. It is lowest in Europe and highest in the Middle East.

Inequality within world regions varies greatly. In 2016, the share of total national income accounted for by just that nation’s top 10% earners (top 10% income share) was 37% in Europe, 41% in China, 46% in Russia, 47% in US-Canada, and around 55% in sub-Saharan Africa, Brazil, and India. In the Middle East, the world’s most unequal region according to our estimates, the top 10% capture 61% of national income (Figure E1).

In recent decades, income inequality has increased in nearly all countries, but at different speeds, suggesting that institutions and policies matter in shaping inequality.

Since 1980, income inequality has increased rapidly in North America, China, India, and Russia. Inequality has grown moderately in Europe (Figure E2a). From a broad historical perspective, this increase in inequality marks the end of a postwar egalitarian regime which took different forms in these regions.

  • There are exceptions to the general pattern. In the Middle East, sub-Saharan Africa, and Brazil, income inequality has remained relatively stable, at extremely high levels (Figure E2b). Having never gone through the postwar egalitarian regime, these regions set the world “inequality frontier.”
  • The diversity of trends observed across countries since 1980 shows that income inequality dynamics are shaped by a variety of national, institutional and political contexts.
  • This is illustrated by the different trajectories followed by the former communist or highly regulated countries, China, India, and Russia. The rise in inequality was particularly abrupt in Russia, moderate in China, and relatively gradual in India, reflecting different types of deregulation and opening-up policies pursued over the past decades in these countries.
  • The divergence in inequality levels has been particularly extreme between Western Europe and the United States, which had similar levels of inequality in 1980 but today are in radically different situations. While the top 1% income share was close to 10% in both regions in 1980, it rose only slightly to 12% in 2016 in Western Europe while it shot up to 20% in the United States. Meanwhile, in the United States, the bottom 50% income share decreased from more than 20% in 1980 to 13% in 2016 (Figure E3).
  • The income-inequality trajectory observed in the United States is largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s, and in top capital incomes in the 2000s. Continental Europe meanwhile saw a lesser decline in its tax progressivity, while wage inequality was also moderated by educational and wage-setting policies that were relatively more favorable to low- and middle-income groups. In both regions, income inequality between men and women has declined but remains particularly strong at the top of the distribution.

How has inequality evolved in recent decades among global citizens? We provide the first estimates of how the growth in global income since 1980 has been distributed across the totality of the world population. The global top 1% earners has captured twice as much of that growth as the 50% poorest individuals. The bottom 50% has nevertheless enjoyed important growth rates. The global middle class (which contains all of the poorest 90% income groups in the EU and the United States) has been squeezed.

At the global level, inequality has risen sharply since 1980, despite strong growth in China.

  • The poorest half of the global population has seen its income grow significantly thanks to high growth in Asia (particularly in China and India). However, because of high and rising inequality within countries, the top 1% richest individuals in the world captured twice as much growth as the bottom 50% individuals since 1980 (Figure E4). Income growth has been sluggish or even zero for individuals with incomes between the global bottom 50% and top 1% groups. This includes all North American and European lower- and middle-income groups.
  • The rise of global inequality has not been steady. While the global top 1% income share increased from 16% in 1980 to 22% in 2000, it declined slightly thereafter to 20%. The income share of the global bottom 50% has oscillated around 9% since 1980 (Figure E5). The trend break after 2000 is due to a reduction in between-country average income inequality, as within-country inequality has continued to increase.

III. Why does the evolution of private and public capital ownership matter for inequality?

Economic inequality is largely driven by the unequal ownership of capital, which can be either privately or public owned. We show that since 1980, very large transfers of public to private wealth occurred in nearly all countries, whether rich or emerging. While national wealth has substantially increased, public wealth is now negative or close to zero in rich countries. Arguably this limits the ability of governments to tackle inequality; certainly, it has important implications for wealth inequality among individuals.

Over the past decades, countries have become richer but governments have become poor.

  • The ratio of net private wealth to net national income gives insight into the total value of wealth commanded by individuals in a country, as compared to the public wealth held by governments. The sum of private and public wealth is equal to national wealth. The balance between private and public wealth is a crucial determinant of the level of inequality.
  • There has been a general rise in net private wealth in recent decades, from 200–350% of national income in most rich countries in 1970 to 400–700% today. This was largely unaffected by the 2008 financial crisis, or by the asset price bubbles seen in some countries such as Japan and Spain. In China and Russia there have been unusually large increases in private wealth; following their transitions from communist- to capitalist-oriented economies, they saw it quadruple and triple, respectively. Private wealth–income ratios in these countries are approaching levels observed in France, the UK, and the United States.
  • Conversely, net public wealth (that is, public assets minus public debts) has declined in nearly all countries since the 1980s. In China and Russia, public wealth declined from 60–70% of national wealth to 20–30%. Net public wealth has even become negative in recent years in the United States and the UK, and is only slightly positive in Japan, Germany, and France. This arguably limits government ability to regulate the economy, redistribute income, and mitigate rising inequality. The only exceptions to the general decline in public property are oil-rich countries with large sovereign wealth funds, such as Norway.

V. What is the future of global inequality and how should it be tackled?

We project income and wealth inequality up to 2050 under different scenarios. In a future in which “business as usual” continues, global inequality will further increase.

Alternatively, if in the coming decades all countries follow the moderate inequality trajectory of Europe over the past decades, global income inequality can be reduced– in which case there can also be substantial progress in eradicating global poverty.

The global wealth middle class will be squeezed under “business as usual.”

  • Rising wealth inequality within countries has helped to spur increases in global wealth inequality. If we assume the world trend to be captured by the combined experience of China, Europe and the United States, the wealth share of the world’s top 1% wealthiest people increased from 28% to 33%, while the share commanded by the bottom 75% oscillated around 10% between 1980 and 2016.
  • The continuation of past wealth-inequality trends will see the wealth share of the top 0.1% global wealth owners (in a world represented by China, the EU, and the United States) catch up with the share of the global wealth middle class by 2050.

Tax progressivity is a proven tool to combat rising income and wealth inequality at the top.

Research has demonstrated that tax progressivity is an effective tool to combat inequality. Progressive tax rates do not only reduce post-tax inequality, they also diminish pre-tax inequality by giving top earners less incentive to capture higher shares of growth via aggressive bargaining for pay rises and wealth accumulation. Tax progressivity was sharply reduced in rich and some emerging countries from the 1970s to the mid-2000s. Since the global financial crisis of 2008, the downward trend has leveled off and even reversed in certain countries, but future evolutions remain uncertain and will depend on democratic deliberations. It is also worth noting that inheritance taxes are nonexistent or near zero in high-inequality emerging countries, leaving space for important tax reforms in these countries.

A global financial register recording the ownership of financial assets would deal severe blows to tax evasion, money laundering, and rising inequality.

Although the tax system is a crucial tool for tackling inequality, it also faces potential obstacles. Tax evasion ranks high among these, as recently illustrated by the Paradise Papers revelations. The wealth held in tax havens has increased considerably since the 1970s and currently represents more than 10% of global GDP. The rise of tax havens makes it difficult to properly measure and tax wealth and capital income in a globalized world. While land and real-estate registries have existed for centuries, they miss a large fraction of the wealth held by households today, as wealth increasingly takes the form of financial securities. Several technical options exist for creating a global financial register, which could be used by national tax authorities to effectively combat fraud.

More equal access to education and well-paying jobs is key to addressing the stagnating or sluggish income growth rates of the poorest half of the population.

  • Recent research shows that there can be an enormous gap between the public discourse about equal opportunity and the reality of unequal access to education. In the United States, for instance, out of a hundred children whose parents are among the bottom 10% of income earners, only twenty to thirty go to college. However, that figure reaches ninety when parents are within the top 10% earners. On the positive side, research shows that elite colleges who improve openness to students from poor backgrounds need not compromise their outcomes to do so. In both rich and emerging countries, it might be necessary to set trans- parent and verifiable objectives– while also changing financing and admission systems– to enable equal access to education.
  • Democratic access to education can achieve much, but without mechanisms to ensure that people at the bottom of the distribution have access to well-paying jobs, education will not prove sufficient to tackle inequality. Better representation of workers in corporate governance bodies, and healthy minimum-wage rates, are important tools to achieve this.

Governments need to invest in the future to address current income and wealth inequality levels, and to prevent further increases in them.

Public investments are needed in education, health, and environmental protection both to tackle existing inequality and to prevent further increases. This is particularly difficult, however, given that governments in rich countries have become poor and largely indebted. Reducing public debt is by no means an easy task, but several options to accomplish it exist–including wealth taxation, debt relief, and inflation–and have been used throughout history when governments were highly indebted, to empower younger generations.

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Economic Nationalism: What It Means
worker | December 28, 2017 | 7:31 pm | Analysis, Economy | Comments closed

– from Greg Godels is available at:

Economic Nationalism: What it Means

In the throes of the 2007-2008 economic collapse, I projected that the global economy would be irrevocably and qualitatively marred by the unfolding events. I foresaw a shift in the structure of international relations, a shift away from the so-called “globalization” interlude. Writing in November of 2008:

The economic crisis has reversed the post-Soviet process of international integration – so-called “globalization.” As with the Great Depression, the economic crisis strikes different economies in different ways. Despite efforts to integrate the world economies, the international division of labor and the differing levels of development foreclose a unified solution to economic distress. The weak efforts at joint action, the conferences, the summits, etc. cannot succeed simply because every nation has different interests and problems, a condition that will only become more acute as the crisis mounts.
A crisis of the severity of 2007-2008 understandably challenges some earlier verities, but more importantly, it renders some economic roads now impassable. My view was that the era of completely open, free, and secure international exchange fueling dramatic growth in trade was not a new stage of capitalism– as many wished to argue– but a phase created by politically contingent factors and spurred by the intensified international competition of the last thirty years of the twentieth century. Moreover, that phase– unhelpfully called “globalization”– was both fortuitous and disastrous for the fate of capitalism. I elaborated on this further in April of 2009:
To simplify greatly, a healthy, expanding capitalist order tends to promote intervals of global cooperation – enforced by a hegemonic power – and trade expansion, while a wounded, shrinking capitalist order tends towards autarky and economic nationalism. The Great Depression was a clear example of heightened nationalism and economic self-absorption. Most commentators acknowledge this fact, but attribute it to the predilections of national leaders. It was said that Roosevelt “sabotaged” the London Economic Conference, for example. Earlier, he said: “Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound economy.” It is my contention, and I believe essential to a Marxist understanding, that Roosevelt’s reaction was an expression of the logic of capitalism under stress; the structural development that led to intense nationalism throughout Europe, especially in Germany and Italy, and ultimately to war.
The stress of the 2007-2008 economic collapse created “centrifugal forces,” forces pulling apart the institutions, the regulations, and the commitment to an open, unified, and universal global marketplace. In its place would come a growing national partisanship, a commitment to winning-against-adversaries, rather than partnership. This process of “de-globalizing,” of going it alone would gain against both the process and ideology of economic integration.
I believe these projections have been borne out. My February, 2017 article New Developments in Political Economy: The Demise of “Globalization”, makes the case that the trade internationalism of the post-Soviet era is in profound decline. Moreover, emergent and growing nationalism enjoys its vitality from the reaction to the failure of the global order. Events in the months since the article appear only to underscore that claim.
Rising Economic Nationalism
President Trump has substantially called the World Trade Organization (WTO) irrelevant to US trade policies. But skepticism about the WTO precedes his political rise as a nationalist. The once heralded WTO Doha (Doha Development Agenda) was mired in dispute and ineffectiveness from its inception in 2001 and especially after 2008. The annual number of WTO trade disputes has more than doubled since 2008 even though trade growth has been tepid (below global GDP growth for the last 3 years), a sure sign of growing protectionist sentiments. The recent December 10-13 meeting of the WTO was largely a failure. “The trade body’s 164 members didn’t reach full consensus on any of the major objectives it had set itself before the meeting,” in the words of Bloomberg’s Bryce Baschuk and Charlie Devereux, with the EU blaming failure on “destructive behavior by several large countries.”
But the European Union (EU) is itself enduring a burst of economic nationalism. While the popular press and liberal pundits stress the role of xenophobia in Brexit, the economic ills that fueled the growth of nationalism in the UK vote against EU membership are largely neglected. Also, the breadth of the rejection of open market policies throughout the EU are largely missed.
A recent The Wall Street Journal article (12-14-17) affirms my projections made in 2008 and 2009 for the EU:
The financial crisis that erupted in 2008 caused a drop in trade between EU countries, with little rebound since beyond precrisis levels. As Europe’s swoon dragged on, many politicians strove to prop up their economies with fixes that prioritized domestic markets over the EU. (The EU, a Disciple of Free Trade, is Erecting Barriers)
The WSJ author, Valentina Pop, choses the example of Emmanuel Macron, the new French President, to highlight the trend in the EU. Macron ran for office as a passionate advocate for Europeanism and free markets. Nonetheless, he nationalized a shipyard to block its purchase by an Italian firm, he supports limiting foreign employment, and he “gutted” dairy imports from EU countries. Further evidence for the retreat from border-free markets and the embrace of nationalism comes from the growth of trade barriers: legal actions against violators of the EU market openness more than tripled last year.
Earlier this year, the European commission moved legally against Romania and Hungary and, in June, against Poland over economic disputes.
Nothing shows the fraying of the one-global-market consensus and the turn to economic nationalism more than the dispute escalating between the US and Canada and waged though their corporate surrogates, Bombardier and Boeing. Boeing lodged a complaint against Canadian aircraft firm Bombardier with the US Commerce Department. With typical US arrogance, Commerce slapped a 300% tariff on Bombardier planes sold in the US.
Indignantly, the Canadian government cancelled its plan to purchase $5.2 billion of new Boeing fighters to supplement its existing Boeing fighter jets. Instead, it will accept bids in 2019 for a purchase of 88 new fighters, but with the pointed caveat that any bidder causing injury to Canada’s interests would be disadvantaged, a not very subtle slap at Boeing.
Further, as Canada grows increasingly unhappy with renegotiations over NAFTA, the government has turned to the People’s Republic of China (PRC) to craft an alternative free-trade agreement (Canadian merchandise exports to the PRC have more than doubled since 2007). Clearly, one of history’s oldest and most intimate trading partnerships is under increasing stress from economic nationalism.
Elsewhere, I have demonstrated the qualitative changes in global energy markets, along with the dramatic intensification of competition and associated hostilities. The shifting energy alliances, the swings in market share, and the political instabilities that are commonplace have spurred the turn to economic nationalism.
What does it Mean?
The hasty conclusion that expansion of global markets along with universal homage to a new global community constituted an irreversible change in capitalist relations is now thoroughly discredited by the realities of imperialist aggression and economic crisis. In fact, the “globalization” moment coincided with the vast inclusion of new economies – the former socialist community – and the absolute hegemony of a capitalist power – the US. History has known other moments, but theorists – including many on the left – were too awed by capitalist triumphalism, drawn to knee jerk anti-Communism, and desirous of facile answers to recognize this continuity with the logic of state-monopoly capitalism. Well before World War I, a similar moment occurred with the massive expansion of markets under the global hegemony of the British Empire, a period followed by economic decline spurring extreme nationalism.
As I stress in the above passage, written in 2009, the normal course of global economic relations in the era of state monopoly capitalism is intense competition, pressure on profitability, accumulation crises, rising nationalism, and conflict. This is the norm in the age of imperialism. This is the logic of late capitalism.
Appearances may suggest to some a different narrative– enduring prosperity in the mid-twentieth century, peace guaranteed by economic internationalism at the turn of the new century– but the reality is different, far different. Reality is imposed by crisis. And the upheaval of 2007-2008 exposed the reality of fierce competition and national self-interest.
For some, the rise of nationalism is strictly a political phenomenon anchored in demagogy and ignorance; they see no linkage with the course of capitalism. But the economic base for this phenomenon cannot be denied. Liberal markets produced the crisis and the resulting human suffering sparked a political response.
And ruling classes, faced with pressure on profits from increasingly desperate and cut-throat competition in the unprecedented slow-growth recovery, are inexorably driven towards economic nationalism. While economic nationalism is a natural fit with the far right’s ultra-patriotism, it attracts centrist forces as well. Elements of the US trade union movement and Democratic industrial state politicians have warmed to economic nationalism since the days of bashing Japanese imports. Liberal Senators like Sherrod Brown have quietly worked with President Trump around overturning trade deals like NAFTA– “strange bedfellows” in the words of The Wall Street Journal.
We do not have to press the parallel too hard to recognize that the economic nationalism of today threatens to spark disastrous wars, as did the rabid economic nationalism of the European powers in the prelude to World War I (and World War II). As in both eras, hostility and tensions are smoldering. And as in that era, war promises to follow, with devastation well beyond the comprehension of a complacent, self-absorbed population. The threat of general war, nuclear war, is possibly greater than any time in my lifetime, excepting the early Cold War years of General Curtis “Dr. Strangelove” LeMay and the US nuclear monopoly.
While extreme right nationalism is a serious political danger, the rise of economic nationalism, a growing policy consensus with capitalist rulers, threatens the very existence of millions, if not the planet.
Greg Godels