There’s an obvious solution: a global minimum wage. If capitalism is going to be globalised, it makes sense that we should globalise the rules and standards that protect people from it as well. Economist Thomas Palley recommends a floor set at 50% of each country’s median wage, so it would be tailored to local economic conditions and cause minimum disruption to comparative advantage. The International Labour Organization has already proven that they have the capacity to manage such a system. And it would make good sense to couple it with a universal basic income. By allowing people to opt out of exploitative jobs, a basic income would force employers to raise wages – and would provide a crucial cushion for the workers who will soon be displaced by the rising tide of automation.
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How to Stop the Global Inequality Machine: If capitalism is going to be globalised, it makes sense to globalise the rules and standards that protect people as well
When the UN unveiled the new sustainable development goals two years ago, it was the one on inequality that captured everyone’s attention. Goal 10 – “reduce income inequality within and among countries” – was let in at the 11th hour after a long fight by civil society groups in the face of fierce resistance.
And it’s a timely intervention. Income inequality within countries has increased (pdf) virtually everywhere as a result of globalisation. And over the past 50 years the per capita income gap between the global north and south has roughly tripled in size, according to World Bank data.
Reversing these trends is crucial to restoring stability to a world shot through with crises. Goal 10 calls for a number of important reforms: improving social protections, reducing fees on migrant remittances, regulating global financial markets, and so on. But one stands out as particularly compelling, and that is the call for better wages.
This move vindicates a longstanding demand by developing countries. For decades, a group of scholars from the south have argued that the global wage gap is a major driver of inequality between poor countries and rich countries. And they don’t just mean the obvious fact that different wages translate into different standards of living. They mean that, through the mechanism of international trade, the wage gap also actively produces inequality.
It was the Egyptian economist Samir Amin – a well-known critic of neocolonialism – who first articulated this argument in the 1970s. He noticed that if we look at the labour that goes into producing goods for trade between south and north, we see that workers in the south are paid much less than their northern counterparts – even when adjusted for productivity or units of output per hour. This means that when the north buys goods from the south, they pay far less than those goods would otherwise be worth. In other words, the north effectively siphons uncompensated value out of the south – it buys cheap and sells dear. But when the south buys goods from the north, on the other hand, they have to shell out for the north’s comparatively high wages.
Amin called this “unequal exchange”, and described it as a hidden transfer of value from south to north.
How big is this transfer, exactly? Amin suggested we might calculate the scale of unequal exchange by comparing the south’s existing earnings through trade to what they would be earning if we lived in a fairer world – one where the labour that goes into producing goods for trade was paid equal wages for equal productivity. Using this method, Amin calculated that in the 1960s, at the end of the colonial period, the south was transferring about $22bn to the north each year, or $160bn (£123bn) in today’s dollars – twice the amount of aid and foreign investment they were receiving during the same period.
Following this logic, the scale of unequal exchange has only worsened over the intervening decades. Economists Zak Cope and Timothy Kerswell recently updated Amin’s calculations for 2012, and found that the south’s transfers due to unequal exchange had risen to an eye-popping $1.46tn (£1.13tn) per year, outstripping foreign aid by a factor of 11.
This is a conservative estimate, they add. It assumes that southern workers are far less productive than their northern counterparts; but the productivity gap may not be as big as we think. In fact, southern workers are probably at least as productive since these days many of them work in foreign-owned factories (think of Apple’s iPad factories) with highly efficient technology and rigid Taylorist rules, designed to extract as much as possible from every movement. If this is true, then the hidden transfer of value may be as large as $4.9tn (£3.8tn) each year.
Most neoclassical economists don’t see this as a problem. It’s only natural, they say, that workers in poor countries like Bangladesh earn less than workers in rich countries like Britain. In a world of free movement we might reach wage equilibrium, but in a world of rigid borders wages will fall in line with national economies.
This makes intuitive sense, on the face of it. But the problem with this approach is that it ignores the political forces that determine wages. It’s easy to see how this works in our own countries. We know that institutional sexism and racism keep the wages of women and ethnic minorities artificially low. And we know that wages go down when right-wing politicians pass anti-union legislation or cut welfare and working standards. And then there are extreme examples like apartheid South Africa, where the whole legal regime was designed to keep African labour cheap and exploitable, allowing the white minority to pump uncompensated value out of black bodies for their own enrichment.
The same thing happens on the international stage. Take colonialism, for example. Colonial policy in most countries was designed to force people into the labour market, by kicking them off their land or imposing crushing taxes, leaving them with no choice but to work in European industries where employers could get away with paying rock bottom wages – when they paid wages at all. And because colonial powers could dictate the rules of trade, they were able to depress the prices of exports from their colonies, which in turn put downward pressure on wages.
After colonialism, western powers often intervened to topple pro-worker leaders in the south – like Salvador Allende, Mohammad Mossadegh, and Jacobo Árbenz – replacing them with rulers who would keep labour cheap and exploitable. During the 1980s and 1990s, structural adjustment programmes imposed by the IMF caused wages to collapse across the south. Today, many trade agreements compel developing countries to restrict unions and worker protections. And because globalisation allows companies to move easily across borders, employers can chill their workers’ wage demands by threatening to pull up stakes and move somewhere cheaper.
All of this conspires to keep wages in the south artificially low. And it doesn’t help that developing countries have the deck stacked against them at the World Bank, the IMF and the WTO. Because rich countries have all the power in these institutions, they get to make the rules that shape export prices and wages in the rest of the world.
The point is that wages are not somehow naturally low in the south – they have been made low by design. Wages are an effect of power.
Goal 10 understands this, and takes steps in the right direction. For example, it highlights the crucial fact that developing countries need a real voice at the World Bank, the IMF, and the WTO, which would allow them to negotiate for policies that protect their workers and treat their exports fairly. It also calls for easier movement of labour across borders. But aside from this it is vague on how we should go about bettering wages in the south.
There’s an obvious solution: a global minimum wage. If capitalism is going to be globalised, it makes sense that we should globalise the rules and standards that protect people from it as well. Economist Thomas Palley recommends a floor set at 50% of each country’s median wage, so it would be tailored to local economic conditions and cause minimum disruption to comparative advantage. The International Labour Organization has already proven that they have the capacity to manage such a system. And it would make good sense to couple it with a universal basic income. By allowing people to opt out of exploitative jobs, a basic income would force employers to raise wages – and would provide a crucial cushion for the workers who will soon be displaced by the rising tide of automation.
These ideas are not only feasible, they are quickly gaining traction. Implementing them will require a political struggle, to be sure. But if we want to stop the global inequality machine, it’s a battle we’ll have to fight
Basic income isn’t just a nice idea. It’s a birthright:A basic income could defeat the scarcity mindset, instil a sense of solidarity and even ease the anxieties that gave us Brexit and Trump Jason Hickel, The Guardian,
Every student learns about Magna Carta, the ancient scroll that enshrined the rights of barons against the arbitrary authority of England’s monarchs. But most have never heard of its arguably more important twin, the Charter of the Forest, issued two years later in 1217. This short but powerful document guaranteed the rights of commoners to common lands, which they could use for farming, grazing, water and wood. It gave official recognition to a right that humans nearly everywhere had long just presupposed: that no one should be debarred from the resources necessary for livelihood.
But this right – the right of habitation – came under brutal attack beginning in the 15th century, when wealthy nobles began fencing off common lands for their own profit. Over the next few centuries, the enclosure movement, as it came to be known, shifted tens of millions of acres into private hands, displacing much of the country’s population. Excluded from the basic means of survival, most were left with no choice but to sell themselves for wages for the first time.
And it wasn’t only England. The same process unfolded across Asia and Africa and most of the global south as European colonisers staked private claim to lands and forests and waterways that were previously held in common, leaving millions dispossessed. In much of the colonial world the goal, or at least the effect, was to drive people into the capitalist labour market, where, in exchange for low wages and poor conditions, they and their descendants would power the mines, plantations and sweatshops for export to the west.
As the era of colonialism came to an end, the governments of many newly independent nations sought to reverse these patterns of historical dispossession with land reform programmes. But they were quickly forced to abandon this approach by big foreign landowners and international creditors. Instead, the new plan for eradicating poverty – the dream of development – came to hinge on drawing people ever deeper into the labour market. Jobs came to be hailed as the salvation of the poor: as the World Bank puts it, “jobs are the surest pathway out of poverty”.
But now this promise is beginning to look hollow. With the rise of robots, robust employment is no longer a realistic hope. We know that automation is a real threat to jobs in the global north, but the threat is much worse in the south. The main industries there, such as small electronics and textile manufacturing, are some of the easiest to automate. According to a United Nations report, up to two-thirds of jobs in developing countries could disappear in the near future.
This is all bitterly painful, particularly for the postcolonial world. First they were dispossessed of their land and promised jobs instead. Now they will be dispossessed of their jobs, and many will be left with literally no way to survive. Their dispossession will be absolute. Technological unemployment will almost certainly reverse the modest gains against poverty that have been made over the past few decades, and hunger will likely rise.
Governments are scrambling to respond, and they don’t have many options. But one stands out as by far the most promising: a universal basic income.
Once a fringe idea, basic income is now speeding its way into the public imagination. Finland is running a two-year experiment in basic income. Utrecht in the Netherlands is conducting a trial, too. Y Combinator is trying it out in Oakland in the US. Scotland looks likely to follow suit. And cash transfer programmes have already proven to be successful in Namibia, India and dozens of other developing countries, sparking what some scholars have billed as “a development revolution from the global south”. In Brazil, to cite just one example, cash transfers helped to cut poverty rates in half in less than a decade.
But the success of basic income – in both the north and the south – all depends on how we frame it. Will it be cast as a form of charity by the rich? Or will it be cast as a right for all?
Thomas Paine was among the first to argue that a basic income should be introduced as a kind of compensation for dispossession. In his brilliant 1797 pamphlet Agrarian Justice, he pointed out that “the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race”. It was unfair that a few should enclose it for their own benefit, leaving the vast majority without their rightful inheritance. As far as Paine was concerned, this violated the most basic principles of justice.
Knowing that land reform would be politically impossible (for it would “derange any present possessors”), Paine proposed that those with property should pay a “ground rent” – a small tax on the yields of their land – into a fund that would then be distributed to everyone as unconditional basic income. For Paine, this would be a right: “justice, not charity”. It was a powerful idea, and it gained traction in the 19th century when American philosopher Henry George proposed a “land value tax” that would fund an annual dividend for every citizen.
The beauty of this approach is that it functions as a kind of de-enclosure. It’s like bringing back the ancient Charter of the Forest and the right of access to the commons. It restores the right to livelihood – the right of habitation.
Critics of basic income often get hung up on how to fund it. But once we come to see it as linked to the commons, that problem becomes more tractable. In the US state of Alaska natural resources are considered a commons, owned collectively by the people, so every resident receives an annual dividend from the state’s oil revenues.
The Alaska model is popular and effective, and scholars have pointed out that the same approach could be applied to other natural resources, such as forests and fisheries. It could even be applied to the air, with a carbon tax whose yields would be distributed as a dividend to all. And the upshot is that this approach helps protect commons against overuse, giving our planet some room to regenerate.
Implementing this idea will require political will – but it is far from impossible. In fact, some research indicates that it might be politically easier to implement than other social policies. Even in the US, leading policymakers – including former treasury secretary Henry Paulson and two former Republican secretaries of state – have just put forward a carbon tax and dividend proposal. The idea of a basic income also has broad and growing support from high-profile figures including Elon Musk and Bernie Sanders.
There are risks, of course. Some worry that a basic income will only increase the nativism that is spreading across the world right now. Who will qualify for the transfers? People won’t want to share with immigrants.
It’s a valid concern. But one way to address it is to think in more universal terms. The earth’s natural bounty belongs to all, as Paine pointed out. If the commons know no borders, why should a commons-linked income? Indeed, why should people in resource-rich nations get more than their neighbours in resource-poor ones? A tax on resources and carbon around the world could go into a global fund, in trust for every human. Dividends could be set at $5 per day – the minimum necessary for basic nutrition – corrected for each nation’s purchasing power. Or we could set it at each nation’s poverty line, or some ratio thereof. Scholars are already thinking about how such a system could be designed.
We already know, from existing experiments, that a basic income can yield impressive results – reducing extreme poverty and inequality, stimulating local economies, and freeing people from having to accept slave-like working conditions simply in order to stay alive. If implemented more broadly, it might help eliminate “bullshit jobs” and slash unnecessary production, granting much-needed relief to the planet. We would still work, of course, but our work would be more likely to be useful and meaningful, while any miserable but necessary jobs, like cleaning the streets, would pay more to attract willing workers, making menial work more dignified.
But perhaps most importantly of all, a basic income might defeat the scarcity mindset that has seeped so deep into our culture, freeing us from the imperatives of competition and allowing us to be more open and generous people. If extended universally, across borders, it might help instill a sense of solidarity – that we’re all in this together, and all have an equal right to the planet. It might ease the anxieties that gave us Brexit and Trump, and take the wind out of the fascist tendencies rising elsewhere in nativism that is spreading across much of the world.
We’ll never know until we try. And try we must, or brace ourselves for a 21stcentury of almost certain misery.
