How to narrow the GLOBAL WEALTH GAP? Musings from a Nobel Laureate

How to narrow the GLOBAL WEALTH GAP
The Oxfam report “An Economy for the 1%,” which was released in January this year, showed that the richest 1% of the world have more wealth than the rest of the world combined. Power and privilege is being used to skew the economic system to increase the gap between the richest and the rest. Although world leaders have increasingly talked about the need to tackle inequality, the gap between the richest and the rest has widened dramatically. There is an urgent need of taking action in order to tackle the extreme inequality as it threatens to undermine the progress made in tackling poverty during the last quarter of a century. 

The outcome of the Paris Climate Conference at the end of 2015 inspired me to believe in citizens’ power. Forty years of persistent popular campaigning made that agreement happen. We need to mobilise that same power once more if we are to overcome another impending global disaster: continuous wealth concentration, which is a trend so dangerous that it threatens to destroy peace, human rights and democracy worldwide. Wealth concentration is intensifying non-stop under the present economic system, with wealth acting like a magnet. Every year, Oxfam has been providing us with horrifying updates on wealth concentration. They told us this year that 62 people now hold more wealth than the bottom half of the world’s population. Just six years back, it was the richest 388 people who together held similar wealth. At this rate, it won’t be long before a single lucky person owns more wealth than half the people on Earth. As we enter 2017, we can already expect the richest 1% to own 99% of the world’s wealth.

Wealth concentration is as dangerous to humanity as climate change, and threatens the ability of people to live in any dignity or peace. But just as with global warming, this disaster is of our own creation, so we can solve it ourselves. If the collective effort of citizens, led by a committed group of scientists and activists from all sections of society, could make us aware of our environmental catastrophe, I believe we can protect humanity from wealth concentration by the same means. Citizens, particularly the young, have to show the world that this can and must be done. But we first need to inspire and enable such popular mobilisation. Education has to play the key role here. Schools should ready young people to become entrepreneurs and job-creators, not job-seekers. They’re born go-getters. But, at present, education produces workers to enhance the speed of wealth concentration. We need to completely redesign our economic framework, to offer young people more and better choices.

Sustainable Development Goal (SDG) 10 calls for reducing income inequality within and among countries by improving the regulation and monitoring of financial markets and institutions, encouraging development assistance and foreign direct investment, and so on. But without closing the wealth gap, which is the cause of the income gap, any attempted reduction in unequal pay will prove ineffective. We can achieve an egalitarian society by introducing a new form of business driven by selflessness, a non-dividend business dedicated to solving human problems that I call ‘social business’. Such a concept gives entrepreneurs another option; I and many others following the concept have been creating them with very positive results.

At present, governments and charities have to bear full responsibility for solving social problems; businesses, with their very clear mandate to make money for the owner, are totally excused from it. As such a global economy has developed, mankind has been brought to the verge of losing its sense of empathy, compassion and fellowship. If we create a conceptual framework that allows us, indeed encourages us, to express these deeply-rooted human values in our economic life, we can transform the wealth pyramid into a wealth diamond. Europe already has a history of businesses driven by selflessness. Bosch is a good example. The company’s founder also created the Bosch Foundation, and in retirement, he gave 92% the company’s ownership to the foundation, leaving just 8% for his family.

I have recently been promoting social business as a distinct category of business, and have been met with a very good response from European individuals, corporations and non-profits. Universities and business schools across Europe are teaching social business to their students, and Wiesbaden in Germany, Pistoia in Italy and Barcelona in Spain have each declared themselves ‘social business cities’. Leading European companies are setting up their own spin-off social businesses in Bangladesh and in Europe. Danone has created Grameen Danone in Bangladesh as a social business to address child malnutrition; it has also funded social businesses in eight other countries. Glasgow Caledonian University, meanwhile, has created a nursing college as a social business in Bangladesh, which has become the country’s leading nursing college. McCain Europe has created a social business in France to address both food waste and youth unemployment by hiring young people to make soups from potatoes that are rejected from the consumer market for their unfitting shapes. HEC has created an Action Tank with leading French companies to design social businesses that address social problems in France. Ten of these designs were adopted by the French government.

If these businesses are to take off more widely, and more young entrepreneurs are to set up their own, the basics of our financial system need to change. The present system is designed and operated as the prime instrument for wealth concentration. Its basic policy is: the more you have, the more you can get. This system has to be redesigned to make wealth obtainable by all people irrespective of what wealth they already have. Governments should be offering attractive facilities to create social business banks, which would seek to help unbanked individuals as well as unemployed young people and women. The Grameen Bank, which I established in Bangladesh in 1983, is an example of how well this can work, having allowed some of the country’s poorest women to move from marginalisation and illiteracy to becoming successful entrepreneurs and owners of the bank. Conventional banks, too, should have guidelines that reduce or stop them from financing that leads to wealth concentration. In such cases, banks should have high priority in financing companies owned by trusts, or designed as social businesses, rather than those owned for personal profit.

Wealth concentration is a global threat. We cannot wait any longer to recognise the gravity of the situation we’re in and take action against it. We can initiate a process that builds a global consensus to halt the process of wealth concentration in phase one, and reverse it in phase two. Both global warming and wealth concentration arose from an economic framework based on greed. We can undo both by reinventing the economic world to be caring and sharing, as human beings should be.

Written by: Muhammad Yunus

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