Thursday, April 8, 2010

The Rich Get Richer…

We’ve all heard the old saying that the rich get richer while the poor get poorer. It’s an expression which has the ring of familiarity to it, but is it actually true? The short answer is yes but no. While the rich do indeed on the whole become richer over time, aside from the occasional market crash or global financial crisis, the poor also often become less poor. It is safe to say that it is far better to be poor in today’s society than a hundred years ago thanks to improved social welfare, better health and modern technology. But the real hitch is that any improvements in the living conditions of the poor are vastly outstripped by the advances made by the rich, with the gap becoming wider over time.

Research from the Australian National University working with Britain’s Oxford University has shown that since the 1980’s the share of total income going to the top 1% of taxpayers has consistently grown. The most recent figures show that the top 1% of people took home almost 10% of the available income in the 2008 tax year. Interestingly, that puts it at the highest level it has been since the 1920s, and we all know what happened in 1929. Following the Wall Street crash at the end of the twenties, the gap between rich and poor actually got smaller until the eighties when the recent growth in executive salaries took off. Perhaps it’s no coincidence that record levels of income growth for the top earners have been recorded just before both of the two biggest financial disasters of the past one hundred years.

Perhaps there is also a connection between the growing wealth gap and the plight of low income earners who are now confronting the choice between feeding the family and paying the power bill. The price of power has already risen significantly, and the recent ruling by the Independent Pricing And Regulatory Tribunal means that it will increase even more, perhaps by as much as 60% over three years. Leaving aside the potential impact of an emissions trading scheme which may or may not be introduced, the bulk of the price rise is supposed to pay for the maintenance, upgrade, and expansion of the distribution network. It’s money that must come from somewhere if we are to continue using electricity, but the real question is why provision has not already been made for this known expense out of the massive dividends already paid by the power companies to the government over the years.

The fact is that over the last decade and a half, the New South Wales government received about $11.4 billion from electricity suppliers through taxes and dividends. The suppliers have been amalgamated, corporatized, and now are in the process of being privatized. Throughout this process the insidious philosophy of bottom line thinking has driven a process of maximizing apparent profits at the expense of proper maintenance and provision for future supply. The people at the top have sucked the money out for their own purposes, and now that the system needs to be fixed they expect the people at the bottom to pay for it.

That’s just one more way that the rich keep on getting richer, while the poor keep on getting… well you know the rest.

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