Photo by POURIA 🦋 on Unsplash
Although I’ve been relatively insular in recent times, I can’t help but feel what is going on in the world.
Things feel tough for people. I’m not really seeing many people truly thriving. It feels like a lot of us are stuck in a broken system.
Perspective is always helpful. I’ve been editing my father’s biography, where he talks about coming to the UK in the 70s. He came as a student, integrated, saw an opportunity, opened a business and eventually thrived.
This came with a lot of hard work. So it’s important to recognise that creating wealth and comfort does not happen out of thin air. But it’s also eye opening how much more access to opportunity there was fifty years ago compared to today.
My father managed to get a loan, attain leaseholding rights and refurbish a building with next to no money. The business was a success, meaning it brought in money to pay off these debts.
In modern times, such a venture would be crazy. The price of renting a physical space is incredibly high, to the point where you just couldn’t get a loan to do this. You would need some sort of financial backing beforehand.
Even if you were able to open something, the amount of competition is absolutely cutthroat. My father was in catering, and there are restaurants everywhere, supplying all sorts of cuisines. Or you can get a ready meal from a supermarket which are also pretty high quality too.
In a lot of ways, social mobility seems to have reduced. Although we now have more access to tools and information, the competition has also increased exponentially.
Perhaps I’m seeing the more extreme side of it, but in Brussels, I’m regularly around people who speak several languages and have a Masters degree, if not two. These are the people that are fighting for an intern position that often is below minimum wage. (Note: if you’re wondering, yes this is illegal. But there is little enforcement, and often the organisations that do this feel that the rules do not apply to them).
From an economic standpoint, I think this is as tough as it’s probably been, outside of the moments of actual tragedy – the war, the famines and the recessions.
I think the increased difficulties have crept up upon us. Silently we seem to have been squeezed through rising food prices, increased rent and ever-increasing demands in our work lives.
There are some explanation. There’s always world politics. We’re in a moment of greater hostility, which inhibits free trade. The effect of US tariffs does have a knock on effect, meanwhile industries such as in China are driving ahead in low-cost goods, making it difficult for a newcomer in many industries.
Although I do think these are real issues, I don’t think they are the root cause.
I am not an economist. I do not understand the inner workings of the world economy. Yet I also have difficulty in finding any economist who seems to understand it either. So here’s my take:
The problem we have in the world right now is how much wealth is being accumulated, but not distributed. In other words, we’re seeing wealth being created, but rather than flowing around our society, they are going into the pockets of crazily-rich people.
Oxfam did a report on this earlier this year. There’s a whole raft of stats, but some headlines are that the richest 1% own 45% of all wealth. Over the last ten years the richest 1% has gained at least $33.9tn in real terms. If the top ten billionaires (Elon Musk, Mark Zuckerberg, Jeff Bezos etc.) lost 99% of their wealth that they would still be billionaires. Meanwhile, since 1990, working class people’s general income hasn’t really changed. There are still nearly 3.6 billion people living under the World Bank poverty line.
One of the challenges of these numbers is really understanding what they mean. This means the scale of what’s happening is lost on us. I must admit that I also fell in this category: that yes, there are and always have been rich people. But the scale of wealth being accumulated is insane.
Here’s an attempt to illustrate it.
When we say a billion, we mean a thousand million:
$1,000,000,000
When we say a trillion, we mean a thousand billion:
$1,000,000,000,000.
Compare that to an average US salary, around $40,000. A billion is 25,000 times more than this.
The richest man, Elon Musk, will earn several thousand in mere seconds. Calculations may vary, but a site like this can illustrate it: he will earn the average yearly salary of someone in two minutes. In an hour, he will earn over $1 million.
This is what is causing the disparity. It is confusing, because we have more access to information, greater skills, more mobility and better technology than ever before. Yet the benefits of these advancements are not being shared.
To give a practical example, let’s look at the hot topic of AI. I personally believe that AI, with safeguards, can do an incredible amount of good. It makes our lives easier, and advances us as a society.
Yet the practical issue is that whilst we can shorthand this as ‘creating wealth’, the wealth ends up going to the big tech firms. The wealth is overwhelmingly going one way, and the benefits are not being shared.
Meanwhile, there are many people losing work because of the change. It’s crazy to me that computer scientists are losing their jobs. I remember ten years ago everyone talking about how this was a golden industry. Naturally, people losing jobs means that they are losing income, making them poorer.
And so, my issue with such technical advancements aren’t that they are necessarily bad, but that the benefits of these are not being shared. Instead, they are currently a mechanism to increase the wealth of people who really don’t need it.
People are increasingly getting squeezed. We went from a society that only a generation ago could afford to own housing and support a family based upon a single income. Nowadays, you’ll typically see two working adults per household, who are probably still renting. The idea of having a child is probably the biggest financial decision they’ll make.
What is the solution? I don’t know. Well, beyond redistribution of wealth. But the means to get there are more murky.
The key message here is that if you are finding things are feeling increasingly difficult, it’s not your imagination.
It’s okay to feel like it’s tough right now.