Does capitalism inevitably generate inequality?
Not always. In the decades of the fifties and sixties, the differences in wealth between countries and between the rich and the poor in each country were reduced.
Why have social inequalities stopped reducing afterwards?
Because the rules of world trade have changed. Let’s analyze what has happened between Spain and Germany and you will see how it determines the Spaniards who are rich or poor.
Come in.
Until 2003, the German economy had a trade deficit – it earned less from sales than it paid for purchases in other countries – but it grew, and its wages, too, until it approved the Hartz reforms, which unprotected workers, cut their salaries and skyrocketed business profits.
After the Hartz, Germany did not gain competitiveness by selling cheaper?
This was argued, yes, but Keynes already showed that countries that tighten their belts on their citizens grow faster; but not only at the expense of its workers, but also at the expense of other countries.
If we worked more for less in Spain, would we also sell more in Germany?
That is why it was said that the Spanish had to tighten their belts like the Germans until they achieved surpluses like them, especially like those of German businessmen.
If the employer wins, does it not create employment?
That the entrepreneur earns more is neither good nor bad: it depends on whether he reinvests what he earns and where and how. But in general, the richest tend to save more than to consume, and the rest to consume more than to save.
And isn’t that good for the country?
If you’re a developing country and you need to invest to build everything, and your citizens are so poor that they can’t save to finance it, then yes: having the rich earn a lot and reinvest in it is good for everyone and reduce inequality.
Is it the spillover effect, whereby what falls from the table of the rich feeds the poor?
But this spillover of wealth can also fall from the table of the rich from one country to another. In 2003, the rich Germans were richer, but they did not reinvest in Germany.
Where did they put all their fresh money?
In Spain! This huge German trade surplus from exporting so much went to Spain, Portugal, Greece… Because there they gave them more interest than in Germany – and what’s more, in euros – without the risk of changing currency.
And that inflated our bubble?
It was crazy! My family lives in Málaga and it was filled with buildings in four days funded by German savings. When the bubble burst in 2008 they were sold at bargain prices.
Did the great German savings go to waste?
And it flooded the Spanish bank; that’s why banks and banks had to start giving cheap credit to anyone to place it.
Many boxes went down after chasing us to place credits.
In the eighties, having a credit card in Spain was success; in 2008, for many who overused it, it was ruin.
What had changed?
Everywhere there are people who spend more or less than they can. So it is up to the bank to impose the balance; if you have a lot of liquidity, lower the requirement to leave money; if he has little, he raises it. And then in Spain, banks and banks gave credit to those who didn’t deserve it.
Why didn’t he deserve it?
Do you know the amount of absurd Mercedes that my friends accumulated in Malaga?
That’s why we fell in love and it still lasts?
After the bursting of the bubble and the collapse of banks and banks, Spanish unemployment skyrocketed. But not because the Spanish are lazy and wasteful and the Germans, austere and industrious, but because of this trade which depends on the laws and who imposes them.
Why do you think we are not lazy?
Because in the same decade the same thing that happened in Spain happened in France, Italy, Greece… Are they all lazy spenders or is it just that they were all subject to the same rules after adopting the euro? The prosperity of nations and the inequality in distributing it do not depend on their culture, but on trade and their laws.
How to measure it?
The key measure is the percentage – whether it rises or falls – of wages in GDP.
Does the percentage reflect inequality?
And to reduce global inequality, it would be necessary to rebalance the system that allows most of the world’s savings to end up in the US.
With?
For example, imposing a tax on foreign investment, as already proposed by Democratic and Republican senators.
Why limit their wealth and power?
Because the artificial strength of the dollar benefits financiers, but penalizes medium and small producers who have to export expensively and compete at home with those in Japan, Germany, Holland, China…
