Business & Money

'Greed, for a lack of better word, is good'

By Jehron Muhammad -Contributing Writer- | Last updated: Jan 3, 2012 - 11:41:55 AM

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Yes, they are greedy dogs which can never have enough, and they are shepherds that cannot understand: they all look to their own way, everyone for his gain, from his quarter. —Isaiah 56:11

COSATU president Sidumo Dlamini
( - The Congress of South African Trade Unions (COSATU) president Sidumo Dlamini while addressing the 47th National African Federated Chamber of Commerce Conference in Johannesburg on November 18 said “greed,” or the wealth of the world being controlled by a few, is the root cause of the world’s economic instability.

“The current dominant world political and economic system is predicated on greed and is constructed by and on behalf of a tiny minority,” said the president of South Africa’s largest union. “Its primary purpose is to deliver profit for them.”

Dlamini explained that the vicious nature of the capitalist system scraps all “proposed alternatives” that take humanity into consideration, “in favor of those who present an opportunity to have capital continue to maximize profit even during the [world’s] worsening crisis.”

“Greed, for a lack of a better term, is good,” said the unscrupulous corporate raider played by Michael Douglas in the 1987 Oliver Stone movie Wall Street. What he didn’t say is that countless lives are sacrificed to make greed good for the few.

To give insight into the above, we only have to revisit the economic crises of 2008 that led to the collapse of the U.S. subprime mortgage market and the reversal of the housing boom in other industrialized economies. According to Dlamini, “when we could see levels of poverty increasing, people being retrenched, and when all of us were made to carry our hands on our heads about the big economic crisis, evidence shows that during that period the world’s billionaires saw their wealth grow by 50 percent, and their ranks swell to 1,011 from 793.”

During that same period the U.S. billionaires’ numbers grew from 359 to 403.

The 1,011 billionaires’ combined net worth increased to $3.6 trillion, “up,” said Dlamini, “$1.2 trillion from the year before.” Each billionaire on average had his or her wealth increased by $500 million.

Special attention should be paid U.S. billionaires, who outnumber Europe’s 248 billionaires, even though Europe has twice the population of the U.S.

According to Dlamini, “The wealth of the 403 U.S. billionaires [could have] more than cover[ed] the 2008 U.S. federal deficit, with money left over for the states.”

But what did government economic advisors—like the former Goldman Sachs employees that have made up part of past and present U.S. administrations—have to say? Governments the world over were advised to bail out banks and financial institutions that were “too big to fail.”

In other words, said Dlamini, the billionaires “were utterly refusing to touch their billions which they accumulated leading to the crisis but making the working class, through their taxes, to pay for their consciously self-made crisis.”

A study authored by Stanford University researchers and published jointly by the Russell Sage Foundation and Brown University and referenced by Dlamini shows the increasing chasm in the U.S. between the rich and the poor.

The study found that “the proportion of American families living in middle-income neighborhoods has declined sharply over the past four decades, while the share of families living in either poor or affluent neighborhoods has dramatically increased.”

In addition, the report shows, the proportion of American families living in affluent neighborhoods has doubled from 7 to 14 percent from 1970 to 2007, while, during the same period, the proportion of families in poor neighborhoods rose from 8 to 17 percent.

A new census study had determined that 49 million Americans now live in poverty.

“Over the same period, the proportion of families living in middle-income neighborhoods fell by 21 percentage points. This is a Nation of endless opportunities,” said Dlamini, “where in the midst of 49 million extremely poor people coexist 403 billionaires!”

The world’s increasingly heightening challenges, imposed on the global economy seemingly almost daily, seem to go on without end.

Remember the subprime mortgages that led to the global recession? Well, what is happening right now in Europe is similar “except it’s not mortgages, but eurozone government debt that’s the main problem,” said Stephen Beard, the European bureau chief who provides coverage of European business and economic development for NPR’s Marketplace.

Investors that lend governments money have been spooked for “fear” that European governments might default. “US investors in particular have pulled billions of dollars out of the eurozone. And as a result, the banks have been hoarding their cash, and cutting back on their lending,” said Beard.

Peter Tal Larsen, of the website Breaking Views, thinks it might be far worse this time. He told Marketplace: “I think what we’re seeing now is a more severe credit crunch really because it looks like it’s going to go on for longer and there are no obvious solutions in terms of government support, because governments are not really in the position to support banks in the same way that they were in 2008.”

Beard agrees, saying it could be “very bad.” He said, “The OECD—the organization of leading countries—reckons that not only could the eurozone slip into recession next year, but the U.S. could be affected too. The OECD has cut its forecast for U.S. growth next year down from 3.1 to 2 percent.”

And remember the mortgage-backed securities that were considered “toxic”? Now European government bonds, which were considered a safe investment, are now considered the same, meaning U.S. banks are staying away from these potentially toxic eurozone government bonds.

As financial institutions and governments are reeling from past avaricious practices, people are increasingly struggling to live on less.

A recent report released by the international development charity Oxfam warns that the global scramble for land and water and the increasing food price hikes indicate the world has entered a new age of crises. The report is telling, in that it explains that the 2008 food price spike pushed around 100 million additional people into poverty, while “the current spike has pushed 44 million more into poverty so far this year alone,” said Dlamini, who referenced the report during his speech.

Oxfam highlights the West African nation of Niger as being at the “epicenter of hunger,” with nearly half its children being malnourished and one in six dying before age five.

The UN Food and Agriculture Organization reports that while spending on food in th U.S. accounts for nearly seven percent of the family budget, in the East African nation of Kenya it is 45 percent and in Azerbaijan 49 percent.

Urban neighborhoods across America sometimes fare worse than so-called third world nations.

A Food Research and Action Center report, part of its “Food Hardship In America,” series shows nearly one in four U.S. households with children struggled with affording food in 2010. In Philadelphia—this author’s hometown—the first congressional district was ranked the second hungriest, with 49.6 percent of households with children suffering from hunger. The district of U.S. Rep. Frederica Wilson of Florida was ranked the hungriest, with 50.4 percent of households with children suffering from hunger.

Dlaminia revealed that the reason food is priced out of the reach of the poor “is that for powerful investors, food is treated just like another financial asset around which speculation can be played in the financial markets.”

He cited the recent World Development Movement report, titled “Betting on Hunger,” which explains that futures contracts were devised to give farmers a degree of “certainty” about the price they’d receive for crops yet to be sold. These commodity futures were then traded by bankers and traders, “becoming in effect bets on food prices.”

The Strategic Investment Group in New York estimated that “speculative demand for commodity futures has increased since 2008 by 40-80 percent in agricultural futures.”

A hedge fund manager giving testimony during a US Senate hearing on speculation of food prices in 2008 revealed that when billions of dollars of capital are put to work in small markets like agricultural commodities, “it inevitably increases volatility and amplifies prices of food stuffs… it’s not like real estate and stocks. When food prices double, people starve.”

The film Wall Street and the Douglas character’s explanation of the term “greed” to justify his impetus for the accumulation of wealth have come to be seen as the archetypal portrayal of the excesses of financial institutions. The movie, which won Douglas an Academy Award, reportedly inspired many to work on Wall Street, with Charlie Sheen, Michael Douglas, and Oliver Stone remarking that people still approach them to say that they owe their careers in the financial industry to having viewed the film.

That the movie has influenced so many possible careers is a testament to how engrained this culture of receiving financial dividends at the expense of others is.

Jehron Muhammad can be reached at [email protected].