This same week Oxfam-Mexico published its report The monopoly of inequality. How the concentration of corporate power leads to a more unequal Mexico. This brief report can be read as a continuation of the document that I wrote for Oxfam almost a decade ago: Extreme inequality in Mexico. Concentration of economic and political power.
The new document makes a compelling argument: while income inequality has decreased in Mexico in recent years, wealth inequality has increased. The above, which to some might seem like a contradiction, is not. Let us remember that income is a flow, that is, it is measured by period of time, and that its distribution has improved as a result of the social and salary policies of the current administration. Wealth, on the other hand, is an asset, that is, it is something that is measured at a point in time and that represents the value of people's assets: cars, houses, durable goods, stocks, bonds, bank accounts. , jewelry, works of art, etc., less the value of your liabilities or debts.
This definition implies that the net wealth of many households at the bottom of the distribution may not only be very small, but even negative. Therefore, wealth inequality can grow if the value of the net wealth of the wealthiest households or individuals in an economy increases disproportionately. This is just what has happened in Mexico in recent years. The Oxfam paper cites some very surprising results. For example, it mentions that the combined net wealth of the two richest people in Mexico increased by more than 70% in real terms since the pandemic. This implies, according to Oxfam, that the wealth of these two people is equivalent to the wealth of the poorest half of the entire population of Latin America and the Caribbean, that is, their wealth is equivalent to that of more than 334 million people. .
Now, do not believe that the excessive increase in wealth is exclusive to the ultra-rich Mexicans. Already in another document, the Oxfam had documented that the wealth of the five richest people in the world doubled since the pandemic. A question that immediately arises is why this phenomenon has occurred. One of the reasons mentioned in both Oxfam documents is that billionaire companies have managed to make extraordinary profits in the current circumstances. Furthermore, they suggest that to some extent this is associated with the monopolistic positions or great market power of the companies that these people own.
Regarding the latter, it is worth noting that empirical evidence has gradually accumulated that supports the idea that the recent outbreak of inflation worldwide was associated with a significant increase in corporate profits. A recent study by researchers at the International Monetary Fundfor example, estimates that about half of inflation in the Eurozone is explained by an increase in corporate profits. Another work by researchers at the European Central Bank reaches similar conclusions for that same region. It is not entirely unlikely that something similar has happened in other regions of the world, including Mexico. In fact, according to Oxfam, “company profits captured 60% of the increase in prices in the Mexican economy from September 2021 to September 2022, the period with the largest increase in the cost of living in the last two decades in Mexico.”
Thus, everything suggests that there is a close relationship between the market power of large companies and the wealth gains of the ultra-rich. This situation seems to have worsened in a context such as the pandemic, in which multiple economic disruptions allowed large multinational companies in communications, transportation, food, medicine and energy, among other sectors, to increase their prices disproportionately and thus obtaining extraordinary benefits that translated into increases in the value of some companies and, therefore, in increases in the net wealth of a few families in the world.
In addition to the above, another factor that has undoubtedly contributed to increasing the wealth of the ultra-rich in the world is high global interest rates. As is known, most of the income of people at the top of the distribution comes from returns to capital. Thus, a context of high interest rates is more conducive to fulfilling the well-known formula popularized by Thomas Piketty a few years ago: r > g, which he called the fundamental divergence force and where 'r' is the yield. of capital (which comes from profits, dividends, interest, rents, etc.) and 'g' is the growth rate of product or income. Compliance with this equation inevitably implies an increase in wealth inequality.
All of the above should lead us to reflect on the type of economy and society that the current system produces. This implies reflecting on the role and scope of our current economic competition schemes, on fiscal and monetary policy and, more generally, on what the role of the State should be in an economy that many of us want to be more fair and equitable. The Oxfam reports are undoubtedly a good starting point to begin this reflection.
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