Why Money Should Be Like Manure – But It Isn’t!

By Shlomo  Maital   

                  manure pile 

   Money, it is said, is like manure.  To do any good, it has to be spread around widely.

   But in today’s screwed-up post-global-crisis world,  it isn’t.  Money is increasingly concentrated in a very few hands.  And as a result it just sits there.   This is the nub of the problem.

   Consider these two pieces of data.

   *  A new study by Oxfam, the British philanthropic NGO, claims that  85 super-super-rich individuals in the world hold wealth worth $1.65 trillion!   This amount of wealth, held by fewer than 100 individuals, is equal to the value of all the wealth held by the poorest half of the whole world – 3.5 billion people.   The average wealth of the super-super-rich 85 is $19 b. per person. 

     Try this imaginary exercise.  Suppose, tomorrow, these 85 super-super-rich followed Warren Buffett and Bill Gates and gave away their wealth (gradually selling assets, in order not to depress the prices of stocks, bonds and real estate) and handed the proceeds to the world’s 3.5 billion poor people.  Each poor person would get $471.   This is a paltry sum. But it would change the lives of the poor.  They could start businesses, buy small pieces of land, buy a home.  And this spending would generate income for other poor people, who in turn would spend it…and end the global economic stagnation. 

     Imagine, as John Lennon says.. Imagine.  But it’s just a pipe-dream.  The wealth of the super-super-rich is the opposite of manure.  It sits in their safes and living rooms,  instead of spreading around the world.

   *  According to the Financial Times, Jan. 22,  “the pile of unspent corporate cash that has built up since the start of the financial crisis is being held by an increasingly concentrated pool of companies that will be crucial to hopes of a pick-up in business investment to stimulate the world economy.”   A study by the consulting firm Deloitte shows that globally,  “about a third of the world’s biggest non-financial companies are sitting on most of a $2.8tn gross cash pile of unspent corporate cash (retained earnings) !  And of that sum, fully 5 per cent is accounted for by Apple alone, with $150 b. in unspent cash! ”   “Looking ahead, the wave of cash [spending] that many are expecting will depend on the decisions of a few, rather than the many,” a Deloitte expert said.

  Why aren’t corporations spreading around their cash, like manure?  In a risk-averse world, with sluggish economies, there is no need to invest in more productive capacity.  Better to hold on to the money and play with it than invest it in real industry, in real job-creation, in real innovation.  This is what the handful of rich corporations believes.

    Why not impose a tax on unspent retained earnings, to create an incentive to invest it?  Why reward Apple for holding its cash abroad, instead of investing it in America? 

     So there you have it.   Billionaires and rich corporations. Both sit on huge piles of money.  And the money just sits there.  Until it starts to move, we won’t see true global economic recovery or more new jobs for those who really need them.  

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