Why you should care
Because the gap between the richest and poorest is only getting wider.
Budi is a shrimp processing worker in Indonesia who peels prawns at a plant that distributes shrimp to food retailers around the world. She’s paid minimum wage — currently $260.50 per month in Jakarta — if she can peel up to 950 shrimp within one hour. But to meet that target, she has to skip breaks, giving herself barely enough time to eat and sometimes no time to make a trip to the bathroom. Sometimes she stands for nine straight hours.
But while Budi is struggling to make her quota, those on the other end of the supply chain aren’t feeling the pinch. In fact, as the World Economic Forum kicks off its yearly Davos, Switzerland, summit, which aims to examine Globalization 4.0, inequality has continued to rise across the world — and organizations like the World Inequality Lab are outright saying globalization is part of the problem. According to the WIL’s latest report: “Rising inequality cannot be viewed as a mechanical, deterministic consequence of globalization.”
So maybe Davos should consider this. According to a 2018 Oxfam report …
It would take a woman working in a shrimp processing plant in Indonesia approximately 4,442 years to make the average annual salary of a top executive at a supermarket in the United States.
The global charity looked specifically at supply chains of food retailers, highlighting some of the unfair practices that supermarkets adopt to squeeze the price at the supply end — the costs of which are often transferred to workers. And this isn’t just an American problem: It would take that same worker about 1,534 years to earn what an average U.K. supermarket executive makes in 365 days. Meanwhile, between 1996 and 2015, the share of value recouped by a food retailer in the U.S. for Indonesian shrimp increased by 278 percent.
Oxfam’s Tim Gore, head of policy, advocacy and research for the charity’s campaigning on food and hunger, explained how some of the retailers’ contract terms allow these unfair practices to continue. For instance, by paying for goods much later, they can reject produce even after they’ve physically accepted it, maybe on quality grounds, if bananas aren’t a particular shade of yellow, for example. This passes the risks from retailer to supplier: The producer has incurred all the costs, and the goods may just get trashed.
Another example, he says, has been seen in double auctions, where suppliers are invited to submit quotes for a certain volume of produce. Out of, say, 10 or 20 bids, they’ll choose five or 10 of the lowest and invite them to a second-round online auction, with the lowest price quoted as the starting price, encouraging suppliers to bid lower. “That is in a very intensive, time-bound window of auctioning — basically minute-by-minute,” Gore says, adding it “has the effect of driving costs way below even the cost of production.” Italy, he says, is one country with a national initiative to try and stop the practice, although it’s voluntary for businesses. The EU has also made an effort at mitigating such practices, issuing new rules in December that let member states punish retailers for last-minute cancellations or retroactive contract changes. At the international level, further voluntary guidelines exist in the United Nations Guiding Principles on Business and Human Rights — but the uncoerced nature of these has affected the pace of implementation.
Davos, unlike other big summits, is a forum for discussion rather than a place where decisions are made.
Part of the stated aim at Davos this week — where the luminaries gathered will include German Chancellor Angela Merkel, Japanese Prime Minister Shinzo Abe, new Brazilian President Jair Bolsonaro and a U.S. delegation led by Secretary of State Mike Pompeo — is to face the problems caused by globalization and attempt to learn from past mistakes. But supply chains are just one focus in a world where the gap between rich and poor is rapidly widening. Oxfam’s latest report found that billionaire fortunes increased by 12 percent last year — $2.5 billion a day. At the same time, the 3.8 billion people who make up the poorest half of humanity saw their wealth decline by 11 percent. But even as the forum calls just-around-the-corner technologies “the fourth industrial revolution,” it’s acknowledging that such changes may demand new forms of governance to safeguard the public good.
Global economies are walking a knife edge as they approach this technological and automated future — and the way such tools could mitigate or exacerbate inequality. Phil Bloomer, executive director of London’s Business and Human Rights Resource Center, says there is no doubt that artificial intelligence, robotics and the gig economy can genuinely build shared prosperity, but in times of extreme inequality, such as the one we’re currently in, “there’s a clear and present danger that it will lead to mass unemployment, hollowed-out work and in fact hollowed-out lives.”
The conference, unlike other big summits, is a forum for discussion rather than a place where decisions are made. But both Gore and Bloomer acknowledge there are some attendees making what they feel are the right noises, including New Zealand’s Prime Minister Jacinda Ardern and South Korea’s Lee Nak-Yeon, on rising inequality.
Still, Bloomer fears the forum may offer little more than business as usual. “When it comes to the solutions they describe, they are absent or anemic at best,” but they tend to fall back on neoliberal solutions in any case — such as more private investment, harnessing the open market to create economic growth — which are then supposedly to be applied for the public good, he says.
Instead of elites deciding what’s best for the rest of the world, Bloomer suggests the forum should invite a more diverse set of attendees and mentions that already good work has been done by the head of the Church of England and the British Academy, who essentially talk about redistribution of wealth and power from shareholders to stakeholders. More diverse voices, he says, will offer real solutions rather than the solutions being proffered only because those at the table don’t want to change the status quo.