Market economies are failing society

Democratised market systems in most Western countries, including the diverse economies of the United States and Cyprus, are failing society in that wealth has become increasingly concentrated among the very few, while incomes of a large portion of the population are not keeping pace with the cost of living. And the great wealth of rich individuals and their corporations is used to buy political influence, enabling business entities to lobby for laws, tax breaks and deregulatory frameworks that further protect concentrated wealth rather than contribute to broad societal welfare. United States In the United States the richest top 1 per cent of the population own nearly a third of all US wealth, an amount equal to the entire bottom 90 per cent of the population combined. A K-shaped economy characterises the United States whereby rich asset owners and high-income earners rapidly accumulate wealth and exhibit strong discretionary spending, while a very large number of people live from paycheck to paycheck, burdened by high costs and debt. For the United States a small minority of self-centered capitalists have subverted the democratic and economic system to control resources so as to amass great wealth, while keeping tax and wage rates low. Indeed, billionaires hold massive control over national policies, resources and digital infrastructure through political spending, corporate ownership and technology monopolies. In fact, as reported in the Financial Times “America’s mega donors are overwhelmingly backing Donald Trump’s Republicans in this year’s race for Congress, as billionaires from Silicon Valley to Wall Street bankroll the party’s midterm push”. Furthermore, the very wealthy with their political donations and economic power gain government contacts and subsidies that has been pivotal in their accumulation of extreme wealth. Undeniably, public money helped Elon Musk build up his business and personal wealth, with his companies receiving at least $38 billion in government contracts, loans, subsidies and tax credits over the past 20 years. To correct failures of the market economy the government has passed laws that break up monopolies, combat corruption, regulate wages and provide safety nets. Antitrust Acts aim at stopping companies from forming illegal monopolies. And the Fair Labour Standards Act sets a federal baseline for the lowest hourly pay employers can offer workers. But unfortunately, enforcement of many of these laws to protect society has been weak. For example, reduced antitrust enforcement over decades has allowed dominant corporations to consolidate market power and erode competition. And in 2025 the US president halted the enforcement of an anti-corruption law that allowed for the prosecution of Americans accused of bribing foreign officials. Cyprus Recent years in Cyprus have been characteried by a marked widening of wealth inequalities and very modest increases in median wages that have failed to match rises in living costs. It is estimated that between 2007 and 2023 the share of the national wealth of the richest 10 per cent of Cyprus households increased spectacularly by 13 percentage points to 67 per cent. Furthermore, the ultrawealthy one per cent of Cyprus households owned 33.7 per cent of the national wealth by 2023, which compared with 31.7 per cent held by one per cent of American households Critics attribute the crony capitalism of Cyprus as severely distorting market competition and enabling the accumulation of great wealth, while curbing the ability of its market economy to contribute adequately to societal welfare. Indeed, in Cyprus rich families and big corporations including banks have transformed massive wealth into political (undemocratic) power, that corrupts the political process and generates laws and regulations favouring the wealthy. More specifically, the government influenced profoundly by employer organisations and wealthy politicians have designed an increasingly regressive tax system to favour the wealthy. In fact, the central government progressive tax on immovable property wealth was abolished completely on January 1, 2017. And despite the considerable increases in consumer prices and personal incomes of over 25 per cent since the tax reform of 2008, the corresponding “reform” of 2025 only raised the tax-free threshold by 12.8 per cent and kept the top marginal personal income tax rate at a relatively low 35 per cent on incomes above €72,000. Besides, these wealthy corporations and individuals have used their economic and political power to indulge in prolific tax evasion and questionable tax avoidance that has been readily tolerated and even facilitated by a weak and inefficient tax administration. Certain powerful building contractors, despite their damaging role in contributing to the financial crisis of 2012/13 have been awarded the bulk of government contracts on very lucrative terms, often in exchange for them extending favours and donations to government officials and politicians. Furthermore, the extremely concentrated nature of the Cyprus banking sector restricts price competition and allows banks to exploit customers by offering very low deposit rates and charging high loan rates. Moreover, Cyprus banks appear to be primarily motivated to boost the incomes and wealth of their foreign shareholders and top executives, rather than using their abundant financial resources to support the economy and society with the financing of infrastructure projects and in extending affordable loans to small businesses, as well as giving their many depositors positive real interest rates on their savings. Indeed, Cyprus banks are depositing huge amounts of their funds at the ECB to earn interest income, seizing and reselling houses of vulnerable borrowers and carrying out share buybacks, all action geared to enrich the very few. To significantly improve the functioning of the market economy of Cyprus new laws and regulations need to be introduced and strictly and even-handedly enforced along with that of existing legislation. Actions that should be taken The minimum wages and working conditions of employees should be closely monitored and relevant regulations strictly enforced. Serious efforts must be made to combat tax evasion and questionable tax avoidance, starting with detailed and publicised audits of the taxes paid by large corporations and double-jobbing politicians. Better and apolitical supervision of the financial sector is needed so that, inter alia, the very favourable treatment afforded to wealthy companies and individuals, particularly property developers and unlicensed hoteliers, is rapidly reduced. Major foreclosure and insolvency reforms introduced in April 2026, that offer better legal protections and fair treatment for bank borrowers facing the seizure of their properties must be passed and implemented. An extraordinary tax on the abnormally high profits of banks and energy companies should be levied. And reintroduction of a recurrent, progressive tax on immovable property, including unused land plots, is necessary. Most importantly, Cyprus needs a strategy to diversify away from the heavy reliance on the property development, mass tourism and retail sectors, that keep the economy’s productivity and wages low. Accordingly, the government should substantially rearrange tax and other incentives to induce a significant shift in the allocation of resources toward high-value added and innovation-driven economic activities that can lead to sustained increases in productivity and incomes.