Runaway inequality has created a world where 62 people own as much wealth as the poorest half of the world’s population – a figure that has fallen from 388 just five years ago, according to an Oxfam report, published ahead of the annual gathering of the world’s financial and political elites holding in Davos, Switzerland, the World Economic Forum.
The report, An Economy for the 1 percent, shows that the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, a drop of 41 per cent. This has occurred despite the global population increasing by around 400 million people during that period. Meanwhile, the wealth of the richest 62 has increased by more than half a trillion dollars to $1.76tr. The report also shows how women are disproportionately affected by inequality – of the current ‘62’, 53 are men and just nine are women.
Although world leaders have increasingly talked about the need to tackle inequality, and in September 2015 agreed a global goal to reduce it, the gap between the richest and the rest has widened dramatically in the past 12 months. Oxfam’s prediction, made ahead of last year’s Davos, that the 1 percent would soon own more than the rest of the world, actually came true in 2015 –– a year earlier than expected.
Consequently, there is an urgent need for action to tackle the extreme inequality crisis, which threatens to undermine the progress made in tackling poverty during the last quarter of the 20th century. “As a priority, it is calling for an end to the era of tax havens which has seen the increasing use of offshore centres by rich individuals and companies to avoid paying their fair share to society. This has denied governments valuable resources needed to tackle poverty and inequality,” the report stated.
Oxfam International Executive Director, Winnie Byanima, who co-chaired last year’s Davos event, said: “It is simply unacceptable that the poorest half of the world’s population owns no more than a few dozen super-rich people who could fit onto one bus”.
As such, there has been increasing call on world leaders to end tax havens as a priority. According to a statement made available to The Guardian, “The estimated $170 that developing countries lose every year because rich individuals and companies hide money in tax havens can go a long way towards paying for the policies required to end extreme inequality.” These policies include, pay workers a living wage and close the gap with executive rewards, promote women’s economic equality and women’s rights, as well as, keep the influence of powerful elites in check.
Other policies encompass the need to change the global system for research and development and the pricing of medicines so that everyone has access to appropriate and affordable medicines; share the tax burden fairly; and use progressive public spending to tackle inequality.
According to the report, there is no getting away from the fact that the big winners in global economy are those at the top. Economic system is heavily skewed in their favour, and arguably increasingly so. Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate. Once there, an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments. One recent estimate is that $7.6 trillion of individual wealth –– more than the combined gross domestic product (GDP) of the UK and Germany –– is currently held offshore.
The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments. The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
Oxfam has also recently demonstrated that while the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10 percent of total global emissions. The average footprint of the richest 1 percent globally could be as much as 175 times that of the poorest 10 percent.
Instead of an economy that works for the prosperity of all, for future generations, and for the planet, we have instead created an economy for the 1 percent.
One of the key trends underlying this huge concentration of wealth and incomes is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing. Tax avoidance by the owners of capital, and governments reducing taxes on capital gains have further added to these returns.