How the other 1% lives: wealth gap not the only way in which global elite is taking advantage
Oxfam’s latest report, focused on an increasingly obscene wealth inequality and the stranglehold exerted by a global elite, had one central message: The era of tax havens that have made this possible must be brought to an end.
The headline numbers showed that the top 1% own as much wealth as the other 99% and – even more startling – that the richest 62 individuals own more wealth than the poorest half of the world’s population (compared to 388 individuals in 2010). To put this into stark perspective, this group of 62 people own as much as the 3.6 billion people on the bottom of the heap.
Oxfam makes it clear that this distribution of wealth is not some incidental byproduct of rising worldwide prosperity. Since 2000, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while 50% of that has gone to the 1% of people on the top of the pile – about 74m people. While the richest have been getting richer, the combined wealth of the poorest half of the planet has fallen by US$1 trillion (41%) in the past five years alone.
The power and privilege exercised by a global elite is forcing a crisis – and the report offers many illustrations to support Oxfam’s argument that our global economic system is broken. An industry of wealth managers, tax avoidance schemes and offshore accounting proliferate – for example, massive profits generated in core regional markets such as the UK and Japan are reported instead in countries that have no corporate income tax. As the report said:
Globally, it is estimated that super-rich individuals have stashed a total of US$7.6 trillion in offshore accounts. If tax were paid on the income that this wealth generates, an extra US$190 billion would be available to governments every year.
The equality crisis is not a simple divide between rich and poor countries. For example, a total of US$500 billion generated from within Africa is held offshore in tax havens, costing an estimated US$14 billion a year in lost tax revenue across the continent. This sum could pay for enough healthcare to save the lives of 4m children and employ enough teachers to get every African child into school.
Nations rise, poverty remains
China and India have been responsible for a dramatic increase in the combined GDP of Asian countries. These figures, along with growing prosperity in smaller nations such as Ghana, mean that average incomes in poorer countries are catching up with those in richer ones, and inequality between nations is falling.
Oxfam’s report reminds us that 36% of the world population was living in extreme poverty in 1990, falling to 16% in 2010 and meeting the Millennium Development Goal to halve extreme poverty five years ahead of target. This progress is undeniable and led to the ambitious Sustainable Development Goal to end extreme poverty completely by 2030.
However – and until we meet that goal there will always be a “however” – while inequality between countries is falling, inequality within countries is actually increasing. As much as 80% of the world’s poorest people are now estimated to live in middle income countries. During the period in which extreme poverty was halved, an extra 700m people could have escaped poverty if poor people had benefited more than the rich from economic growth.
Economies may be growing as poorer countries catch up with richer ones, but incomes of the poorest people all over the world are not keeping pace.
Left alone, world gender parity would be roughly 50:50 and, if that were reflected in the wealthiest 62, I would settle for either 30 or 31 women to be a fair representation of a proportionate gender divide. In fact, just nine out of the total are women. A study from The International Monetary Fund found that higher income inequality in a nation aligns with bigger gender gaps in terms of health, education, labour market participation and representation in institutions such as parliaments. It also found that the gender pay gap was highest in the most unequal societies.
Women make up the majority of the world’s low-paid workers and are concentrated in the most precarious jobs.
Another Oxfam report from December 2015 demonstrated that while the poorest half of the planet live in areas most vulnerable to climate change, they are responsible for only around 10% of total global emissions: “The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.”
Listen to the 99%
Oxfam asserts that the current situation is the consequence of deliberate policy choices, of our leaders “listening to the 1% and their supporters rather than acting in the interests of the majority”.
Chief executive (UK) Mark Goldring said:
World leaders’ concern about the escalating inequality crisis has so far not translated into concrete action to ensure that those at the bottom get their fair share of economic growth … We need to end the era of tax havens which has allowed rich individuals and multinational companies to avoid their responsibilities to society by hiding ever increasing amounts of money offshore.
I hope that the wealthy and privileged few attending the forum in Davos will listen to Oxfam rather than their wealth managers – and start adding their considerable influence to arguably the single most effective action in the fight to end extreme poverty.