By GREGORY N. HEIRES
We have a winner-take-all global economy, a malady that undermines democracy, distorts economic development and fuels inequality.
Timed to coincide with the meeting of the global economic elite at the World Economic Forum in Davos, Switzerland, a report released by Oxfam on Jan. 20 shows how the wealthy have rigged the economic and political rules in their favor. So much so that the 85 richest people in the world own as much wealth as the 3.5 billion poorest people.
“It is staggering that in the 21st century, half of the world’s population own no more than a tiny elite whose numbers could all sit comfortably in a single train carriage,” said Winnie Bryanyima, executive director of Oxfam, an international confederation of 17 organizations that work together to try to find solutions to injustice and poverty.
“We cannot hope to win the fight against poverty without talking inequality. Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.”
Concentration of Wealth and Power
Today, nearly half of the world’s wealth is concentrated in the hands of just 1 percent of the population, according to the 32-page report, “Working for the Few,” which is available at the organization’s website at www.oxfam.org. The wealth of the world’s richest 1 percent amounts to $110 trillion, which is 65 times what the bottom half of the global population owns.
According to the report:
• Seven out of 10 people reside in countries where inequality has risen in the last 30 years
• an estimated $1 trillion is held secretly in off-shore accounts
• From 1980 to 2012, the top 1 percent increased their share of wealth in 24 out of the 26 countries with available data, and
• The wealthiest 1 percent in the United States captured 95 percent of the post-financial crisis growth after 2009, while the bottom 90 percent became poorer.
Rigging the Rules
How did we get to this state of extreme inequality?
Over three decades, the global elite has shaped the economic and political rules of the game to stuff their pockets.
Privatization of public assets, the crippling the power of labor unions, free-trade policies, austere economic policies, the easing of financial regulations, the proliferation of tax havens, and tax breaks for the rich have allowed a tiny elite to accumulate vast wealth.
“Concentration of wealth in the hands of the few leads to undue political influence, which ultimately robs citizens of natural resource revenues, produces unfair tax policies and encourages corrupt practices, and challenges the regulatory powers of governments,” the report says. These policies have coincided with the greatest concentration of wealth since before the Great Depression.
In the United States, deregulation has allowed executives in the banking and financial sectors to become fabulously wealthy while creating the financial instability that led to the economic crisis that began in 2008. President Barack Obama signed the Dodd-Frank banking reform bill three years ago, but so far only 148 of its 398 rules have been implemented.
The growth in the power of corporations has coincided with the declining power of unions, the falling value of the minimum wage, lower tax rates for the wealthy and the suppression of wages and benefits. The decline of unions is correlated with the rising income of the 1 percent in the United States. “Had the share of income going to the richest one percent stayed the same as in 1980, the rest of America would have an additional $6000 at their disposal in 2012,” the report says.
In Europe, austerity has walloped public employees, the rest of the middle class and the poor. The richest 10 percent have seen their income grow, while the remaining population copes with unemployment, reduced pensions, and slashes in public services, such as health care and education.
In India, the number of billionaires has increased from about five to 61 in the last decade. The share of national wealth held by this tiny elite skyrocketed from 1.8 percent in 2003 to 26 percent in 2008.
Pakistan is a case study of how the rich and powerful rig the rules to allow for tax avoidance and a regressive tax system.
The landowners who control Parliament avoid taxes by exempting agriculture. Few parliamentarians pay taxes, even though their average income is $900,000. Only 2.5 million out of the 10 million people who should pay taxes actually do.
In Mexico, Carlos Slim has accumulated an estimated $73 billion through his control of the telecommunications industry, which was privatized two decades ago. A study by the Organisation for Economic Co-operation and Development says the monopolistic practices of Slim’s America Movil have hurt the economy by forcing citizens to pay inflated prices for phone service and siphoning away money that could be used for combating poverty.
A Beacon of Hope
Mexico stands in contrast to the rest of Latin America, which has become a beacon of hope in our polarized world as fiscal policy and social spending there have succeeded in reducing poverty over the past decade. The progress has come as the region makes the transition from the military dictatorships of the Cold War era to democracy.
“The reduction of inequality is the result of the right mix of government policies that focus on poor people by increasing social public expenditures,” the report says.
Social spending as a percentage of GDP throughout Latin America has increased by as much 66 percent over the past 20 years. Between 2002 and 2011, income inequality dropped in 14 of 17 countries, and 50 million people moved into the middle class.
“Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations,” said Oxfam’s Bryanyima. “We will soon live in a world where equality of opportunity is just a dream. In too many countries economic growth already amounts to little more than a ‘winner takes all’ windfall for the richest.”
To combat inequality, Oxfam calls upon governments to crack down on financial secrecy and tax dodging. And it has made a moral appeal (however futile) to those gathered at the World Economic Forum at Davos to support progressive taxation, provide a living wage for their employees, publicly disclose all their investments and refrain from using their wealth to seek political favors.
“The large and rising concentrations of income and wealth in many countries represent a global threat to stable, inclusive societies for one simple reason: the unbalanced distribution of wealth skews institutions and erodes the social contract between citizens and the state,” the report says.
“Rising inequality, a trend that has grown apace over the past 30 years, must be reversed.”