Economy for the 1% instead of Economy for Life: 62 people own the same as half the world
The Oxfam report An Economy for the 1%, 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 percent. Meanwhile, the wealth of the richest 62 has increased by more than half a trillion dollars to $1.76tr. Of these 62, just nine are women.
Although world leaders have talked about the need to tackle inequality, and in September agreed a global goal to reduce it, the gap between the richest and the rest has widened dramatically in the past 12 months. Last year Oxfam’s predicted that the 1% would soon own more than the rest of us in 2016, but that actually came true a year earlier than expected, due to the increasing pace of profit-taking by the most wealthy.
Oxfam has highlighted how the extreme inequality crisis threatens to undermine the work of the last quarter of a century in tackling poverty. As a priority, it is calling for an end to the era of tax havens that rich individuals and companies have increasingly used to avoid paying their fair share to society, denying governments valuable resources needed to tackle poverty and inequality. Oxfam’s Executive Director, Winnie Byanyima, 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. We cannot continue to allow hundreds of millions of people to go hungry while resources that could be used to help them are sucked up by those at the top. I challenge the governments, companies and elites at Davos to play their part in ending the era of tax havens, which is fuelling economic inequality and preventing hundreds of millions of people lifting themselves out of poverty. Multinational companies and wealthy elites are playing by different rules to everyone else, refusing to pay the taxes that society needs to function. The fact that 188 of 201 leading companies have a presence in at least one tax haven shows it is time to act.”
In 2015 G20 governments agreed steps to curb tax dodging by multinationals through the BEPS agreement, however these measures will do little for the poorest countries and largely ignore the problems posed by tax havens. Globally, it is estimated that a total of $7.6tr of individuals’ wealth sits offshore. If tax were paid on the income that this wealth generates, an extra $190 billion would be available to governments every year.
As much as 30 percent of all African financial wealth is estimated to be held offshore, costing an estimated $14 billion in lost tax revenues every year. This is enough money to pay for healthcare for mothers and children in Africa that could save 4 million children’s lives a year, and employ enough teachers to get every African child into school.
Nine out of ten WEF corporate partners have a presence in at least one tax haven and it is estimated that tax dodging by multinational corporations costs developing countries at least $100 billion every year. Corporate investment in tax havens almost quadrupled between 2000 and 2014. Allowing governments to collect the taxes they are owed from companies and rich individuals will be vital if world leaders are to meet their new goal, set last September, to eliminate extreme poverty by 2030.
Although the number of people living in extreme poverty halved between 1990 and 2010, the average annual income of the poorest 10 percent has risen by less than $3-a-year in the past quarter of a century. That equates to an increase in individuals’ daily income of less than a single cent a year. Had inequality within countries not grown between 1990 and 2010, an extra 200 million people would have escaped poverty.
One of the other key trends behind rising inequality set out in Oxfam’s report is the falling share of national income going to workers in almost all developed and most developing countries and a widening gap between pay at the top and the bottom of the income scale. The majority of low paid workers around the world are women.
By contrast, the already wealthy have benefited from a rate of return on capital via interest payments, dividends, etc, that has been consistently higher than the rate of economic growth. This advantage has been compounded by the use of tax havens which are perhaps the most glaring example set out in the Oxfam report of how the rules of the economic game have been rewritten in a manner that has supercharged the ability of the rich and powerful to entrench their wealth.
Oxfam is calling for action against tax havens to be part of a three-pronged attack on inequality. Action to recover the missing billions lost to tax havens needs to be accompanied by a commitment on the part of governments to invest in healthcare, schools and other vital public services that make such a big difference to the lives of the poorest people.
Governments should also take action to ensure that work pays for those at the bottom as well as for those at the top – including moving minimum wage rates towards a living wage and tackling the pay gap between men and women.
Byanyima added: “The richest can no longer pretend their wealth benefits everyone – their extreme wealth in fact shows an ailing global economy. The recent explosion in the wealth of the super-rich has come at the expense of the majority and particularly the poorest people.” Oxfam is also pressing world and business leaders to tackle climate change and act to resolve humanitarian crises.