In a report Working for the Few, Oxfam concluded that wealthy elites have co-opted political power to rig the rules of the economic game, undermining democracy and creating a world where the 85 richest people own the wealth of half of the world’s population, worldwide development organization Oxfam warns in a report published today.
The report, released at the January meeting of the World Economic Forum in Davos, detailed the pernicious impact that widening inequality is having in both developed and developing countries, helping the richest undermine democratic processes and drive policies that promote their interests at the expense of everyone else.
The report says that there is a growing global public awareness of this power-grab. Polls done for Oxfam in six countries (Brazil, India, South Africa, Spain, the UK and US) show that most people questioned in all those countries believe that laws are skewed in favor of the rich.
There are encouraging signs that the issue of inequality is being taken seriously. For example, President Obama said that inequality was “‘morally wrong” while the World Economic Forum (WEF) has identified widening income disparities as the second greatest worldwide risk in the next 12-18 months. In addition, in its annual Global Risks 2014 report, the WEF warned the income disparity was the most likely risk to cause an impact on a global scale in the next decade.
It raises concerns about the Great Recession and the squeezing effect it had on the middle classes in developed economies.
In Davos, Oxfam made a strong case for action. “We cannot hope to win the fight against poverty without tackling 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,” Winnie Byanyima, Oxfam’s Executive Director told the meeting. She went on to say that: “Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations. 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.”
With privilege, comes better access to health and education. Moreover, the rich have disproportionate political power, which has allowed them to secure policies that favor their interests. These include financial deregulation, tax havens and secrecy, anti-competitive business practice, lower tax rates on high incomes and investments and cuts or underinvestment in public services for the majority. Since the late 1970s, tax rates for the richest have fallen in 29 of the 30 countries for which data are available, meaning that in many places the rich not only get more money but also pay less tax on it.
These outcomes are not surprising when you consider that the interests of the poorest have little or no impact on the votes of elected officials.
This capture of opportunities by the rich at the expense of the poor and middle classes has helped create a situation where seven out of every ten people in the world live in countries where inequality has increased since the 1980s and one per cent of the world’s families now own 46% of its wealth ($110 trillion).
The main conclusions reached by Working for the Few are
- Globally, the richest individuals and companies hide trillions of dollars away from the tax man in a web of tax havens around the world. It is estimated that $21 trillion is held unrecorded and off-shore;
- In the US, years of financial deregulation directly correlates to the increase in the income share of the top one per cent which is now at its highest level since the eve of the Great Depression;
- In India, the number of billionaires increased tenfold in the past decade, aided by a highly regressive tax structure and the wealthy exploiting their government connections, while spending on the poorest remains remarkably low;
- In Europe, austerity has been imposed on the poor and middle classes under huge pressure from financial markets whose wealthy investors have benefited from state bailouts of financial institutions;
- In Africa, global corporations – particularly those in extractive industries – exploit their influence to avoid taxes and royalties, reducing the resources available to governments to fight poverty.
Did the elites gathered in Davos pay attention? Some may have, but the impression is that most believed that globalization was doing the job of pulling people out of poverty. For example, Microsoft founder Mr. Gates argued: “Extreme poverty rates have been cut in half in the past 25 years. Child mortality is plunging. Many nations that were aid recipients are now self-sufficient.” Having recently topped the richest list, is it little wonder that Gates thinks that the problem will look after itself.