The top one percent of the wealthiest
people on the planet own nearly fifty percent of the
world's assets while the bottom fifty percent of the
global population combined own less than one percent of
the world's wealth.
"These figures give more evidence
that inequality is extreme and growing, and that
economic recovery following the financial crisis has
been skewed in favor of the wealthiest.
In poor
countries, rising inequality means the difference
between children getting the chance to go to school
and sick people getting life saving medicines."
Emma Seery, Oxfam International
Those are the findings of an annual
report (Global
Wealth Report 2014) by the investment firm Credit Suisse released
Tuesday,
which shows that global economic inequality has surged
since the
financial collapse of 2008.
According to the report,
"global wealth has grown to a new
record, rising by $20.1 trillion between mid-2013
and mid-2014, an increase of 8.3%, to reach $263
trillion - more than twice the $117 trillion
recorded for the year 2000."
Though the rate of this wealth creation
has been particularly fast over the last year - the
fastest annual growth recorded since the pre-crisis year
of 2007 - the report notes that the benefits of this
overall growth have flowed disproportionately to the
already wealthy.
And the report reveals that as of
mid-2014,
"the bottom half of the global
population own less than 1% of total wealth. In
sharp contrast, the richest
decile hold 87% of
the world's wealth, and the top percentile alone
account for 48.2% of global assets."
Campaigners at Oxfam International, which
earlier this put out their
own
report on global inequality, said the Credit
Suisse report, though generally serving separate aims,
confirms what they also found in terms of global
inequality.
"These figures give more evidence
that inequality is extreme and growing, and that
economic recovery following the financial crisis has
been skewed in favor of the wealthiest.
In poor
countries, rising inequality means the difference
between children getting the chance to go to school
and sick people getting life saving medicines,"
Oxfam's head of inequality Emma Seery, told the
Guardian in response to the latest study.
In addition to giving an overall view of
trends in global wealth, the authors of the Credit
Suisse gave special attention to the issue of
inequality in this year's report, noting the increasing
level of concern surrounding the topic.
"The changing distribution of wealth
is now one of the most widely discussed and
controversial of topics," they write.
"Not least owing to [French
economist] Thomas Piketty's recent account of
long-term trends around inequality. We are confident
that the depth of our data will make a valuable
contribution to the inequality debate."
According to the report:
In almost all countries, the mean
wealth of the top decile (i.e. the wealthiest 10% of
adults) is more than ten times median wealth.
For the top percentile (i.e. the
wealthiest 1% of adults), mean wealth exceeds 100
times the median wealth in many countries and can
approach 1000 times the median in the most unequal
nations.
This has been the case throughout
most of human history, with wealth ownership often
equating with land holdings, and wealth more often
acquired via inheritance or conquest rather than
talent or hard work.
However, a combination of factors
caused wealth inequality to trend downwards in high
income countries during much of the 20th century,
suggesting that a new era had emerged.
That downward trend now appears to
have stalled, and possibly gone into reverse.
Working for The Few
Political Capture and Economic Inequality
OXFAM BRIEFING PAPER - SUMMARY 20
JANUARY 2014
from
Oxfam Website
|
This
paper was written by Ricardo Fuentes-Nieva
and Nick Galasso. Oxfam acknowledges the
assistance of Natalia Alonso, Ana Arendar,
Teresa Cavero, Anna Coryndon, Kimberly
Pfeifer and Max
Lawson in its production.
It is
part of a series of papers written to inform
public debate on development and
humanitarian policy issues.
For further information on the issues raised
in this paper please e-mail
advocacy@oxfaminternational.org
|
Housing for the
wealthier middle classes
rises above the
insecure housing of
a slum community in
Lucknow, India.
Photo: Tom Pietrasik/Oxfam
In November 2013, the World Economic Forum released its
'Outlook on the Global Agenda 2014',1
in which it ranked widening income disparities as the
second greatest worldwide risk in the coming 12 to 18
months.
Based on those surveyed, inequality is
'impacting social stability within countries and
threatening security on a global scale.' Oxfam shares
its analysis, and wants to see the 2014 World Economic
Forum make the commitments needed to counter the growing
tide of inequality.
Some economic inequality is essential to drive growth
and progress, rewarding those with talent, hard earned
skills, and the ambition to innovate and take
entrepreneurial risks. However, the extreme levels of
wealth concentration occurring today threaten to exclude
hundreds of millions of people from realizing the
benefits of their talents and hard work.
Extreme economic inequality is damaging and worrying for
many reasons: it is morally questionable; it can have
negative impacts on economic growth and poverty
reduction; and it can multiply social problems. It
compounds other inequalities, such as those between
women and men. In many countries, extreme economic
inequality is worrying because of the pernicious impact
that wealth concentrations can have on equal political
representation.
When wealth captures government
policymaking, the rules bend to favor the rich, often to
the detriment of everyone else.
The consequences include the erosion of
democratic governance, the pulling apart of social
cohesion, and the vanishing of equal opportunities for
all.
Unless bold political solutions are instituted to
curb the influence of wealth on politics, governments
will work for the interests of the rich, while economic
and political inequalities continue to rise.
As US Supreme Court Justice Louis
Brandeis famously said,
'We may have democracy, or we may
have wealth concentrated in the hands of the few,
but we cannot have both.'
Oxfam is concerned that, left unchecked,
the effects are potentially immutable, and will lead to
'opportunity capture' - in which the lowest tax rates,
the best education, and the best healthcare are claimed
by the children of the rich.
This creates dynamic and mutually
reinforcing cycles of advantage that are transmitted
across generations.
Given the scale of rising wealth concentrations,
opportunity capture and unequal political representation
are a serious and worrying trend.
For instance:
-
Almost half of the world's wealth
is now owned by just one percent of the
population.2
-
The wealth of the one percent
richest people in the world amounts to $110
trillion.
-
That's 65 times the total wealth
of the bottom half of the world's population.3
-
The bottom half of the world's
population owns the same as the richest 85
people in the world.4
-
Seven out of ten people live in
countries where economic inequality has
increased in the last 30 years.5
-
The richest one percent increased
their share of income in 24 out of 26 countries
for which we have data between 1980 and 2012.6
-
In the US, the wealthiest one
percent captured 95 percent of post-financial
crisis growth since 2009, while the bottom 90
percent became poorer.7
This massive concentration of economic
resources in the hands of fewer people presents a
significant threat to inclusive political and economic
systems.
Instead of moving forward together,
people are increasingly separated by economic and
political power, inevitably heightening social tensions
and increasing the risk of societal breakdown.
Oxfam's polling from across the world captures the
belief of many that laws and regulations are now
designed to benefit the rich. A survey in six countries
(Spain, Brazil, India, South Africa, the UK and the US)
showed that a majority of people believe that laws are
skewed in favor of the rich - in Spain eight out of 10
people agreed with this statement.
Another recent Oxfam poll of low-wage
earners in the US reveals that 65 percent believe that
Congress passes laws that predominantly benefit the
wealthy.
The impact of political capture is striking. Rich and
poor countries alike are affected. Financial
deregulation, skewed tax systems and rules facilitating
evasion, austerity economics, policies that
disproportionately harm women, and captured oil and
mineral revenues are all examples given in this paper.
The short cases included are each
intended to offer a sense of how political capture
produces ill-gotten wealth, which perpetuates economic
inequality.
This dangerous trend can be reversed.
The good news is that there are clear
examples of success, both historical and current. The US
and Europe in the three decades after World War II
reduced inequality while growing prosperous.
Latin America has significantly reduced
inequality in the last decade - through more progressive
taxation, public services, social protection and decent
work. Central to this progress has been popular politics
that represent the majority, instead of being captured
by a tiny minority.
This has benefited all, both rich and
poor.
RECOMMENDATIONS
Those gathered at Davos for the
World Economic Forum
have the power to turn around the rapid increase in
inequality.
Oxfam is calling on them to pledge that they
will:
-
Not dodge taxes in their own
countries or in countries where they invest and
operate, by using tax havens;
-
Not use their economic wealth to
seek political favors that undermine the
democratic will of their fellow citizens;
-
Make public all the investments
in companies and trusts for which they are the
ultimate beneficial owners;
-
Support progressive taxation on
wealth and income;
-
Challenge governments to use
their tax revenue to provide universal
healthcare, education and social protection for
citizens;
-
Demand a living wage in all the
companies they own or control;
-
Challenge other economic elites
to join them in these pledges.
Oxfam has recommended policies in
multiple contexts to strengthen the political
representation of the poor and middle classes to achieve
greater equity.
These policies include:
-
A global goal to end extreme
economic inequality in every country. This
should be a major element of the post-2015
framework, including consistent monitoring in
every country of the share of wealth going to
the richest one percent.
-
Stronger regulation of markets to
promote sustainable and equitable growth; and
-
Curbing the power of the rich to
influence political processes and policies that
best suit their interests.
The particular combination of policies
required to reverse rising economic inequalities should
be tailored to each national context.
But developing and developed countries
that have successfully reduced economic inequality
provide some suggested starting points, notably:
-
Cracking down on financial
secrecy and tax dodging
-
Redistributive transfers; and
strengthening of social protection schemes
-
Investment in universal access to
healthcare and education
-
Progressive taxation
-
Strengthening wage floors and
worker rights
-
Removing the barriers to equal
rights and opportunities for women
Figure 1: The rich get
richer
Source: F. Alvaredo, A. B. Atkinson, T. Piketty and E.
Saez, (2013)
'The
World Top Incomes Database'
NOTES
-
World Economic Forum (2013)
'Outlook on the Global Agenda 2014', Geneva:
World Economic Forum,
http://www3.weforum.org/docs/WEF_GAC_GlobalAgendaOutlook_2014.pdf
-
Credit Suisse (2013) 'Global
Wealth Report 2013', Zurich: Credit Suisse.
https://publications.credit-suisse.com/tasks/render/file/?fileID=BCDB1364-A105-0560-1332EC9100FF5C83,
and Forbes' The World's Billionaires (accessed
on December 16, 2013)
http://www.forbes.com/billionaires/list/
-
Calculated based on information
from Credit Suisse, op. cit. Total wealth
amounts to $240.8 trillion. Share of wealth for
the bottom half of the population is 0.71
percent. That for the richest one percent is 46
percent (amounting to $110 trillion).
-
Credit Suisse, op. cit.
-
The World Top Incomes Database,
http://topincomes.g-mond.parisschoolofeconomics.eu/
-
Ibid.
-
E. Saez (2013) 'Striking it
Richer: The Evolution of Top Incomes in the
United States (updated with 2012 preliminary
estimates)', Berkeley: University of California,
Department of Economics.
http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012.pdf
and The World Top Incomes Database
http://topincomes.g-mond.parisschoolofeconomics.eu/
OXFAM
Oxfam GB, Oxfam House, John Smith
Drive, Cowley, Oxford, OX4 2JY, UK.
Oxfam is an international confederation of 17
organizations networked together in more than 90
countries, as part of a global movement for change, to
build a future free from the injustice of poverty:
