21 JAN 2014
Rigged rules create a world where winner takes all
A tiny elite now holds the same amount of wealth as half the world’s population
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 same amount of wealth as half of the world’s population, worldwide development organisation Oxfam warned in a recent report.
Working for the Few, published ahead of the World Economic Forum in Davos earlier this month, details the pernicious impact that widening inequality is having in both developed and developing countries. This inequality is helping the richest undermine democratic processes and drive policies that promote their interests at the expense of everyone else.
The report says there is a growing global public awareness of this power grab. Polls done for Oxfam in six countries (Brazil, India, South Africa, Spain, the United Kingdom and the United States) show that most of the people questioned believe that laws are skewed in favour of the rich.
Inequality has shot up the global agenda in recent years. US President Barack Obama has made it a key priority this year. The Forum has identified widening income disparities as the second greatest worldwide risk in the next 12 to 18 months. Its Outlook on the Global Agenda 2014 report, published in November, warns inequality is undermining social stability and “threatening security on a global scale”.
Oxfam wants governments to take urgent action to reverse the trend. It has asked those who attended the Forum to make a six-point personal pledge to tackle the problem.
Winnie Byanyima, Oxfam International Executive Director , who attended the Davos meetings, said: “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.
“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.
“In developed and developing countries alike, we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.
“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.”
Policies successfully imposed by the rich in recent decades include financial deregulation, tax havens and secrecy, anti-competitive business practices, 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.
A recent US study presented compelling statistical evidence that the interests of the wealthy are overwhelmingly represented by the US government compared to those of the middle class. The preferences of the poorest had no impact on the votes of elected officials.
This capture of opportunities by the rich at the expense of poor people and the middle class has helped create a situation where seven out of 10 people live in countries where inequality has increased since the 1980s. One per cent of the world’s families now own 46 per cent of its wealth (US$110 trillion).
The report says:
- 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 believed that US$21 trillion is held unrecorded and off-shore.
- In the US, the income share growth of the top 1 per cent correlates directly with financial deregulation. That share 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 because of a highly regressive tax structure, low spending on the poorest, and the wealthy, who exploit their government connections.
- In Europe, the poor and middle classes are bearing the brunt of the impact from their governments’ market bail-outs.
- 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.
Oxfam is calling on those who gathered at the Forum to pledge to:
- support progressive taxation and not to dodge their own taxes
- refrain from using their wealth to seek political favours 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
- challenge governments to use tax revenues to provide universal healthcare, education and social protection for citizens
- provide a living wage in all companies they own or control
- challenge other members of the economic elite to join them in these pledges.
Oxfam is calling on governments to tackle inequality by cracking down on financial secrecy and tax evasion, including through the G20; investing in universal education and healthcare; and agreeing on a global goal to end extreme inequality in every country as part of the post-2015 negotiations.