Oxfam’s 2018 report on the growing gap between the rich and the poor is an eye opener. Released on the eve of the World Economic Forum in Davos last month, it said that the 26 richest billionaires own as many assets as the 3.8 billion people, who make up the poorest half of the planet’s population.
Another report – the World Inequality Report 2018 – says that between 1980 and 2016, the poorest 50% of humanity only captured 12 cents in every dollar of global income growth. By contrast, the top 1% captured 27 cents of every dollar.
Oxfam’s methodology for assessing the gap between the rich and the poor is based on global wealth distribution data provided by the Credit Suisse global wealth data book, covering the period from June 2017 to June 2018. The wealth of billionaires was calculated using the annual Forbes billionaires list published in March 2018. The figures show that the world’s 26 richest people now own the same wealth as the poorest half of humanity, with inequality spiralling out of control. Oxfam says that the wealth of more than 2,200 billionaires across the globe had increased by $900b in 2018 – or $2.5b day. The 12% increase in the wealth of the very richest contrasted with a fall of 11% in the wealth of the poorest half of the world’s population. As a result, the number of billionaires owning as much wealth as half the world’s population fell from 43 in 2017 to 26 last year. In 2016 the number was 61.
In the 10 years since the financial crisis, the number of billionaires has nearly doubled.
Between 2017 and 2018, a new billionaire was created every two days. For example, the world’s richest man, Jeff Bezos, the owner of Amazon, saw his fortune increase to $112b. Just imagine:1% of his fortune is equivalent to the whole health budget for Ethiopia, a country of 105 million people.
In the same way, the poorest 10% of Britons are paying a higher effective tax rate than the richest 10% (49% compared with 34%), once taxes on consumption such as VAT are taken into account.
The developed countries are particularly to blame for the deteriorating situation. Besides failing to tackle inequality at home, developed nations have also not been meeting their overseas aid commitments which can help mitigate extreme poverty in the poorest countries. China’s rapid growth over the past four decades has been responsible for much of the decline in extreme poverty but in sub-Saharan Africa, extreme poverty was on the increase. This is how Oxfam’s director of campaigns and policy, Matthew Spencer, describes the situation:
“The massive fall in the number of people living in extreme poverty is one of the greatest achievements of the past quarter of a century but rising inequality is jeopardising further progress. The way our economies are organised means wealth is increasingly and unfairly concentrated among a privileged few while millions of people are barely subsisting. Women are dying for lack of decent maternity care and children are being denied an education that could be their route out of poverty. No one should be condemned to an earlier grave or a life of illiteracy, simply because they were born poor. It doesn’t have to be this way – there is enough wealth in the world to provide everyone with a fair chance in life. Governments should act to ensure that taxes raised from wealth and businesses paying their fair share are used to fund free, good-quality public services that can save and transform people’s lives.”
According to the report, many governments are making inequality worse by failing to invest enough in public services. It notes that about 10,000 people per day die for lack of healthcare and there were 262 million children not in school, often because their parents are unable to afford the fees, uniforms or textbooks.
Oxfam has warned that governments are exacerbating inequality by underfunding public services, like healthcare and education, at the same time as they consistently under-tax the wealthy. Calls for hiking taxes on the wealthy have multiplied amid growing popular outrage in a number of countries over swelling inequality. In the United States, new Congresswoman Alexandria Ocasio-Cortez made headlines by proposing to tax the ultra-rich up to 70 per cent. The Democratic Socialist’s proposal came after President Donald Trump’s sweeping tax reforms cut the top income rate last year from 39.6 per cent to 37 per cent. In Europe, the “yellow vest” movement that has been rocking France with anti-government protests since November is demanding that President Emmanuel Macron repeal controversial cuts to wealth taxes on high earners. And in Britain, a populist campaign helped persuade a majority of voters to opt for quitting the European Union in the country’s 2016 referendum on Brexit.
As a remedial measure, Oxfam has recommended that governments should do more to fund high-quality, universal public services by tackling tax dodging and ensuring fairer taxation, including on corporations and the richest individuals’ wealth, which it says are often undertaxed. A global wealth tax has also been suggested to arrest the trend in inequality. Oxfam has noted that the widening gap is hindering the fight against poverty, adding that a wealth tax on the 1% would raise an estimated $418bn (£325b) a year – enough to educate every child not in school and provide healthcare that would prevent 3 million deaths.