Global inequality returned to the news this week with the release of an updated report by Oxfam to coincide with the opening of the World Economic Forum in Davos for the global elite. NZ Prime Minister John Key attended Davos this year and he described the experience as “like speed dating in first class.” Trade Minister Tim Grosser accompanied Key, no doubt to the deserved accolades of his big business masters for pimping the alleged “benefits” of the Trans Pacific Partnership Agreement. 2500 bankers, corporate moguls and politicians discussed how to rule the world.
This year the conference discussed a report on “The Fourth Industrial Revolution, which includes developments in previously disjointed fields such as artificial intelligence and machine-learning, robotics, nanotechnology, 3-D printing, and genetics and biotechnology, will cause widespread disruption not only to business models but also to labour markets over the next five years, with enormous change predicted in the skill sets needed to thrive in the new landscape.” Last year they discussed global inequality.
The Oxfam report says that just 62 people own as much wealth as the poorer half of the world’s population. This number has fallen from 388 five years ago. The wealth of those 62 people increased by 44% in those five years to US$1.76 trillion. The rich are certainly getting richer.
The poor have also been getting poorer with a 41% decline in combined wealth of the poorest 3.6 billion people on the planet.
The top one percent own more than the other 99% combined!
“The big winners in our global economy are those at the top. Our economic system is heavily skewed in their favour. Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate,” the report said.
With economic power comes political power. That is what is on display at Davos and why John Key goes to pay homage.
The super rich write their own laws when it comes to tax or any other social obligation. The Oxfam report doesn’t even include the estimated US$7.6 trillion hidden in offshore tax havens which is equivalent to 8% of global wealth. If tax was paid on the income this wealth generated Oxfam estimates that an extra $190 billion a year would be available to governments to spend alleviating poverty.
Nine out of ten of the WEF corporate partners in Davos are present in at least one tax haven. Corporate investment in tax havens has increased 400% since the turn of the century.
Oxfam uses data from the Credit Suisse Global Wealth Databook and the Forbes billionaire list which I looked at a few weeks ago. The figures have been criticised because there as been a decline in extreme poverty for millions of people globally in recent decades. But this is almost exclusively a product of China lifting several hundred million people above the arbitrary US$1 a day threshold.
What is true is that extreme wealth inequality is also killing millions of people each year – including in the wealthiest countries. In the US life expectancy actually declined for white working class men for thew first time in recorded history. The Fergusson Commission report in St Louis found that avereage life expectancy ranged from 91 in the richest neighbourhoods to 56 in the poorest.
While public spending for the poor has been slashed in the US the top income earners specialise in tax avoidance on a massive scale. The New York Times reports that the wealthiest Americans have formed an “income defense industry” to shelter their riches, with “a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.” US corporations share of foreign profits in tax havens has doubled to 56% over the last two decades.
A recent study found that 72% of all Fortune 500 companies operate tax havens with the tax loss to the US government around $90 billion a year. Meanwhile, 2.5 million US children experience homelessness each year.
Oxfam notes that four million children’s lives could be saved each year in Africa if 30% of Africa’s wealth was not held in tax havens. US$14 billion a year is lost in tax revenue that could be used for life-saving health and education projects.
It is over half a century since US president Johnstone declared a “War on Poverty”. The failure of that war is a failure of the system we live under – capitalism.
Can anything be done – under capitalism – to fix the problem? That is a question I will look at in a future blog.