(Editorial note: The following are excerpts from a recent report “Working for the Few” by Oxfam, an international organization working to end poverty, written by Ricardo Fuentes-Nieva and Nicholas Galasso. Oxfam began in 1942 as the Oxford Committee for Famine Relief to stop famine in Greece due to the Nazi military occupation. Oxfam works in 94 countries today.)
Economic inequality is rapidly increasing in most countries. World wealth is divided in two: almost half going to the richest 1%; the other half to the remaining 99%. The World Economic Forum identified this as a major risk to human progress. Extreme economic inequality and capture of political institutions are interdependent. Unchecked, democratic institutions are undermined and governments serve economic elites to the detriment of ordinary people. Extreme inequality is not inevitable; it can and must be reversed quickly.
In Nov. 2013, the World Economic Forum released its ‘Outlook on the Global Agenda 2014.’ It ranked widening income disparity as the #2 risk in the coming year. Its survey showed inequality is ‘impacting social stability and threatening security on a global scale.
Oxfam shares its analysis, and wants to see the Forum commit to countering growing inequality. Extreme economic inequality is morally questionable; has negative impacts on economic growth and poverty; and can multiply social problems. It compounds other inequalities, such as those between women and men.
Wealth concentrations have a pernicious impact on equal political representation. Wealth captures policy-making, and bend the rules to favor the rich. Consequences include erosion of democratic governance, pulling apart social cohesion, and disappearance of equal opportunities. Unless bold solutions are instituted to curb the influence of wealth on politics, governments will work for the interests of the rich, further increasing economic and political inequality. As Supreme Court Justice Brandeis said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’
For instance:
• Almost half of the world’s wealth is now owned by just 1% of the population.
The wealth of the richest people in the world amounts to $110 trillion, 65 times the wealth of the bottom half of the world’s population. 85 super-rich people own as much as the bottom half of the world’s people.
• 70% of all people live in countries where economic inequality has increased for 30 years.
• The richest 1% increased their share of income in 24 out of 26 countries for which we have data since 1980.
• The wealthiest 1% in the US got 95% of post- crisis growth since 2009, while the bottom 90% got poorer.
Instead of moving forward together, people are increasingly separated by economic and political power, heightening social tensions and increasing the risk of societal breakdown.
Oxfam’s polling in six countries (Spain, Brazil, India, South Africa, the UK and the US) showed a majority believe laws are skewed in favor of the rich – in Spain 80% agreed with this statement. A recent Oxfam poll of low-wage earners in the US reveals that 65% believe Congress passes laws that predominantly benefit the wealthy. These beliefs are grounded in fact. Financial deregulation, skewed tax systems and rules facilitating evasion, austerity economics, and policies that disproportionately harm women, affect both rich and poor countries.
This dangerous trend can be reversed. The US and Europe in the decades after World War II reduced inequality while growing prosperous. Latin America
has significantly reduced inequality in the last decade through progressive taxation, public services, social protection and decent work. Central to this has been popular politics that represent the majority, instead of being captured by a tiny minority.
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:
• Crack down on financial secrecy and tax dodging;
• Progressive taxes and programs that redistribute wealth and strengthen social protection;
• Invest in universal access to health care and education;
• Strengthen wage floors and worker rights;
• Remove barriers to equal rights and opportunities for women.
In the past year, 210 people have become billionaires, joining1, 426 other individuals with a combined net worth of $5.4 trillion. Corporate profits, chief executive officer (CEO) salaries, and stock exchanges are breaking new records daily. The Dow Jones industrial average recently hit the highest mark in its 117-year history.
This trend may seem surprising in light of the recent global financial crisis. The crisis caused a momentary dip in the share of global wealth held by the rich, but they’ve gained it back, and more. The Great Recession didn’t change the trend in income concentration. Had the share of income going to the richest 1% stayed the same as in 1980, the rest of the US would each have had an extra $6,000 dollars a year in 2012.
Global elites are getting richer, but the vast majority of people have been excluded from this prosperity. For instance, while stocks and corporate profits soar to new heights, wages as a percentage of gross domestic product (GDP) have sunk. The wealth of Europe’s 10 richest people exceeds the total cost of all stimulus measures across the European Union (EU) between 2008 and 2010.
Post-crisis austerity policies hit poor people hard, while making the rich even richer. Austerity is also having an unprecedented impact on the middle classes.
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