Oxfam has released a new report, entitled An Economy for the 1%, which argues that income and wealth is being sucked upwards at an alarming rate, with just 62 individuals now holding as much wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as 2010 (see next chart).
According to Oxfam, the wealth of the richest 62 people has risen by 44% in the five years since 2010 (by more than half a trillion dollars to $1.76 trillion). By contrast, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.
There has also been a big shift of wealth away from workers towards the owners of capital (see next chart).
And this has come despite worker productivity improving (see next chart).
Meanwhile, CEO’s are making-out like bandits (see next chart).
Oxfam also argues that the bigger the financial sector is, the more unequal the wealth distribution:
As profits and remuneration in finance outpace what takes place in the real economy, the gap increases between the ultra-rich who have interests in this sector and everyone else, deepening inequality. The financial sector pays employees disproportionately high salaries, exacerbating wage inequality and also widening the gender pay gap, with men in the sector earning 22 percent more than women with similar profiles…
In addition, the economies of countries with a large and dominant financial sector have been found to grow more slowly over time than those that are more balanced, as the dominance of finance crowds out other productive sectors…
Australia, too, hasn’t escaped the inequality trend, with the richest 10% of people owning more wealth than all other Australians combined, and Australia’s richest individual holding the same amount of wealth as the poorest 10% of Australians. Moreover, over the past 15 years, over half of the increase in wealth in Australia has been captured by the richest 1%, whereas the poorest 10% of Australians experienced almost no improvement.
Oxfam argues that tax policy is one essential tool for combating inequality and promoting fairness, and could help lift millions out of poverty:
In every country in the world, tax revenues pay for public services, infrastructure, regulatory bodies, welfare systems and other goods and services that keep the country running. Fair tax regimes are vital to finance well-functioning and efficient states and to enable governments to fulfil their obligations to uphold citizens’ rights to essential services such as healthcare and education…
The current global tax architecture also weakens the ability of governments to collect the taxes they are due by facilitating cross-border tax dodging and the concealment of wealth. In particular, tax havens and offshore financial centres, which can be characterized by secrecy as well as by low- or zero-tax regimes, are one of the most obvious facilities used to enable individuals and companies to escape their tax liabilities. Governments are so far failing to crack down on the global practice of tax avoidance and the associated network of tax havens. This system is exploited by highly paid and very industrious professional enablers in the private banking, legal, accounting and investment industries, who take advantage of an increasingly borderless, frictionless global economy…
As tax returns from multinational companies and wealthy individuals fall short of their potential, governments are left with two options: either to cut back on the essential spending needed to reduce inequality and deprivation or to make up the shortfall by levying higher taxes on other, less wealthy sections of society and smaller businesses in the domestic economy. Both options see the poorest people lose out and the inequality gap grow.
