Global Inequality: Richest 1% Now Wealthier Than The Rest Of The World by Oxfam
How privilege and power in the economy drive extreme inequality and how this can be stopped
The global inequality crisis is reaching new extremes. The richest 1% now have more wealth than the rest of the world combined. Power and privilege is being used to skew the economic system to increase the gap between the richest and the rest. A global network of tax havens further enables the richest individuals to hide $7.6 trillion. The fight against poverty will not be won until the inequality crisis is tackled.
Summary – An Economy For The 1%
The gap between rich and poor is reaching new extremes. Credit Suisse recently revealed that the richest 1% have now accumulated more wealth than the rest of the world put together.1 This occurred a year earlier than Oxfam’s much publicized prediction ahead of last year’s World Economic Forum. Meanwhile, the wealth owned by the bottom half of humanity has fallen by a trillion dollars in the past five years. This is just the latest evidence that today we live in a world with levels of inequality we may not have seen for over a century.
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‘An Economy for the 1%’ looks at how this has happened, and why, as well as setting out shocking new evidence of an inequality crisis that is out of control.
Oxfam has calculated that:
- In 2015, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as2010.
- The wealth of the richest 62 people has risen by 44% in the five years since2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76trillion.
- Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.
- Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%.
- The average annual income of the poorest 10% of people in the world has risen by less than $3 each year in almost a quarter of a century. Their daily income has risen by less than a single cent every year.
Growing economic inequality is bad for us all – it undermines growth and social cohesion. Yet the consequences for the world’s poorest people are particularly severe.
Apologists for the status quo claim that concern about inequality is driven by ‘politics of envy’. They often cite the reduction in the number of people living in extreme poverty as proof that inequality is not a major problem. But this is to miss the point. As an organization that exists to tackle poverty, Oxfam is unequivocal in welcoming the fantastic progress that has helped to halve the number of people living below the extreme poverty line between 1990 and 2010. Yet had inequality within countries not grown during that period, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.
There is no getting away from the fact that the big winners in our global economy are those at the top. Our economic system is heavily skewed in their favour, and arguably increasingly so. Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate. Once there, an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments. One recent estimate3 is that $7.6 trillion of individual wealth – more than the combined gross domestic product (GDP) of the UK and Germany – is currently held offshore.
Rising economic inequality also compounds existing inequalities. The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labor market participation, and representation in institutions like parliaments.5 The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
Oxfam has also recently demonstrated that while the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions.6 The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.
Instead of an economy that works for the prosperity of all, for future generations, and for the planet, we have instead created an economy for the 1%. So how has this happened, and why?
One of the key trends underlying this huge concentration of wealth and incomes is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing. Tax avoidance by the owners of capital, and governments reducing taxes on capital gains have further added to these returns. As Warren Buffett famously said, he pays a lower rate of tax than anyone in his office – including his cleaner and his secretary.
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