Oxfam Report: Economy for just 1% of the population?

The richest 1% have more wealth than the rest of the world combined and just 62 people in the world, 53 of them men, have as much wealth as the poorest 360 crore people, revealed a report, ‘Economy For the 99%’, released by Oxfam at Davos on Monday.

Stating that “it’s obscene for so much wealth to be held in the hands of so few”, the report holds that the global economy is actually being run for just 1% of the rich and the powerful. It goes on to make the following points:

• In 2010 there were 388 individuals in whose hands wealth equal to wealth held by 360 crore people were held.
• In 2015 the number of individuals has come down to 62, indicating an alarming concentration of wealth and growing inequality
• The bulk of the wealth in 2015 is actually held by just eight men.
• These eight men are Bill Gates, Mark Zuckerberg, Jeff Bezos, Warren Buffet, Carlos Slim, Larry Ellison, Amancio Ortega and Michael Bloomberg

• The wealth of these 62 people has registered a 45% increase during five years between 2010-15.
• During this same period the wealth of the poorest 360 crore have dropped by 38%
• Instead of the much vaunted ‘trickle-down effect’, wealth and income seemed to be sucked upwards.
• Share of national income to workers has been falling steadily and of capital growing
• Tax avoidance by the rich and reduction of taxes on capital gain, the rich and companies are contributing to growing inequality
• CEO salaries at top US firms have gone up by 54.3% since 2009.
• CEO of India’s top Information technology company (the report does not name the company) makes 416 times the salary of a typical employee
• The argument that low taxes are necessary to spur economic growth has been proved to be fallacious.
• The report points to the proliferation of tax havens where the rich are increasingly parking their wealth.
• Wealth, Investment and Fund managers, whose services are available to the rich, are helping clients to avoid paying taxes.

You can read the report here.

The report finds that the global economy has been growing, but as incomes and wealth have become detached from productivity and real added value in societies, people who work hard but who are not in positions of economic and political power have lost out.

“The share of income going to labour compared with capital is in decline, the gap between wages and productivity is growing and income inequality is slowing overall growth, further hurting the poorest people most and preventing millions of people from escaping poverty,” the report adds.

The report examined how the wealthy and powerful have used economic systems and structures to their benefit, to the exclusion of others. This is most apparent in tax systems, where companies and individuals actively seek to reduce their tax burden through the use of complex accounting mechanisms and international loopholes.

“This increases their profits, channelling returns to shareholders as opposed to society in general; societies need tax revenues to fund essential public services and infrastructure, on which these companies and individuals also depend. The existence of tax havens in particular allows income and wealth to flow offshore, untaxed and in secret – a legal means created for the rich to stay rich and to prevent essential redistribution that would reduce inequality and benefit society overall,” it goes on to add.

Tax havens are an injustice that undermines the progressive principles upon which most tax systems are based. Until the rules are changed and there is fairer global governance of tax matters, tax dodging will continue to drain public budgets and undermine the ability of governments to tackle inequality.