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Emerging from the financial crisis, the global economy is strengthening. Yet around the world most people are still being excluded from opportunities to better themselves and achieve prosperity. Increasingly the biggest benefits of growth are being captured instead by a tiny elite. We live in a world where the 85 richest people own the wealth of half of the world’s population.
In the United States, the increase in the income share of the top one per cent is at its highest level since the eve of the Great Depression. In India, the number of billionaires has increased tenfold in the past decade. In Europe, poor people struggle with post-recovery austerity policies while moneyed investors benefit from bank bailouts. Africa has had a resource boom in the last decade but most people there still struggle daily for food, clean water and health care.
Inequality on the global agenda
The problem of inequality has shot up the global agenda. President Obama has made it a key priority for the US administration in 2014. The IMF says that in too many countries the benefits of growth are being enjoyed by far too few people. The World Economic Forum, meeting this week in Davos, has identified economic inequality as a major risk to human progress, that it undermines social stability and threatens security on a global scale.
It’s widely acknowledged that extreme concentrations of wealth are not just morally questionable but they stunt long-term economic growth too, making it more difficult to reduce poverty. What must now be admitted is that extreme income inequality is dangerous because it also threatens to undermine democratic governance.
Political power benefits the rich
Oxfam has spent 70 years working to fight poverty and injustice in more than 90 countries. We’ve witnessed first-hand how the wealthiest individuals and groups can capture political power at the expense of the rest of society. A massive concentration of resources is a significant threat to inclusive political and economic systems.
Increasingly, in rich and poor countries alike, the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children. Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations, and equality of opportunity will be just a dream.
Inequality is not inevitable
Extreme inequality is not inevitable. It can be reversed quickly. There are clear examples of success. The US and Europe in the three decades after World War II reduced inequality while growing prosperous. Ghana’s recent Petroleum Revenue Management Bill is a good example of how targeted regulation can promote shared prosperity. Latin America has significantly reduced inequality in the last decade through progressive taxation, public services, social protection and decent work. Central to this progress has been popular politics that represent the majority, instead of being captured by a small minority.
Governments must crack down on financial secrecy keeping trillions hidden in tax havens. They must invest more in universal education and healthcare. Together, they must work to an agreed global goal to end extreme inequality in every country. For their part, the economic elite must refrain from using their wealth to seek political favors that undermine the democratic will of their fellow citizens. They should be made to publish their investments and to ensure that decent jobs and living wages are paid throughout all the companies they own or control.
Together, for the benefit of all, we need to reverse this dangerous trend, which threatens to unravel long and hard-fought battles against poverty and injustice.
Winnie Byanyima is the Executive Director of Oxfam International. She is attending the Davos World Economic Forum.
Download the report: Working for the Few: Political capture and economic inequality
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