Runaway inequality has created a world where 62 people own as much wealth as the poorest half of the world’s population – a figure that has fallen from 388 just six years ago, according to an Oxfam report published recently ahead of the annual gathering of the world’s financial and political elites in Davos.
Can we think about this for a moment? The estimated world population is 7.2 billion people. The poorest half, 3.6 billion people, have total wealth estiamted at about $1.7 trillion. The world’s richest 62 persons, just sixty-two, have total wealth of $1.76 trillion.
In fact, the richest 1% of the world have total wealth greater than the other 99%. Income inequality isn’t just at its worst in modern history; it’s getting worse. In 2010, it took 388 billionaires to equal the wealth of the poorest half of the world’s population; six years later it takes just 62.
0.00000017% of the world’s population owns 50% of its wealth.
There are two things going on. The very rich are getting richer. In the last six years, the wealth of the world’s richest 62 persons increased by 45%, more than half a trillion dollars.
In the same period, the wealth of the poorest half fell by half a trillion dollars. A decline of 38%. In fact, 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. For the extremely poor, it’s even worse. 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.
It’s crystal clear that income isn’t trickling down; it’s being sucked up to the very wealthiest fraction of the world’s population.
Complex social forces like this have multiple causes. But one of the most important changes WC can point to is the increasing role of off-shore tax havens on the world’s economy. Some $7.6 trillion of the world’s wealth is now stashed in off-shore tax havens, where it largely escapes taxation that might provide the services that would lift the poor a bit out of poverty. That $7.6 trillion, just for perspective, is greater than the combined gross domestic product of Great Britain and Germany, Europe’s two largest economies. A sensible international policy would not allow the off-shore parking of wealth.
A second major force contributing to wealth inequality is the increasing return to capital versus labor. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. So those workers are capturing less and less of the gains from economic 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. All that wealth gives the rich greater and greater control over the political process. Through organizations like ALEC – a nonprofit, tax exempt organization strongly supported by the Koch Brothers – the rich promote their agenda under the banner, of “Limited Government, free markets and federalism.”
Organizations like ALEC are the reason why the Idaho Legislature voted down an increase in the minimum wage. And, going further, voted to forbid Idaho municipalities from setting locally higher minimum wages. Those laws don’t help the poorer half of Idahoans; those laws certainly help the wealthiest Idahoans.
Think of it as unfettered, market fundamentalism. It’s obviously very good to the very rich.
The rest of us? Not so much.
Oxfam argues that “economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization, especially of finance – have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth.” It’s hard to argue with that premise.
Right now, Americans seem to be listening to Donald Trump, who might as well be the poster child for the rich and powerful. But at some point, to borrow John Brunner’s phrase, the sheep are going to look up.[^1] History teaches that periods of extreme wealth inequality lead to revolution. WC isn’t advocating blood and violence. WC is just pointing to the lessons of history.