Have we been doing wrong by targeting extreme poverty instead of extreme richness?
The gap between rich and poor has now reached a new record. Credit Suisse has revealed that the richest 1% has now accumulated more wealth than the rest of the world all together, and the wealth owned by the bottom 50% of the population has fallen by a trillion dollars in the past five years. This occurred a year earlier than Oxfam’s much publicised predictions, and a year after the launch of the United Nations Sustainable Goals, encouraging everyone’s involvement without providing any action plan or even explanations on the “HOW” of this involvement.
It is true that the global wealth has increased since the turn of the century, however half of that increase has gone to the richest 1%, while the bottom half has received 1% of that increase.
Globalisation advocators often describe the extreme poverty reduction as proof that inequality is not a major problem and that globalisation has delivered progress, when it comes to poverty. But this is to miss the point. As an organisation 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 if inequalities among countries have not grown during this same period, an extra 200 million people would have escaped poverty. That could have risen to 700 million if poor countries had benefit from high economic growth of wealthy ones. Central to this is the nature of globalisation, and the type of economic development undertaken.
In the last quarter of the century, the median annual income of the poorest 10% has risen by less than $3 yearly, and their median daily income less than 1 cent.
There is no getting away from the fact that globalisation only serves those at the top “The Elite”. The current Economic development model is tailored in their favour. Far from trickling down, income and wealth are instead being sucked upwards at an alarming speed.
The system of tax havens and an industry of wealth managers ensure this wealth stays “Where it belongs”. The recent Fonseca leaks have shed light on $7.6 trillion of individual wealth in offshore investment – more than the combined gross domestic product of the UK and Germany put together.
How and why did we come to this?
One of the main explanations of this phenomenon is the increase of the return of capital in comparison to the return on labour. In both developed and developing countries, the share of national income going to workers has dropped drastically. As for the capital owners; they have witnessed a constant growth of their capital (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing. Tax avoidance and reductions have also played a major role in this increase. While workers salaries have stagnated or even decreased in certain areas, chief executive salaries have rocketed. The CEO of India’s top information technology firm makes 416 times the salary of a typical employee there.
The most powerful example seems is the intellectual legitimacy given to the web tax heaven and tax avoidance industry by the dominant neoliberal market, justifying that low taxes for corporations and rich individuals is necessary to achieve a high level of economic growth.
It is the wealthiest individuals and companies that should be paying the most tax, those who can afford to use these services and this global architecture. It also indirectly leads to governments outside tax havens lowering taxes on businesses and on the rich themselves in a relentless race to the bottom.
Written by Nawal Allal