A Classic Tale of Money and Power in a Modern World: The Extreme Wealth Gap Occurs when 1% Billionaires Rule the World as Global Wealth Holders in 2015
This is a common concept in society: working hard is the solution to fighting poverty. Even ignorant judgment would point people who lived under the poverty line as lazy people. I bet low-paid labours in developing countries wouldn’t agree on that statement. They are working hard but barely can afford to meet the basic needs of themselves and their families. Go ask garment labours in Myanmar or Bangladesh: after their long hours working in the factory, could they afford housing, food, and medicines? Unfortunately, along with their exhausting hard working they are still trapped in poverty. Even in the European Union, there are 9% workers at the risk of poverty.
The global financial inequality crisis is getting worse than ever. Supported by data from Credit Suisse’s Global Wealth Databook 2015 report, Oxfam revealed that 1% population in the world is wealthier than the rest of the population. Published on January 2016, Oxfam elaborated the economic gap through its policy paper entitled ‘An Economy for the 1%: How privilege and power in the economy drive extreme inequality and how this can be stopped’. In short: there are 62 individuals as global wealth holders in the world who had the same amount of wealth as 3.6 billion people in 2015. As stated before, the financial inequality is worsened since there are individuals as 388 global wealth holders back in 2010. In five years, the wealth of the richest 62 people has risen by 45%, on the contrary, the wealth of the rest of the population fell over 38%. The average annual income of the poorest 10% in the world has risen by less than US$3 annually in almost 25 years, which basically their daily income has risen by less than a single cent annually.
The wealth gap wasn’t just widening by merely the escalating wealth amount of the global wealth holders, the birth of new millionaires became one of the reasons. For instance, between 2014 and 2015 there were 900 new millionaires in the US only. By 2018 it is projected there will be more than 18 million millionaires worldwide with about US$76 trillion personal financial possessions. The expanding amount of the wealth of middle class also took its role in growing inequality which spread in all regions and almost all countries. Even though global wealth is still concentrated in Europe and the US, however, the growth of wealth in emerging markets has been highly impressive. For instance, China holds almost 10% of the global wealth and its middle class is the world’s largest. Chinese millionaires are also being expected to reach 2.3 million by 2020. The other reason behind wealth inequality is the increasing return to capital versus labour; mostly, the share of national income going to workers has been falling. Workers are capturing very less amount of the gains from economic growth while the owners of capital have seen their capital consistently grow faster than the growing economic rate through their interest payments, dividends, or retained profits). Tax avoidance by the owners of capital made it even worse; it can be categorized as a crime since those unpaid taxed tightened the government budgets, therefore, ended up in decreasing vital public services. Inequality is multiplied by the power of companies to use monopoly and intellectual property to skew the market in their favour, for example, pharmaceutical companies. Therefore, the rest competitors and public forced to accept their high prices.
Even though many criticized the statistics such as the Institute of Economic Affairs’ director general and the Adam Smith Institute’s head of research who claimed the data is misleading, however, the most important thing is how we—as the rest of the populations—defend our rights. The exact amount of data is not the case; it is how fair we distribute wealth. How far we concerned about world poverty. The wealthy and powerful have used economic systems and structures merely to their benefit and to the exclusion of others. In order to increase their profits, they actively seek to reduce their tax burden by the use of complex accounting mechanisms and international loopholes. The existence of tax havens made it even worse; it helps the rich individuals to stay rich and prevent the redistribution that would reduce financial inequality. The IMF found that countries with higher income inequality tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments. The increasing financial inequality also puts the social structure on risk and makes the current economic recovery slower.
Oxfam recommends us several points due to minimizing the global inequality crisis:
- While multinational corporations are gaining record profits worldwide and executive rewards are skyrocketing, there are too many underpaid workers. It would be nice for corporations to make commitments such as increasing minimum wages towards living wages, transparency on pay ratios, and protection of worker’s rights to unionize and strike.
- The abolishing of economic inequality and gender discrimination.
- Make sure the policy-making processes become less prone to capture by vested interests and be more people-centered. Basically, governments should be able to distinct between big business and governance, separate business from campaign financing, add transparency within governance for public information, and many more.
- Especially when it comes to big pharmaceutical companies, there should be a new regulation to avoid monopoly on the making and pricing of medicines, therefore, people can access decent and affordable medicines.
- It is ironic when most of the wealth is concentrated in few extremely rich individuals while the tax burden is falling on the rest of the people? Governments should get rid the tax burden away from labour, add transparency on tax incentives, and many more.
- Prioritize policies, practice, and spending that increase financing for free public health and education to fight poverty and inequality at the national level.
The world needs a strategy to rebalance economic power both globally and nationally, empower people who are currently excluded, and keeping the influence of the global wealth holders in check. Governments have a vital role in order to keep the global economic stability; ideally, they have to represent the will of the people instead of the interests of big business. In a perfect world, the public interest should be the guiding principle of all global agreements and national policies and strategies. As we know it very well that life is unfair indeed, perhaps we can reduce the wealth gap one step at a time.
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