Finance Finance News Global inequality: the top 1 per cent soak up the spoils of globalisation

Global inequality: the top 1 per cent soak up the spoils of globalisation

Wealth inequality rising.
The world's wealthy are grabbing more. Photo: Getty
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Inequality on a global level has risen dramatically this decade with a new report from the Oxfam charity highlighting the changes which make very stark reading.

Eight men now control $US426 billion of wealth, the same as the 3.6 billion people that make up the bottom half of humanity. This is far worse than in 2010, when it took the top 388 to equal the bottom 3.6 billion.

Oxfam’s analysis relied on the 1810 billionaires named in the 2016 Forbes list, who collectively own $US6.5 trillion – as much wealth as the bottom 70 per cent of humanity.

Where the money went. Source: Oxfam
Where the money went. Source: Oxfam

Two Australians are on this list. Gina Rinehart and Harry Triguboff reportedly have a combined wealth of $16.1 billion, which is more than the poorest 20 per cent of Australia.

Oxfam Australia chief executive Dr Helen Szoke said in a statement that the “scale of the global wealth inequality crisis is much, much greater than we had feared”.

“Such an extreme divide between the rich and the rest risks plunging future generations into political instability, undermining our democratic institutions and creating economic upheaval.”

The above chart shows the stark reality that, since the turn of the century, the poorest half of the world’s population has received just 1 per cent of the total increase in global wealth.

In income terms, the poorest 10 per cent globally have seen rises of less than $US3 a year over the last quarter of a century and their rise in daily income amounts to less than one cent over that time.

Crumbs at the bottom
Crumbs at the bottom. Source: Oxfam

The rise in inequality is now troubling business elites, with The New Daily reporting that the World Economic Forum’s latest risk report lists income inequality as a major risk factor in global stability.

The WEF’s annual meeting in Davos, Switzerland, kicks off on Tuesday and the organisation recently ran an article on its website promoting the notion of a universal basic income.

Oxfam sees as false the ‘trickle down’ economics theory that says rises in prosperity at the top of the tree find their way to those on the bottom through the effects of high roller spending. “Far from trickling down, income and wealth are instead being sucked up at an alarming rate,” its report observes.

Redistribution through taxation is not happening because sophisticated wealth managers spirit cash offshore to tax havens, eroding the welfare states in developed countries. “One recent estimate is that $7.6 trillion of individual wealth – more than the combined gross domestic product (GDP) of the UK and Germany – is currently held offshore,” Oxfam estimated.

Africa alone loses $US14 billion in tax revenues due to the super-rich using tax havens. Oxfam says this would be enough to pay for the healthcare that could save the lives of four million children and employ enough teachers to educate every African child.

Inequality is leading to a new “gilded age” for the super rich, who have grown their wealth by 11 per cent annually in recent years.

“While some billionaires owe their fortunes predominantly to hard work and talent, Oxfam’s analysis of this group finds that one-third of the world’s billionaire wealth is derived from inherited wealth, while 43 per cent can be linked to cronyism,” the report said.

There's little uplift for the very poor. Photo: Getty
There’s little uplift for the very poor. Photo: Getty

Income inequality presages gender inequality with the International Monetary Fund finding the gender pay gap wider where general inequality is more pronounced.

The rising power of the superrich is matched by corporations and one result is that corporate tax rates are falling all over the world. “This – together with widespread tax dodging – ensures that many corporations are paying minimal tax. Apple allegedly paid 0.005 per cent of tax on its European profits in 2014. Developing countries lose $US100 billion every year to tax dodging,” the report observed.

John Daly, CEO with the Grattan Institute, said Australia had fared reasonably well in income equality levels compared with the US, where income levels for many people have not risen in 30 years.

“In Australia, the top 20 per cent of income earners saw incomes rise 40 per cent in the last 15 years. For the bottom 20 per cent it has been a 30 per cent increase which is significant,” Mr Daly said. The effects of a highly targeted transfers system also enhanced income equality.

Wealth distribution had become less equal in Australia because asset price booms had combined with capital gains, superannuation concessions and negative gearing to build assets of the wealthy, he said.

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