Yves here. Another sobering update from Oxfam on the ever-widening chasm between the squillionaire overclass and the poor. As famed short seller David Einhorn was wont to say, “No matter how bad you think it is, it’s worse.”
By Jomo Kwame Sundaram and Siti Maisarah Zainurin. Originally published at Jomo’s website
Oxfam expects the world’s first trillionaire within a decade and poverty to end in 229 years! The wealth of the world’s five richest men has more than doubled from 2020, as 4.8 billion people became poorer.
The 2024 Oxfam report entitled Inequality Inc. warned, “We’re witnessing the beginnings of a decade of division” as billions cope with the “pandemic, inflation and war, while billionaires’ fortunes boom”.
“This inequality is no accident; the billionaire class is ensuring corporations deliver more wealth to them at the expense of everyone else”, noted Oxfam International’s Amitabh Behar.
Driving Inequality
Summarising the report, Tanupriya Singh noted gaps between rich and poor, and between wealthy nations and developing countries had grown again for the first time in the 21st century as the super-rich became much richer.
The Global North has 69% of all wealth worldwide and 74% of billionaire riches. Oxfam notes contemporary wealth concentration began with colonialism and empire.
Since then, “neo-colonial relationships with the Global South persist, perpetuating economic imbalances and rigging the economic rules in favour of rich nations”.
The report notes, “economies across the Global South are locked into exporting primary commodities, from copper to coffee, for use by monopolistic industries in the Global North, perpetuating a colonial-style ‘extractivist’ model”.
Inequalities within rich nations have grown, with marginalised communities worse off, giving rise to rival ethno-populisms and vicious identity politics.
Seventy per cent of the world’s largest corporations have a billionaire as principal shareholder or chief executive. These firms are worth over $10 trillion, which exceeds the total output of Latin America and Africa.
The incomes of the rich have grown much faster than for most others. Hence, the top 1% of shareholders own 43% of financial assets worldwide – half in Asia, 48% in the Middle East, and 47% in Europe.
Between mid-2022 and mid-2023, 148 of the world’s largest corporations made $1.8 trillion in profits. Meanwhile, 82% of 96 large corporations’ profits went to shareholders via stock buybacks and dividends.
Only 0.4% of the world’s largest companies have agreed to pay minimum wages to those contributing to their profits. Unsurprisingly, the poorer half of the world earned only 8.5% of world income in 2022.
The wages of almost 800 million workers have not kept up with inflation. In 2022 and 2023, they lost $1.5 trillion, equivalent to an average of 25 days of lost wages per employee.
In addition to income inequality, the 2024 Oxfam Report noted workers face mounting challenges due to stressful workplace conditions.
The gap between the incomes of the ultra-rich and workers is so huge that a female health or social worker would need 1,200 years to earn what a Fortune 100 company CEO makes annually!
Besides lower wages for women, unpaid care work subsidises the world economy by at least $10.8 trillion yearly, thrice what Oxfam terms ‘tech industry’.
Monopoly Power
Oxfam notes that monopoly power has worsened world inequality. Thus, a few corporations influence and even control national economies, governments, laws, and policies in their own interest.
An International Monetary Fund (IMF) study found monopoly power responsible for 76% of the fall in the labour share of US manufacturing income.
Behar noted, “Monopolies harm innovation and crush workers and smaller businesses. The world hasn’t forgotten how pharma monopolies deprived millions of people of COVID-19 vaccines, creating a racist vaccine apartheid while minting a new club of billionaires”.
Between 1995 and 2015, 60 pharmaceutical companies merged into ten Big Pharma giants. Although innovation is typically subsidised with public funds, pharmaceutical monopolies price-gouge with impunity.
Oxfam notes the Ambani fortune in India comes from monopolies in many sectors enabled by the Modi regime. Ambani’s son’s recent extravagant wedding celebrations flaunted extreme wealth concentration worldwide.
The 2021 Oxfam report estimated that “an unskilled worker would need 10,000 years to earn what Ambani made in an hour during the pandemic and three years to earn what he made in a second”.
Unsurprisingly, the 2023 Oxfam Report noted, “India’s richest 1% own around 40% of the country’s wealth, while over 200 million people continue to live in poverty”.
Fiscal Subordination
Corporations have increased their value through a “sustained and highly effective war on taxation … depriving the public of critical resources”.
As many corporations increased their profits, the average corporate tax rate dropped from 23% to 17% between 1975 and 2019. Meanwhile, around a trillion dollars went into tax havens in 2022 alone.
Of course, falling corporate tax rates are also due to “the broader neoliberal agenda promoted by corporations and their wealthy owners, often alongside Global North countries and international institutions such as the World Bank”.
Meanwhile, pressures for fiscal austerity have grown as government tax revenue has declined relatively for decades. High government indebtedness with corporate tax evasion and avoidance have exacerbated austerity policies.
Underfunded public services have adversely affected consumers and employees, especially health and social protection. Higher interest rates have worsened debt crises in developing nations.
With governments fiscally constrained from sustaining public services, privatisation advocates have become more influential, gaining greater control of public resources by various means.
Private corporations profit from discounted public asset sales, public-private partnerships and government contracts to deliver public policies and programmes.
“Major development agencies and institutions… have found common ground with investors by embracing approaches that ‘de-risk’ such arrangements by shifting financial risk from the private to the public sector”, the report states.
Access to essential public services should be universal. Insisting on private profit-making considerations deprives marginalised communities of access, worsening inequalities.
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“Oxfam notes the Ambani fortune in India comes from monopolies in many sectors enabled by the Modi regime. Ambani’s son’s recent extravagant wedding celebrations flaunted extreme wealth concentration worldwide…”
Multipolar wealth concentration.
1789 seems like an eternity ago.
The problem certainly does involve the immorality of the rich–but then we have not, in our collective culture articulated a clear moral framework other than the morality of money–if you have money you are good if not you are bad. This is the de facto morality of our common global culture. In the USA, democracy and the virtues associated with it are more or less dead as a practical matter. People wonder, for example, why Bernie Sanders and Elizabeth Warren (and many others) have abandoned their moderate left positions. It is quite simple–they know that they are completely powerless in Washington if they go in that direction. Money talks in Washington so the more money you may have, the louder your voice. The louder your voice the more you can buy legislation favoring our interests and those of your friends–that’s the daily occupation of Washington–facilitating the needs of the richest among so that their wealth continues to grow exponentially. The more influence they have the more influence they have. I saw this happen in Washington starting with Clinton and when I left in 2012. I’m sure it hasn’t changed but I assume from reading the tea leaves that the project of instituting oligarchy has become fully closed. We are not a Constitutional republic with some democratic institutions–we have only massive delusions, mendacity, and delusions not just in Washington but throughout our society though society is beginning to change. I think the alliance between Trump and RFK signals hope for something more positive but I doubt “democracy” will be at center stage. Right now “the people” have basically disenfranchised themselves though their descent into identity politics and hedonism so it will be up to powerful people to change our cultural direction.
Good points, however, as I said above: it’s multipolar wealth concentration.
Modern Monetary Theory has put “paid” to the loanable funds model. What’s missing is the political will and support to accomplish such change and an increase in rax rates towards 100% to reduce the slosh of the super-rich. Career suicide anyone?
Countries without their own sovereign currency or with debts in other currencies are going to have a hard time implementing something like MMT.
“Money doesn’t talk, it swears.” –Bob Dylan
It is what it is and the future does not compute for democracy either culturally or politically. We are stuck, in my view, in a world where the rich (virtual dukes, counts, and barons and down the line) will be and are in power.
Don’t fret too much about the anthropocentric feudal future. Mother Nature will be Queen, Judge, Jury, and Executioner. We will all be her peasants as King Entropy reminds us that thermodynamics does not care for feeble human economics.
The majority of the Global North Middle Class are satisfied with the status quo. As long as the billionaires don’t take from them the Middle Class is okay with extreme poverty and class divisions. This complacency enables the status quo to remain because collectively the Middle Class is a powerful force. As long as it does not act nothing will change.
A terrific essay: The report notes, “economies across the Global South are locked into exporting primary commodities, from copper to coffee, for use by monopolistic industries in the Global North, perpetuating a colonial-style ‘extractivist’ model”.
[ There is of course a critical exception to the Oxfam report, which is China. There is a reason that from April 2011, the United States set out to undermine the possibility of China ever exporting high-technology goods. China was not to be allowed to compete with Global North countries in modern development capabilities. The US has been steadily trying to undermine Chinese high-technology development. ]
Of course, the New York Times has an article today blaming poverty through the global South on China, even though China has managed to end poverty among the 1.4 billion. Reading the NYT article I think that this terrific essay would have benefited by at least briefly discussing China, but possibly that would generate criticism and the writers have no need of criticism:
https://www.nytimes.com/2024/08/28/business/african-debt-crisis.html
August 28, 2024
Africa’s Debt Crisis Has ‘Catastrophic Implications’ for the World
Crushing obligations to foreign creditors that have few precedents have sapped numerous African nations of growth and stoked social instability.
China hasn’t ended poverty. They ended extreme/absolute poverty. Poverty still exists in China, though not as bad as in other Global South countries. And they have somewhat better safety nets.
There is no hunger being recorded, no homeless wander about the fields and streets, homes have utilities and energy, there is proper clothing, universal schooling, medical insurance, pensions… I would say that is having ended poverty, though the Chinese government wants to do and will do better. Officials are looking closely after the well-being of the “poorest” to make sure progress continues.
Health care as a continued British legacy in Hong Kong, for instance, can still be relatively expensive. So, China offers transportation to Shenzhen for completely affordable health care. There is much, much more. A child needing glasses, will have glasses…. There is much more.
China, then, has effectively ended poverty for the 1.4 billion.
https://fred.stlouisfed.org/graph/?g=1tefi
January 15, 2018
Life Expectancy at Birth for United States and China, 2017-2022
https://fred.stlouisfed.org/graph/?g=1tefr
January 30, 2018
Infant Mortality Rate for United States and China, 2017-2022
I’ve been trying to understand economic indicators like the GINI index, and was surprised to find graphs of that index in the US and other places, that show relatively modest change over the past few decades. Is there an explanation? Is there some other measurement that explains what is going on? Does the GINI index in particular assume that wealth and income follow a power-law (Pareto) distribution? I’ve been wondering if there is a critical level after which either a) there is a bloody revolution or other calamity like in Scheidel’s “Great Leveller”; or b) a few rich people end up owning everything? I particularly wanted to be able to calculate what a given policy change would do to the index. Thanks for any wisdom.
The GINI coefficient just measures the level of (in)equality of wealth in a society, which by using it as
inference usually gives an indication of the poverty, corruption, lack of safety nets, and other unpleasantness. It is almost axiomic that the greater the inequality, the worse everything is for the majority of the population with the reverse being true as well, which is why it is such a reliably useful number. Wealthy people are generally stupidly greedy and will rig the system to steal as much as they can despite the almost inevitable warnings. The more wealth that they have, the easier it becomes to steal even more despite the long term outcome of doing so.
With 0 being perfect equality and 1 meaning that all wealth is in one pair of hands, any GINI of 0.50 or older means Really Bad Things are Happening. Restated, it means there will be war. Believe me, in political science or political economics, it is an extremely useful indicator.
In the United States, I think that they first followed it in 1963 as shown in the graph made by the St. Louis FED. Note that in 1963, it was 0.376, in 1980, it was 0.347, then it shot up as the deindustrialization of the Rust Belt, the destruction of Californian’s aerospace industry, and other industries really got going to 0.414 in 2006. It was only The Great Recession and Covid, especially the government spending, that pushed it down to 0.397 in 2020. It appears to be on the quick upswing back into the 40s with the government doing essentially nothing. There are no truly hard lines here, but the closer to 0.5, the more likely the fires.
Wait till interest rates get close to zero again, and that line on a graph showing the super rich getting richer will go vertical if’s not doing so already, heck it might bend backwards.
its the free trade stupid! hudson, urie, welsh and others can explain it quickly and simply.
without that simple explanation, no amount of outrage over off shore tax havens, or a countries loss of sovereignty to tax and regulate will amount to a hill of beans.
this cannot be addressed globally, because that’s the problem, like china and russia, it has to be addressed one country at a time.