Why do the richest 62 own 50% of the world’s wealth?

18th January 2016 By ,   0 Comments

 

“In 2015, 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity.” This is the latest from an Oxfam report. So 62 people have more wealth than 50% of the world’s population, and the richest 1% now control more wealth than the rest of the world put together.

There may be a tiny “woo-hoo” at their offices today, because Oxfam had already predicted that 1% figure, and it came true a year earlier than they said it would. Woo.

 

Are the rich getting richer?

This “richest 62” figure has been trending across the internet, but the real headline is not that some people are rich while some are poor, it’s that the poor are getting poorer and the rich are getting richer.

In 2010 it was 388 individuals who controlled the same wealth as 3.6 billion people. Between 2010 and 2015, Oxfam says, the wealth of the bottom half fell by just over a trillion dollars – a drop of 41%. Meanwhile, the wealth of the richest 62 people rose by 44% in the same period.

 

Why are the rich getting richer while the poor are getting poorer?

OK so even though a lot of people have moved out of poverty in recent years, we can still believe that the top 1% control more wealth than the other 99% of the population, and that at both extremes the richest are gaining wealth while the poorest are losing it. Why is this happening?

The Oxfam report points to three things.

  1. Regular workers are gaining a decreasing share in economic growth in comparison to the people who own the companies and factories where they work. Decoded: For example, regular worker wages have stagnated, while salaries of those at the top have gone up. Why? One explanation is the deregulation and privatisation that happened under President Ronald Reagan and Prime Minister Margaret Thatcher. Leaving the economy to sort itself out through invisible market forces, with less control from trade unions, opens up a market for highly paid executives. Companies offer big enticing packages for the top jobs to make sure they can attract the global talent, while the low- to middling-workers become more expendable.
  2. There has been a trend towards cutting taxes for those bringing in the most cash. The logic is that we don’t want to discourage people from raking in the money, because we need that for strong economies.
  3. Tax havens and tax avoidance means that big companies and wealthy individuals who might have big tax bills find completely legal ways to pay less tax, meaning their wealth doesn’t get put to use elsewhere by the government. According to Oxfam, corporate investment in tax havens has quadrupled between 2001 and 2014.

Explore: How Do Big Companies Escape Paying Tax?

Is it a problem that the richest 62 individuals have the same wealth as the world’s bottom half?

As always, it depends on how you look at it. #Inequality is currently trending on Twitter.

Some might argue that it can’t be right that a few people are getting richer while others’ lives remain the same or get worse. Oxfam point to the income gaps between men and women at the very bottom, and say that the situation is even more unfair on some than others.

Beside the point that it’s unfair – you could argue that, if everyone was a bit better off, then the world economy could grow faster. People with less would spend more on buying the useful stuff like washing machines they couldn’t afford before – which would heighten trade and give people more time to do other things like learn, earn or play.  

Others might say that “inequality” is a red herring, and isn’t as much of a problem as these numbers make it out to be. If you look at other numbers, you might say, you get a much rosier picture. For example: Between 1990 and 2010, the number of people living below the extreme poverty line was halved. Surely rich people created jobs on their way up, surely they’ve invested a ton in economic growth, and don’t these rich people donate a bunch of money to charity?

Oxfam has an answer to that: Even though millions escaped poverty between 1990 and 2010, inequality within countries still increased during that time. The Economist reports that this might have had something to do with big companies setting up factories in poorer countries, where they can benefit from the cheap-cheap costs of production but still don’t employ that many low-skilled workers. If this rise in inequality hadn’t happened, Oxfam claim, an extra 200 million people could have escaped poverty as well.

It’s not that there should be no gap whatsoever between rich and poor, but we should probably be worried that that gap is getting wider.

But hey, don’t go thinking inequality is a “First World / Third World” kind of thing. This guy shows us just how little we tend to know about how quality of life is spread about the world. He has said in other videos that the media will tell you that the majority of countries are desperately poor and struggling, whereas most countries are more or less in the middle.

 

What can be done to balance out the world’s wealth?

The big push right now is for ending tax avoidance. That involves getting tax havens – places with crazy low tax rates like Switzerland, Luxembourg, and controversially British territories like Jersey and Isle of Man – to play ball. Is this the right thing to focus the efforts on?

Or does a bigger change need to be made? Should governments focus on aiding smaller business rather than the biggest and wealthiest? Or do we need a change at all? Perhaps, as Boris Johnson argues, inequality is necessary. It’s all a matter of scale, we suppose.

 

Here’s something you can do right now. Sign up to our weekly newsletter, follow @scenesofreason and like us on Facebook


No comments yet

Leave a Reply