Mind the growing gap

from David Ruccio

Oxfam’s headline-grabbing numbers are bad enough: “Eight men are as rich as half the world.” But the international organization has presented an even more serious and severe indictment of current economic arrangements—which can’t be glossed over by merely encouraging those at the top to pay more taxes.

In the background paper, “An Economy for the 99 Percent” (a follow-up to last year’s “An Economy for the 1%“), Oxfam researchers both document the existence of grotesque levels of economic inequality in the world today and analyze the main causes of that inequality.

Regular readers of this blog will recognize the numbers indicating the obscene levels of contemporary inequality: 

• Since 2015, the richest 1% has owned more wealth than the rest of the planet.
• The incomes of the poorest 10% of people increased by less than $3 a year between 1988 and 2011, while the incomes of the richest 1% increased 182 times as much.
• A FTSE-100 CEO earns as much in a year as 10,000 people in working in garment factories in Bangladesh.
• In the US, new research by economist Thomas Piketty shows that over the last 30 years the growth in the incomes of the bottom 50% has been zero, whereas incomes of the top 1% have grown 300%.
• In Vietnam, the country’s richest man earns more in a day than the poorest person earns in 10 years.

But it’s the analysis behind those numbers that, in my view, deserves even more attention.

Oxfam starts where they should, with the key institution within global capitalism: corporations.

Businesses are the lifeblood of a market economy, and when they work to the benefit of everyone they are vital to building fair and prosperous societies. But when corporations increasingly work for the rich, the benefits of economic growth are denied to those who need them most. In pursuit of delivering high returns to those at the top, corporations are driven to squeeze their workers and producers ever harder – and to avoid paying taxes which would benefit everyone, and the poorest people in particular.

Corporations are where much of the world’s surplus (at least the surplus that is created within the bounds of capitalism) is both appropriated and distributed. In recent years, corporate profits have been rising because they’ve been able to squeeze their own workers, by forcing more of them to work not for themselves but for corporate giants and, when they do, paying them a smaller and smaller share of the value that is created. And corporations have managed to get even more of the surplus by squeezing small producers, who are forced to have the freedom to sell their goods and services to those corporations, and by using “their huge power and influence to ensure that regulations and national and international policies are shaped in ways that enable continued profitability.” Then, once they’ve managed to get more surplus, corporations have been able to keep more of it, by “paying as little tax as possible.” Finally, corporations have been “paying out an ever-greater share of these profits to the people who own them,” such that the small group of already-wealthy shareholders have been able to receive a large share of the surplus.

What we have then is a Second Gilded Age, “in which a glittering surface masks social problems and corruption.” And, of course, “once a fortune is accumulated or acquired it develops a momentum of its own.”

The huge fortunes we see at the very top of the wealth and income spectrum are clear evidence of the inequality crisis and are hindering the fight to end extreme poverty. But the super-rich are not just benign recipients of the increasing concentration of wealth. They are actively perpetuating it.

One way this happens is through their investments. As some of the biggest shareholders (particularly in private equity and hedge funds), the wealthiest members of society are huge beneficiaries of the shareholder worship that is warping the behaviour of corporations.

The end result is exactly what one would expect: “Eight men now own the same amount of wealth as the poorest half of the world.”