Written by Winnie Byanyima
Executive Director, Oxfam International
Yet again I am attending the World Economic Forum in Davos, warning about the global inequality crisis – and proposing steps to tackle it. Yet again, Oxfam has released shocking new statistics which illustrate how severe this crisis has become: 62 people now have the same wealth as the poorest half of the planet – that’s 3.6 billion people.
I am not the only one raising the alarm: Consistently now, we hear concern on inequality from voices such as President Obama, the Pope, Christine Lagarde of the IMF, and people on the street. And things are starting to change. But not enough.
It’s not enough because the gap between the rich and poor has grown dramatically in the past 12 months. This time last year 85 people owned the same amount as the poorest half of the planet and Oxfam was predicting the wealth of richest one percent would overtake the rest of us by 2016 – this particular milestone was passed ahead of schedule in October.
The consequences of such rapidly growing and extreme inequality are huge. Economic inequality can act as a brake on growth, slow poverty reduction efforts, and spark social unrest. Oxfam sees the devastating impact of extreme inequality in many of the countries where we work – from the school children of South Africa whose education is suffering because of lack of government funding, to the garment workers of Myanmar who work long exhausting hours for global suppliers but who can’t cover their rent and feed their families on what they earn.
This continued trend is hardly surprising: The inequality crisis is not a blip. It is hardwired into our economy. Oxfam’s recent report, An Economy for the 1%, explores how today’s global inequality crisis was born and raised on 30 years of unchecked deregulation, privatisation, financial secrecy and globalisation. Our economic system has enabled companies and individuals to use their power and influence to capture and retain an ever increasing share of the benefits of economic growth while the benefits for the poorest in society have shrunk.
Reversing this trend will take the determination of political leaders, and the active cooperation of business. It’s not hopeless, it’s just hard.
2015 saw some faltering steps forward. In September, the world agreed to global goals on ending inequality and on eradicating extreme poverty. There was also a very welcome engagement from business. These commitments show governments’ intention to act. But these intentions need to be put into action.
This requires addressing the drivers of inequality and challenging vested interests.
Top of that list of vested interests has to be tax havens. Serving no social purpose, these jurisdictions – characterised inter alia by high levels of secrecy and low or no tax rates – are fuelling the rise in inequality. As tax returns from wealthy companies and individuals disappear into this global network, governments are left with two options: to cut back on the essential spending needed to reduce inequality and deprivation; or to make up the shortfall by levying higher taxes on other less wealthy sections of society. Consequently, wealth is redistributed upwards, and the inequality gap grows.
Tax havens take billions from rich industrialized countries. But it is in the poorer countries that the impacts are felt most dramatically. Wealthy African’s use of tax havens cost African governments an estimated $14 billion in lost tax revenues in 2014. This is enough money to pay for healthcare for mothers and children that could save 4 million African children’s lives a year and employ enough teachers to get every African child into school. While the United Nations Conference on Trade and Development (UNCTAD) has estimated that the use of tax havens by business costs developing countries around US$100 billion every year.
Some governments have recognized that tax dodging is a serious problem that needs addressing. In November, G20 governments agreed on steps to curb tax dodging by multinational companies. However, these reforms largely ignore the problems posed by tax havens and do not do enough to ensure developing country governments can claim their fair share of taxes.
Now with tax havens becoming an ever more common way of doing business – 109 of the WEF’s 118 partners have a presence in at least one tax haven – it time we put a stop to this practice.
For the benefit of all their citizens, governments across the world need to commit to a second generation of tax reforms to end the race to the bottom on tax, and they need to end the secrecy around financial assets.
But this isn’t just about governments forcing companies to behave. I doubt many people, employees or employers, want a world of such vast inequities. Neither do they want the tax base on which their societies and economies rely to be undermined. So my message at Davos 2016 is for companies to think about how they can be tax responsible too – starting with a commitment to bring their money onshore.
In 2010, 388 people had the same wealth as half the world. Now it’s 62. When my research team told me this, I asked where this trend was taking us. Half-joking they continued the line on the graph they had plotted to 2020 where just 11 people occupied this exalted position. But I am not joking. This year I will fight inequality harder than ever on behalf of the world’s poorest people.
Read Oxfam's Report: An Economy for the 1%