A new Oxfam report released in time for the World Economic Forum spells out just how vast the inequality divide has become and the urgent need to act. It's just not good for anyone
The annual meeting of the ultimate insider's club has begun in Davos, Switzerland today. The World Economic Forum attracts the rich, powerful and seriously cool from all over – the opening day has seen speeches from Mario Monti, David Cameron and Larry Summers, an award for Charlize Theron and reports of Prince Andrew drifting around for some reason. What's surprising are some of the comments from the IMF.
Its chief Christine Lagarde has been stressing the importance of long-term thinking by the world's leaders, with one of her key points being concerns about inequality. Not what you'd expect from the IMF really, but crucial in the light of a new report by Oxfam released just prior to the forum.
According to the report, 'The cost of inequality: how wealth and income extremes hurt us all', the world's richest 100 billionaires made US$240 billion last year, which would be enough to end global poverty four times over. Oxfam says baldly that "Extreme wealth and inequality are reaching levels never before seen and are getting worse", continuing:
"It is now widely accepted that rapidly growing extreme wealth and inequality are harmful to human progress, and that something needs to be done. Already this year, the World Economic Forum’s Global Risk Report rated inequality as one of the top global risks of 2013. The IMF and the Economist agree...
In the last decade, the focus has been exclusively on one half of the inequality equation - ending extreme poverty. Inequality and the extreme wealth that contributes to it were seen as either not relevant, or a prerequisite for the growth that would also help the poorest, as the wealth created trickled down to the benefit of everyone.
There has been great progress in the fight against extreme poverty. Hundreds of millions of people have seen their lives improve dramatically – an historically unprecedented achievement of which the world should be proud. But as we look to the next decade, and new development goals we need to define progress, we must demonstrate that we are also tackling inequality- and that means looking at not just the poorest but the richest... That is why we are calling for a new global goal to end extreme wealth by 2025."
Which, for an organisation reliant on donations, often from rich people, is a ballsy critique to be offering. My first response is to wonder at the research. I mean, in all reality, how can they identify the richest 100 people and know their income. Who knows what this Russian oligarch or that tin-pot dictator is worth? But allowing for those numbers being a half-decent guess, my other response is to feel like weeping.
For me, that kind of wealth in the hand of a few is hand-wringing stuff. There's nothing good about it. As Oxfam points out, in a finite world that can only mean many, many others are missing out. The emotional, psychological and physical detachment created by that kind of wealth, and lack of care it must create for your fellow man, cannot be healthy. It's a dehumanising, destructive amount of money, both for those who have it and those who don't.
Sure, some use their mega wealth well. But Oxfam estimates that as much as a third of the world's wealth is hidden in tax havens. In other world, the Buffets and Gates are the exceptions, not the rule.
I'm always wary of claims that things are 'worse than ever', but the great concern is that the Global Financial Crisis, despite its name, has actually been very good business for the very rich. Oxfam points out that:
"Globally the incomes of the top 1% have increased 60% in twenty years. The growth in income for the 0.01% has been even greater. Following the financial crisis, the process has accelerated, with the top 1% further increasing their share of income."
In China the top 10 percent take home 60% of the income. And in the US it's worse. The New Yorker reported last year that billionaires were lining up against Barack Obama because he was spelling out the dangers of extreme wealth – they called it class warfare and felt persecuted. But the numbers said otherwise. The Obama years have been good to the uber-rich, according to the magazine:
"At the end of September, the S. & P. 500, the benchmark U.S. stock index, had rebounded to just 6.9 per cent below its all-time pre-crisis high, on October 9, 2007. The economists Emmanuel Saez and Thomas Piketty have found that ninety-three per cent of the gains during the 2009-10 recovery went to the top one per cent of earners... the top 0.01 per cent captured thirty-seven per cent of the total recovery pie"
Many of the billionaires the New Yorker discussed were the hedge-fund managers, Wall St titans and the very buggers who got us into this mess in the first place. It's obscene that they have profited from the damage done by their hubris and greed. Meanwhile, this week the ILO reported that global unemployment was up by 4.2 million last year, with a global unemployment rate for 15-24 year-olds standing at 12.4 percent.
This is unsustainable and shows just how fragile the talk of a recovering global economy really is. Economies simply function better if wealth distribution is more even and the middle classes have some cash in their pocket and skin in the game. Look at how countries like the US and New Zealand grew in the '50s and '60s, how Brazil is growing now. Cutting inequality is good business.
President Obama seems to be recognising that at last – or at least speaking more openly about it. One of the best things about his election win last year was that those billionaires didn't get their way – great organisation trumped great wealth. I just hope Obama repays that debt with action.
Inequality is not new, the poor will always be with us, and coming back from a financial disaster is a decade-long task. I don't want to be Pollyanna-ish about this. But justice demands action on narrowing this obscene gap in wealth – and all the comes with it. And not just justice. If we want a safer world. If we want an economy where the masses have enough to spend and build and save. If we want something left for our kids, this is something to take seriously. Really, there's nothing more important.