The charity Oxfam has predicted that within the next 12-24 months the wealthiest 1 per cent of the global population will have more wealth than the remaining 99 per cent with the divide only expected to get greater unless something is done about it.
Pretty damning, and frightening stuff when you consider the infinite power wealth can bring. During 2013 alone more than $500 million (£330.8 million) was spent lobbying Washington and Brussels by billionaires listed as having interests in the pharmaceutical industry, the same industry with patents granted to them that ensures life saving medicines are priced far, far out of the reach of the worlds poorest, the same industry incidentally that had no interest in looking for a cure for Ebola, until it looked like it might be an illness that could eventually spread to the rich, rather than one just affecting the poor.
But can we really do anything about this? Can we really ensure the trickle down effect of wealth that is promised by the capitalist ethos, yet failing so miserably to appear at the moment?
Lies, damned lies and then there are statistics
Firstly, let’s dissect the figures a little, because, as ever with statistics, it’s never as black and white as it seems, especially when talking on a global scale.
Wealth, in this instance, is asset based and assets will rise and fall in value. Whilst Oxfam are predicting the rich will continue to get richer, this report has not taken into account the impact market downturns, such as the current falling oil price, are having on investors, or the impact of the hedge fund losses and crash of the Swiss stock market following the removal of the Swiss franc exchange rate cap, or the impending predictions of financial doom should there be a Greek exit from the Euro.
In fact, Oxfam’s predictions are based on some pretty rosy certainties for the rich, which is troubling because if there’s one thing that you can be certain of with the current global economy, it’s that there are no certainties.
It also needs to be kept in mind that when Oxfam refer to the top 1 per cent wealthiest people in the world, given a global population of 7bn, they’re talking about 70 million people, more people than currently live in the UK. And the figure needed to join this elite 1 per cent? It’s actually only £526,000. Undoubtedly a lot of money, but we’re probably surrounded by people who own their property outright and by default belong to that magical 1 per cent club.
Not only are the figures of those at the top slightly misleading, those at the bottom are too. For example, mortgages, loans or other debts that essentially wipe out your capital make you part of the worlds poorest. As far as Oxfam’s report is concerned, no or even negative capital, and you are akin to an orphan in a shanty town.
It’s also worth remembering that the figures haven’t been adjusted for purchasing power parity, that is that a dollar of wealth in the richest countries is worth a lot less than a dollar of wealth in the poorest countries.
Whist I can nit-pick through the statistics, the fact remains that there is a real disparity about the way wealth is distributed globally that is getting worse, and it’s not just a social issue, it’s an economic one as well.
Wealth should trickle down
One of the main ideals with a free market is that wealth trickles down. You have money, you spend money, you spend money it increases demand, increasing jobs, wages and essentially giving everyone a piece of the pie through market forces with little government intervention. But when you have global economy where so much wealth is concentrated amongst so few, they get to a point where they just can’t spend it anymore.
There are only so many houses, yachts and supercars you can buy (I know, poor things, the stress of it all!) and this is where it becomes a problem. If money isn’t flowing around economies, if it’s just sitting in a bank somewhere, if it’s not trickling down, demand, employment, growth etc all slow down. So in reality, the current wealth distribution isn’t just unfair, it’s economically damaging in the long term and a partial cause of cyclical downturns in the economy, which as we know, generally impact the poorest the hardest.
So what can be done about it?
Well that’s where it gets really complicated. The ideas of clamping down on tax dodging, moving taxation away from income and consumption and instead taxing capital and wealth, moving towards living wages, universal benefits such as health care, education and safety nets for the poor are all very well and good.
However, for it to really work, for there to be a real change, it would require all the governments around the world to work in unity. Comparable tax, trade and labour laws globally etc. It means in effect asking countries like Russia to sit down and agree tax laws with the US, asking the US to agree to free state healthcare (the US who apart from anything else, can’t even sort out maternity leave benefit), asking the various tax haven around the world to stop being tax havens etc.
Can things get better?
Whilst this might seem a utopian ideal, Oxfam are confident change may not be so far away, and with IMF managing director Christine Lagarde warning of the dangers of increasing wealth inequality, it looks as though change, however slowly, might soon help more people get a fairer share of the pie.
What do you think of the report? Have your say in the comments section below.