Be wary of those who defend 42 people having the same wealth as the 3.7 billion poorest

World Bank - On Two Dollars A Day You Are No Longer in Poverty

Photo by NeONBRAND on Unsplash

Oxfam have released another report that highlights the widening gap in wealth inequality. The release of the report in time for the World Economic Forum (WEF) in Davos is obviously strategic and lends support to Oxfam’s* call for world leaders to implement policies to tackle tax evasion and improve workers’ rights and pay.

The figures are based on new data and therefore revise figures presented last year where 8 people deemed to have the same wealth as half the global population has been revised to 61. The stark numbers of the report include 42 people now having the same wealth as 3.7billion of the world’s poorest; the wealthiest 1% accumulated 82% of the global wealth generated in 2017; and 2006 to 2015 has seen a 13% yearly average wealth increase for billionaires. The $762bn wealth increase for billionaires in 2017, the report claims, is enough to end extreme poverty seven times over.

The $2.2 billion a year that it would cost to increase the pay of 2.5 million Vietnamese garment workers to a living wage is about a third of the amount paid in 2016 to the wealthy shareholders of the top five garment sector companies. Much of the gains for the rich in 2017 has been due to rising stock markets while the poorest half of the population has seen no increase in wealth.

The release of such prominent reports tends to draw responses in the comments sections and in articles wishing to defend the status quo. Basically, they accuse Oxfam of ideological bias and of ignoring how the global shift since the 80s towards the economic liberalization of neoliberalism – involving greater privatization, deregulation, free trade – have lifted millions, even billions, out of poverty. In the UK it is to the Institute of Economic Affairs (IEA) that newspapers turn to for this counterargument. Writing in Murdoch’s Times the IEA research director Jamie Whythe  argues that Oxfam in its ideological objection to inequality ignores how “billions” have been lifted out of poverty and is instead obsessed with a side effect of neoliberalism where some people become billionaires. This is a win win situation for Whythe and the IEA where the widening gap is not a problem – some people are getting richer than others but everyone benefits.

Implied in such statements is how the IEA is somehow outside of ideology despite being a free market think tank that has been a cheerleader for neoliberalism since its outset. It also has a history of receiving substantial funds from the tobacco industry which it has defended against regulation.

These claims of billions lifted out of poverty as a direct result of a neoliberalist expansion is a very narrow quantitative ideological position that presumes correlation as explanation. The term ‘lifted out of poverty’ is based on the World Bank standard that marks poverty as an income at or below $2 a day. Any shift above it, even if it is to just $2.01 dollars a day, is considered being lifted out of poverty. Oxfam also argues that an extra 200 million would’ve also escaped poverty between 1990 and 2010 had the inequality not grown within countries during that period. Furthermore, the argument that free trade is the reason for why such gains have occurred overlooks how many successful trading countries such as Japan, Korea, Taiwan, and China have actually applied a lot of protectionism and state capitalism to advance their growth .

The counterarguments also ignore the consequences of income and wealth inequality with the amassing of funding power for lobbying and political campaigns in the hands of a few – a democratic deficit that is potentially exacerbated by the reduction in workers’ rights that has enabled the expansion of wealth inequality in the first place. It also can become an obstacle for more equal opportunities and restrict possibilities for upward mobility as the rich locate their families within economically advantageous social networks and on the pathways of elite education.

The risk to growth itself can be made worse as the rich have a tendency to save more. This can increase the potential for a fall in total consumer spending when the rich get richer. The arguments also ignore how an economic system with an implicit ideological position of infinite growth is going to square that with the wall of environmental consequences emerging from the depletion of finite resources – e.g. climate change, soil depletion, global water crisis.

Meanwhile the discussions at Davos proceed under the WEF’s declared goal of “Improving the State of the World” with this year’s official theme of “Creating a Shared Future in a Fractured World”. However, if a PwC Global CEO survey is to be believed, inequality is not a serious concern for the rich CEOs attending the event. Instead they fear over-regulation (that would include greater tax transparency in light of the Paradise Papers tax evasion scandal). They also appear very optimistic at Trump’s slashing of taxes on corporations and the wealthy. So like the IEA they too subscribe to an ideological position that would appear to be very much in their own short-term interests.

*In a future article I hope to return to the hypocrisy and significance of Oxfam’s own high salaries.

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