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21st January 2015

Richest 1% will own more than all the rest by 2016

The combined wealth of the richest 1 per cent will overtake that of the other 99 per cent of people next year, unless the current trend of rising inequality is checked, Oxfam has warned ahead of the annual World Economic Forum meeting in Davos.

 

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The international agency Oxfam, whose executive director Winnie Byanyima will co-chair the Davos event, warns that the explosion in inequality is holding back the fight against global poverty at a time when 1 in 9 people do not have enough to eat and more than a billion people still live on less than $1.25-a-day.

Byanyima will use her position at Davos to call for urgent action to stem this rising tide of inequality, starting with a crackdown on tax dodging by corporations, and to push for progress towards a global deal on climate change.

Wealth: Having it all and wanting more– a research paper published this week by Oxfam – shows that the richest 1 per cent have seen their share of global wealth increase from 44 per cent in 2009, to 48 per cent in 2014 and at this rate will surpass 50 per cent in 2016. Members of this global elite had an average wealth of $2.7m per adult in 2014.

Of the remaining 52 per cent of wealth, almost all (46 per cent) is owned by the rest of the richest fifth of the world's population. The other 80 per cent share just 5.5 per cent and had an average wealth of $3,851 per adult in 2014 – that's 1/700th of the average wealth of the 1 per cent.

"Do we really want to live in a world where the one per cent own more than the rest of us combined?" says Byanyima. "The scale of global inequality is quite simply staggering and despite the issues shooting up the global agenda, the gap between the richest and the rest is widening fast.

"In the past 12 months, we have seen world leaders from President Obama to Christine Lagarde talk more about tackling extreme inequality, but we are still waiting for many of them to walk the walk. It is time our leaders took on the powerful vested interests that stand in the way of a fairer and more prosperous world.

"Business as usual for the elite isn't a cost free option – failure to tackle inequality will set the fight against poverty back decades. The poor are hurt twice by rising inequality – they get a smaller share of the economic pie and because extreme inequality hurts growth, there is less pie to be shared around."

Lady Lynn Forester de Rothschild, CEO of EL Rothschild and chairman of the Coalition for Inclusive Capitalism, speaking at a joint Oxfam-University of Oxford event on inequality, called on business leaders meeting in Davos to play their part in tackling extreme inequality: "Oxfam's report is just the latest evidence that inequality has reached shocking extremes, and continues to grow. It is time for the global leaders of modern capitalism, in addition to our politicians, to work to change the system to make it more inclusive, more equitable and more sustainable.

"Extreme inequality isn't just a moral wrong. It undermines economic growth and threatens the private sector's bottom line. All those gathering at Davos who want a stable and prosperous world should make tackling inequality a top priority."

Oxfam made headlines at Davos in 2013, by highlighting that the 100 richest people on the planet had enough income to end poverty four times over, while in 2014, they revealed that the 85 richest individuals had the same wealth as the poorest 50 per cent (3.5 billion people). That number is now 80 – a dramatic fall from 388 people in 2010. The wealth of these richest 80 doubled in cash terms between 2009-14.

The international agency is calling on governments to adopt a seven point plan to tackle inequality:

  • Clamp down on tax dodging by corporations and rich individuals
  • Invest in universal, free public services such as health and education
  • Share the tax burden fairly, shifting taxation from labour and consumption towards capital and wealth
  • Introduce minimum wages and move towards a living wage for all workers
  • Introduce equal pay legislation and promote economic policies to give women a fair deal
  • Ensure adequate safety-nets for the poorest, including a minimum income guarantee
  • Agree a global goal to tackle inequality.

This week's new research paper, which follows the October launch of Oxfam's global Even It Up campaign, shines a light on the way extreme wealth is passed down the generations and how elite groups mobilise their vast resources to ensure global rules are favourable towards their interests. Over a third of the 1,645 billionaires listed by Forbes inherited some or all of their riches.

Twenty per cent of billionaires have interests in the financial and insurance sectors – a group which saw their cash wealth increase by 11 per cent in the 12 months to March 2014. These sectors spent $550m lobbying policy makers in Washington and Brussels during 2013. The 2012 US election cycle alone saw the financial sector providing $571m in campaign contributions. Billionaires listed as having interests in the pharmaceutical and healthcare sectors saw their collective net worth increase by 47 per cent. During 2013, they spent more than $500m lobbying policy makers in Washington and Brussels.

Oxfam is concerned that the lobbying power of these sectors is a major barrier in the way of reforming the global tax system and of ensuring intellectual property rules do not lead to the world's poorest being denied life-saving medicines.

There is increasing evidence from the International Monetary Fund, among others, that extreme inequality is not just bad news for those at the bottom but also damages economic growth. In an interview with the Guardian, Byanyima says: "We want to bring a message from the people in the poorest countries in the world to the forum of the most powerful business and political leaders.

"The message is that rising inequality is dangerous. It’s bad for growth and it’s bad for governance. We see a concentration of wealth capturing power and leaving ordinary people voiceless and their interests uncared for.

"Extreme inequality is not just an accident or a natural rule of economics. It is the result of policies, and with different policies it can be reduced. I am optimistic that there will be change. A few years ago, the idea that extreme poverty was harmful was on the fringes of the economic and political debate. But having made the case, we now see an emerging consensus among business leaders, economic leaders, political leaders and even faith leaders."

 

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