The gap in wealth between the world’s richest tycoons and the rest of the global population is growing to levels unseen since before the Great Depression, according to new research published this week. But the divide may also be gaining traction as a pressing political issue more than it has at any point in the past 30 years.
The disparity in wealth between the world’s richest and poorest is staggering: 80 billionaires now hold the same amount of wealth as the bottom 50 percent of the global population, according to an analysis by Oxfam International. Of those 80 billionaires, 90 percent are male and 85 percent are over the age of 50.
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Oxfam published its latest report on income inequality Monday, just two days before the annual gathering of tycoons, world leaders, and politicians at the World Economic Forum in Davos, Switzerland. It is the second year in a row that Oxfam decided to highlight income inequality at the same time as the Forum, Nick Galasso, an inequality researcher at Oxfam told VICE News. In part, Oxfam hopes to urge the leaders at Davos to consider policies to help narrow income inequality, but the leaders there are already doing that out of self-interest, Galasso said.
“The World Economic Forum, which is really a hodgepodge for the world’s elites — politicians, rich people, corporate leaders — every year produces a global risk report, and for past few years they’ve identified rising inequality as one of the top risks humanity faces,” Galasso said. “In a lot of ways, it’s bad for business. It creates political instability, it drives down the appetite for investment. If you have too much money all concentrated at the top, it can weaken consumer demand, so there are good business reasons.”
The other reasons leaders should pay attention to the growing disparity, he said, include the fact that economic growth is a proven way to pull people out of extreme poverty. Inequality can slow down growth, Galasso explained, and high inequality correlates with higher rates of disease, unhappiness, and mistrust in leaders.
The report emphasized the rapid growth of the wealth gap and criticized how the wealthiest members of society are shaping policies to protect their wealth. Galasso said there hasn’t been such a gap in wealth in the world since before the Great Depression. After the Depression and World War II, the gap in wealth remained small until it began to widen in the late 1970s and the took off. In 2010, 388 billionaires had the same amount of wealth as the poorest half of the world; by 2014 it was down to 85 billionaires, and now is only 80. By next year, 1 percent of the world’s population will have more wealth than the entire rest of the world combined, according to the report.
That 1 percent includes the population of the US and most Western countries, Galasso said. “Most Americans are going to be in top five percent, even people that we would consider lower middle class or working class are going to be at the very top,” he said.
“It’s really not a problem of economics, it’s a political problem,” Galasso said. “One of the things we wanted to highlight is the political influence, the role of powerful elites to shape the rules of game around the economic systems are what’s driving this incredible mass of concentration at the top. For us this analysis is of how political influence plays into this wealth creation and perpetuation of wealth from one generation to the next, because that’s what really entrenches inequality across generations.”
The report points out that the finance, insurance, pharmaceutical, and healthcare are the industries producing the top 1 percent of billionaires in the world, and those industries also spend the most money lobbying in US politics, including enormous contributions — $571 million in 2012 — to presidential elections, and for issues of budgeting and taxes.
“There’s an economist who calls this the wealth defense industry,” Galasso said. “It’s the deployment of accountants and lawyers and lobbyists to defend wealth at the very top. And I think they’re doing a good job. Capital gains, for instance, are taxed at a much lower rate for wealthy people.”
President Barack Obama is expected to propose a change to capital gains taxes in his State of the Union address Tuesday night. Obama will reportedly propose raising taxes on individuals who earn more than half a million dollars a year, and giving tax credits to lower-income groups. The Republican-controlled Congress is expected to shoot down the proposal, but many analysts say the move will position Democrats as the party championing the middle class and pushing for reforms ahead of the 2016 election.
It may not be such a partisan issue, however. Mitt Romney, who famously said he didn’t care about the “very poor” while running for president in 2012, said this week that a top priority for the 2016 election — for Republicans — should be improving the lives of poor Americans, according to the New York Times.
“Under President Obama the rich have gotten richer, income inequality has gotten worse and there are more people in poverty in American than ever before,” Romney reportedly said.
Galasso said that he and other reform advocates are pleased to hear politicians talking about income inequality, but there has not been much action on it yet.
“It’s kind of like déjà vu,” he said, referring to the President’s plan to talk about income inequality in his State of the Union address. “The President spoke at the Center for American Progress last year and articulated that income inequality is the issue of our time. Politicians and world leaders have been paying homage to that as a fundamental issue for a long time, but it’s a lot of talk and not a lot of walk.”
He said that other leaders, including Pope Francis and International Monetary Fund manager Christine Lagarde, have also talked about the issue publicly and that it has become “politically salient” to champion it.
“But again we’re ready to see some action,” he said. Oxfam advocates for increasing the federal minimum wage and closing tax loopholes so that people and corporations pay their fair share of taxes back into the system.
“Hopefully we’ll see some change that will reduce poverty and give chances to poor people so they can have the American dream,” Galasso said.
Follow Colleen Curry on Twitter: @currycolleen
Photo via Wikimedia Commons
