A new report from Oxfam International, a confederation of organizations dedicated to fighting poverty, has some pretty sobering statistics about economic inequality. In the working paper published on January 20, 2014, Oxfam highlights the extreme disparities in wealth and income distribution and how it has affected everything from geopolitical structures to climate change. The report was released just as world financial leaders gathered at the annual World Economic Forum in Davos, Switzerland.
The “top one percent”Ě we so often hear about in the news actually own 50 percent of all wealth, compared to just 3 percent for nearly 70 percent of the world. The majority of people live in a country where economic inequality has increased dramatically in the last 30 years. Here in the United States, the report shows that almost all (95 percent) of the post-recession recovery went directly into the pockets of the wealthiest one-percent of Americans.
Also, 85 people own as much wealth as the bottom 3 billion combined. That is half the world’s population.
It’s not a case of the rich getting richer (though they definitely are) and the poor getting poorer. There will always be a certain amount of economic inequality, which some believe is necessary to encourage hard work and social mobility. The problem lies in the unequal distribution of progress being concentrated in the hands of a few. While wealth inequality is just one of the byproducts, the disparity affects every aspect of the daily lives of the majority of the population and the problems start at the top.
Out of necessity, lower income earners are more likely to spend their money immediately rather than save it. High income earners (like hedge fund managers or entertainment moguls) save more of their income via things like stocks, homes and other investments which make up their wealth. The gap is further exacerbated by the extreme disparity in income increases. High income earners like bankers, hedge fund managers, or entertainment moguls saw their income increase by 31 percent since 2009. For everyone else, the net increase in wages was less than one-half †(0.4) of one percent in the same time period.
Needless to say, it’s hard to build wealth if you don’t have the income.
With so few people controlling so much wealth, they also have disproportionate access to political power. In the United States, it is nearly impossible to run for office without a large war chest of funds. While some candidates have been successful in grassroots fundraising (including President Obama), the vast majority of campaign finance comes from the extremely wealthy — including the candidates themselves. The Center for Responsive Politics released a report that showed that for the first time in history, the majority of Congress has a net worth of at least $1 million dollars.
This undoubtedly puts into question whose interests they represent.
The past 30 years have seen a push for deregulation in everything from the financial industry to energy. Policies have been enacted to reduce the power of labor unions, decreasing their membership. The results have been a decrease in benefits and wages for workers, just as corporate profits and management pay has increased exponentially. Laws that increase the penalties for crimes often committed by the poor (i.e. drugs, robbery) have led to the largest prison population in history.
Yet when a bank causes a world financial crisis, its CEO gets a 74 percent pay raise.
In Europe, the answer to the financial crisis led to support of policies for austerity measures. This led to reductions in pensions, health benefits, and education — all of which European countries have found to be key to their society’s success. The austerity measures were forced on governments by financial markets, which essentially held them hostage by refusing to offer international loans unless cuts were made. As a result, Europe’s richest 10 percent saw their wealth increase, which now exceeds the total value of the stimulus enacted in all of Europe.
It doesn’t have to be this way.
Oxfam points out there are solutions that can reverse the decades-long trend, which could lead to a complete societal collapse if not reversed quickly. Some are as simple as reversing policies that have led to the current situation. Eliminating tax havens, progressive taxation on wealth and income and an increase investment in public services such as health care and education are just some of the measures proven to be effective to preventing extreme economic inequality.
Not to mention a living wage for all workers.
Of course, real change needs to come from the people that created the situation. This is will not be easy. Many of the one-percent do not see the dangers in the current trajectory. Take venture capitalist Tom Perkins, for example.
In a letter to the Wall Street Journal (aka the paper of record for the one percent), he warned of this dangerous trend of “demonizing” the rich and engaging in class warfare. He uses much heard rhetoric, warning of the “rising tide of hatred of the successful one-percent.” Yes, he even uses a Nazi reference, “This is a very dangerous drift in our American thinking. Kristallnacht was unthinkable in 1930; is its descendent ‘progressive’ radicalism unthinkable now?”
While wishing for more equitable distribution of progress is not akin to killing millions of people, there has been public outcry. Occupy Wall Street began at the height of the financial crisis. Europe’s austerity measures were met with large scale protests all across the continent. Even the International Monetary Fund has realized that their approach was misguided and sees a need for a reversal of policy.
US Supreme Court Justice Louis Brandeis served on the Court from 1916-1939. A staunch supporter of civil liberties, he said, “We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.”
The time has come to make a choice.
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