Extreme inequality is not inevitable but is the result of policy choices.
In January 2014 Oxfam revealed that the richest 85 people in the world had the same amount of wealth as the bottom half of the world’s population: over 3 billion people. This attracted global media interest. As usual, our claim was challenged, but not in the usual way. When Forbes magazine updated the data just a few months later, they found that we were wrong. It now took just the richest 69 people to equal the wealth of the poorest half!
The disparities between the rich and the poor are increasing. Just a few feet of wall in Rio separates the have-nots living in slums from the have-it-alls in the penthouse apartments next door. In the UK, newspaper articles on bankers’ billions sit alongside those documenting the rising number of people forced to rely on food banks.
Does this really matter? Some say that economic growth benefits and creates opportunities for all and that this must involve some getting richer than others; that attacking the very rich is an ideological position that helps no one. Oxfam’s interest is not about the rights and wrongs of wealth per se. It is about the fact that extreme inequality of wealth leads to extreme inequalities in all forms of power, policy and wellbeing, so that poor people do not benefit from improved health, education or opportunity, even in an economy that seems to be growing.
Over the last year there has been widespread recognition that increasing inequality of income and wealth cannot go on unabated. President Obama promised in his State of the Union address to tackle inequality of opportunity. Pope Francis tweeted to warn that inequality is “the root of social evil”. Even the global institutions with orthodox economic outlooks – including the IMF and the World Bank – have been warning of the dangers of inequality, and, in the case of the IMF’s Christine Lagarde, quoting Oxfam.
Leaders and institutions are beginning to challenge inequality head-on and people are paying attention to this debate. Not only was Thomas Piketty’s book Capital in the Twenty-first Century, about the link between rising inequality and wealth, a massive publishing success, but it also sparked a flood of soul-searching about the state of modern capitalism (see review page 58). That an economics tome of graphs and data can top best-seller lists on both sides of the Atlantic clearly demonstrates the resonance of this issue.
Why does this matter for development and wellbeing?
Over the last two decades we have seen impressive reductions in poverty and improvements in health, education and other key indicators in many of the poorest countries around the world. The rapid economic growth of emerging economies has seen many countries improve their prospects dramatically. While this is hugely encouraging, looking through the lens of simple averages masks the unequal fate of those left behind. A baby born into a rich family in prospering Nigeria will live a longer life with far greater opportunities than a baby born into a poor family.
Gender inequalities will exacerbate these discrepancies even further, with a boy likely to spend more than 10 years in school, compared to the three years of schooling that a girl can expect. These disparities are not just a phenomenon in developing countries. Here in the UK a child born in leafy Richmond, South West London can expect to live 15 years longer than one born in Tower Hamlets in the east of the city. That is a year of extra life for every mile covered as you travel across London.
Whilst the marginalised are falling behind, the elite are moving further ahead. In the US, the richest 10% have captured over 90% of economic growth since the recession, while the poor have got poorer. Money yields money and power.
This massive concentration of economic resources in the hands of a few people presents a significant threat to democracy and wider wellbeing. Those with money can use it to buy power and to set the rules, regulations and policies in their favour, creating a cycle of growing inequality and poverty and undermining opportunity.
Politicians and institutions that should represent citizens and keep inequality in check are instead being influenced by the rich and powerful, resulting in policies and actions that further widen the gap between rich and poor. Society becomes a vicious circle where wealth (income, assets and access to resources) and power (particularly political decision-making) are increasingly concentrated in the hands of a few, reinforcing the continued marginalisation and exclusion of the many. We saw this in the response to the financial crisis, with the banks and bankers bailed out whilst the poorest in society were left to suffer the costs of their risk-taking.
Everywhere I travel I see evidence of this. Women’s low status in society means that the issue of maternal health is neglected in budget allocations. The wives, sisters and daughters of the rich and powerful give birth safely in sparkling new private hospitals, so policymakers have very little incentive to care about the health-care provisions for the half of all women in sub-Saharan Africa who give birth in unsafe conditions without trained support.
It is clear that to eliminate poverty and achieve social justice we need to look beyond the country-level average and understand and address how resources, wealth, power and voice are distributed.
Breaking the cycle of inequality
We know change is possible when governments make the right choices and are accountable to the many, not the few. Countries like Bolivia and Brazil, for example, have in the last decade managed to grow their economies whilst making them more equal. Brazil has achieved this through targeted policies, including an increase in the minimum wage that has seen the poorest 10% receive an income growth above the national average, compared to the rich, who have had income growth below the average.
Bolivia has seen a much sharper fall in inequality, with its government introducing a range of new progressive spending programmes while, crucially, funding them by renegotiating the country’s oil and gas tax revenue. Conversely, robust growth in Zambia, averaging 4.6% between 2000 and 2006, was almost entirely captured by the richest 10%, who increased their share of the country’s wealth by more than 9% while poverty rates increased by almost 4%. When I visited Zambia last year for the first time in a decade, it had moved from low to middle income status. The economy had grown but there were actually more poor people.
Extreme inequality is not inevitable but is the result of policy choices. Different choices can reverse it: free public health services that help everyone while ensuring the poor are not left behind; decent wages that end working poverty; and progressive taxation so that the rich pay their fair share. Governments also need to ensure that there is space for people to have their voices heard to rebalance the power of political influence.
Whilst the Pope tweets and the World Bank blogs about inequality, and as new data raises even louder alarm bells, governments and policymakers around the world can choose to seize this opportunity and be leaders in challenging inequality and restoring social and economic justice. Governments everywhere must commit to a more progressive agenda for redistribution and for a fairer world. Power and special interests must not be allowed to push us to the alternative of being tipped irrevocably into a world that caters only for the privileged.
Mark Goldring is the Chief Executive of Oxfam GB. He will be speaking at the Resurgence & Ecologist Festival of Wellbeing on 11 October 2014 in London. For more information and bookings: Festival of Wellbeing bookings