Time to balance books between rich and poor

Britain is the only country in the G7 group of leading economies where inequality has increased this century, a recent annual Credit Suisse global wealth report says, while around the world the rich are getting inexorably richer.

A report from Oxfam earlier this year calculated that  a mere 85 people have the same amount of wealth as half of the population on the planet, one billion of whom live on less than $1.25 a day.  How we distribute these resources between ourselves really matters if we are to ensure that not only do we we all have enough to eat, but it also has profound environmental consequences.

In developed countries the rich and the poor are moving further apart. In the UK, as the rich have got richer, low- and middle-income households have been squeezed by falling real incomes caused by years of rising household bills and lack of wage increases.

Some progress has been made in reducing the gap between rich and poor countries. Developing nations on average are growing faster and catching up with the developed world, while poverty rates have been cut in half. At the same time however, disparities between the rich and the poor are increasing within these nations.

Powerful elites, the owners of land and capital and those with political connections are getting richer. India has seen a tenfold increase in the number of dollar billionaires in the last decade. During the same period India looks set to see an estimated one in three children undernourished. If India stopped inequality from rising, they could lift 90 million more people out of extreme poverty by 2019.

Inequality is NOT inevitable; it is the result of deliberate political and economic choices. Thomas Piketty made the case that without government intervention the market economy tends to lead to extreme concentrations of wealth. But government action is curtailed by the influence and interests of economic and political elites that reinforces inequality.

Money buys political clout that allows elites to further entrench their unfair advantages, and to block policies such as more progressive tax regimes, tighter corporate regulation and the closure of tax havens that could strengthen the rights of the majority.  

In 2013, Oxfam estimated the world was losing $156bn in tax revenue as a result of wealthy individuals hiding their assets in offshore tax havens. Warren Buffet has famously commented on the unfairness of a system that allowed him to pay less tax than his secretary.

The world’s most powerful leaders have been urged to tackle inequality and set targets for inclusive growth to build a fairer economic and political system. Action is needed to level the playing field by implementing policies that redistribute money and power from wealthy elites to the majority. 

Oxfam’s report says that if all the billionaires in the world were to be taxed at 1.5 per cent (on wealth over $1bn, as of 2014) it could raise $74bn, or enough money to fill the annual gaps in funding needed to get every child into school and to deliver health services in the world’s poorest countries.

Economic, social, political and environmental injustices will persist unless positive citizen and government policies are forged. As the  writers of ‘The Spirit Level’  found, more equal societies are happier and more sustainable. At the national level, governments are in a position to provide the universal health and education services to all citizens and to fund this through progressive taxation and better regulate markets to benefit the many rather than the few.

It is critical that countries take responsibility for growing inequality within their borders if we are to all live in a just and sustainable world.