62. That’s the magic number at this year’s World Economic Forum, where political and business leaders will debate how to improve the state of the globe. 62 people now have the same wealth as 3.5 billion people who make up the poorest half of the world’s population. This figure is down from 388 individuals as recently as 2010. The question is whether the global elite gathering in Davos will move beyond debate and act to reduce this damagingly high and growing level of economic inequality.
Although world leaders have talked a lot about the need to tackle inequality, and in September last year agreed a global goal to reduce it, the gap between the richest and the rest has widened dramatically in the past 12 months. This time last year Oxfam predicted that the wealth of the richest one percent would overtake the rest of us by 2016 - this milestone was passed ahead of schedule in October.
The consequences of these new extremes of inequality are huge. Economic inequality is a corrosive force that undermines economic growth, puts a brake on the fight against poverty, and sparks social unrest. In 2012, the World Economic Forum’s global risk report highlighted severe income inequality as the number one global risk that could threaten social and political stability. While Oxfam estimates that the much-heralded goal to eradicate extreme poverty by 2030 will be missed if we do not tackle inequality.
The very real damage inequality does to people’s lives is illustrated by the experience of garment workers in Myanmar who told Oxfam that, even with overtime, they could not afford housing, food and medicine on the incomes they earned in the factories. At the other end of the retail chain the bosses of the companies that sell their clothes on our high streets enjoy multimillion dollar pay deals.
Extreme inequality is no temporary blip. It is hard wired into our economies. Today’s global inequality crisis was born and raised on 30 years of unchecked deregulation, privatisation, financial secrecy and globalisation. Our economic system has enabled companies and individuals to use their power and influence to capture and retain an ever increasing share of the benefits of economic growth while the benefits for the poorest in society have shrunk.
As the President of the World Bank stated last year, wealth is simply not trickling down – it is being sucked up by a powerful and wealthy minority. And once there an elaborate system of tax havens and an industry of wealth managers ensure it stays there – far from the reach of ordinary citizens and their governments. As a result the richest 62 people on the planet have seen their wealth increase by a staggering $542 billion – 44 percent - in the last five years. The 3.5 billion poorest people have seen their wealth shrink by over a trillion dollars – 41 percent - in the same period.
Tackling this level of inequality will require fundamental changes to the way we manage our economies. For example there will need to be action to ensure all workers receive a living wage, more progressive tax systems, increased government spending on public services, greater transparency and accountability of government policy making, and better regulation of our financial system. Amongst the most urgent actions on the ‘to do’ list must also be ending the era of tax havens.
By allowing super wealthy corporations and individuals to avoid paying their fair share of tax, tax havens are denying governments’ revenue that could and should be spent on schools, healthcare and other essential services. Almost a third of rich Africans’ wealth – a total of $500bn – was held offshore in tax havens in 2014 costing African countries an estimated $14 billion a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children in Africa and employ enough teachers to get every African child into school.
G20 governments agreed steps to curb tax dodging by multinational companies in 2015 but these measures largely ignore the problems posed by tax havens and do little to help poor countries claim their fair share of taxes. Now with tax havens becoming an ever more common way of doing business - 109 of the WEF’s 118 partners have a presence in at least one tax haven – it’s time to put a stop to this practice.
That is why I will be pressing political leaders, CEOs and other wealthy individuals in Davos to act. I will be asking wealthy individuals and business leaders to commit to bring their money back on shore and I will be urging our politicians to work together to agree a new robust global approach to end the era tax havens.
Many of those attending the World Economic Forum have been concerned about extreme inequality for a number of years, however they have repeatedly failed to recognise that this is not just about helping the poorest get a foot on the ladder – it is also about tackling the corrupting influence of the extremely wealthy who are pulling up the ladder behind them. If the men and women in Davos act to tackle tax havens we can make 2016 the year where we begin build a new global economy that works for the many and not just the 62.