Wealthy elites have co-opted political power to rig the rules of the economic game, warned Oxfam in a new report published ahead of this week's World Economic Forum in Davos. Income inequality undermines democracy and has created a world in which just 85 of the richest people own the same amount of wealth as half of the world's population, or 3.5 billion people.
The good news, the "Working for the Few" report says, is that global public awareness of this power grab is growing. Oxfam polls conducted in the United States, United Kingdom, Brazil, India, South Africa and Spain show that most people questioned believe that laws are skewed in favor of the rich.
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In the United States, since the 1970s, the main culprits in income inequality have been weak regulation and the role of money in politics. Policies have favored the corporations, and the bargaining power of unions has plummeted. Financial deregulation beginning in the 1980s led to the global economic crisis that began in 2008.
Before the financial crisis, income inequality in Europe was rising as well. But austerity programs have started to dismantle the mechanisms that reduce inequality and enable equitable growth, says the Oxfam report.
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The number of billionaires in India has increased tenfold in the past decade, and a weak regulatory environment in Mexico has helped propel Carlos Slim to become arguably the world’s richest person.
Oxfam is not the only one that is concerned. Christine Lagarde, managing director of the International Monetary Fund, told the Financial Times:
Business and political leaders at the World Economic Forum should remember that in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability.
Oxfam is calling on participants at the World Economic Forum to pledge to do the following:
- Not dodge taxes in their own countries or in countries where they invest and operate, by using tax havens;
- Not use their economic wealth to seek political favors that undermine the democratic will of their fellow citizens;
- Make public all the investments in companies and trusts for which they are the ultimate beneficial owners;
- Support progressive taxation on wealth and income;
- Challenge governments to use their tax revenue to provide universal healthcare, education and social protection for citizens;
- Demand a living wage in all the companies they own or control;
- Challenge other economic elites to join them in these pledges.
Further recommendations include:
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- Cracking down on financial secrecy and tax dodging;
- Redistributive transfers; and strengthening of social protection schemes;
- Investment in universal access to healthcare and education;
- Progressive taxation;
- Strengthening wage floors and worker rights;
- Removing the barriers to equal rights and opportunities for women.