62 people have as much wealth as half the world
Global economic inequality is deepening, with only 62 individuals owning as much wealth as the 3.5 billion people in the bottom half of the world's distribution of wealth.
That calculation is from the charity Oxfam, which will present its report at the World Economic Forum's annual summit, which kicks off Jan. 20 in Davos, Switzerland. The gap between rich and poor is widening even faster than the organization had predicted last year, when it forecast that the top 1 percent would own most of the world's wealth by 2016. In fact, that benchmark was reached long before 2015 ended, according to Oxfam.
While some critics may say Oxfam is taking pot-shots at the wealthy and engaging in the the "politics of envy," the charity stresses that its findings have dire implications for everyone, rich and poor alike.
"It's happening at same time that income and wealth are stagnating and even declining in large portions of the world," said Gawain Kripke, director of policy and research for Oxfam America. Economic growth is "supposed to benefit everybody and it's not. This inequality itself might be hindering growth."
That backs up findings from other researchers, who have warned that rising income inequality is already translating into a serious problem for America in the form of lower economic growth. The gulf between the rich and everybody else means that more Americans have less social mobility and fewer financial resources to afford education, which is making the country less competitive and hampers economic growth, the ratings agency Standard & Poor's warned in 2014.
Just five years ago, the richest 388 individuals had as much wealth as the bottom half of the world's population. But it's not only that the rich are getting richer, given that Oxfam found that the wealth of the bottom 50 percent actually declined 41 percent in the same period, costing them more than $1 trillion in lost assets.
"Global wealth is growing, but it's not growing for everyone," Kripke said. "It shows a lot of precariousness among poor and working people, and that they are one health crisis or job loss away from poverty."
So how did economic inequality reach such extremes? For one, the share of national income going to workers in developed countries has been falling, while the share going to owners of capital -- such as factories, stocks, and private equity stakes -- has been rising. It's the dynamic detailed in Thomas Piketty's best-selling "Capital in the Twenty-First Century," which analyzed two centuries' worth of data and found that the rate of return on capital has been outpacing the rate of economic growth.
Top executives and leader are using their influence and power to ensure they capture economic gains, Oxfam said. That includes CEOs at top U.S. firms, whose salaries have increased by 55 percent since 2009, while the average worker's wages have stagnated.
And then there are tax loopholes, which may be legal -- or at least not clearly illegal -- which have enabled the rich to use tax havens and other strategies to keep their wealth beyond the reach of government. Multinational companies are also increasingly using tax havens and other strategies to reduce their tax bills, Oxfam notes, finding that corporate investment in tax havens nearly quadrupled from 2000 to 2014.
"The same corporations and individuals are lobbying to preserve the status quo," Kripke argued. "That's one of the key ethical issues. It's one thing to take advantage of tax loopholes, but it's another thing to change the rules to your advantage and to the detriment of others."
There are policy changes that can be made that would stem the rising tide of inequality, Oxfam said. Among its recommendations are to pay workers a living wage, promote women's equality and rights, level the tax field by shifting it away from labor and onto capital, and limiting the influence of the rich by separating business from campaign financing.
Will the Davos elites listen? "There is a small group of billionaires who are saying this is wrong, and a growing number of corporate leaders who are acknowledging this is going on," Kripke said. "Are they going to take action this year? I hope so, but I'm not holding my breath."