Ray Offenheiser :
The headline grabs your attention: 62 people have as much wealth as half of humanity. You probably saw it and stopped to think, how could that be? And as a development professional, you might have wondered, is this really relevant to the fight against poverty? Why should I care? And hopefully you asked, what can I do?
In what has become a yearly update on dramatically increasing global inequality, Oxfam’s inequality report highlighted the fact that just 53 men and nine women own as much wealth as 3.6 billion people, down from 388 just five years ago.
This time last year, we also predicted that in 2016 the top global 1 percent would own more than the rest of us – the bottom 99 percent. This prediction came to fruition before 2015 even ended.
Globally, wealth is astonishingly concentrated at the very top of the economic pyramid and becoming ever more so. Such runaway inequality isn’t just unfair; it’s very likely to undermine the progress the development community has achieved in recent decades.
Worsening inequality threatens our ability to make progress in our efforts to eradicate poverty, improve livelihoods, reduce vulnerability, and strengthen gender balance, health and education.
In developing countries, extreme inequality is reflected in the denial of the rights of millions to have enough nutritious food to eat, to go to school, to see a doctor, or to have access to water and dignified sanitation. In unequal societies, economic growth, when it is achieved, does not deliver benefits broadly, and does not reduce poverty. Instead, economic growth delivers increased income to the rich, while little or nothing trickles down.
There’s a political dimension to this problem. The extremely wealthy have disproportionate influence, corrupting politics, pulling income and wealth upwards rather than spreading it widely. In unequal societies, economic opportunity is “captured” by wealthy elites and denies poor people the chance to improve themselves and to flourish. Money doesn’t just buy a nice car or a television; it also buys better education and healthcare. Extreme inequality creates a political paralysis when urgent action is required.
That’s why it’s so important that Goal 10 of the Sustainable Development Goals seeks to tackle income inequality. While the inequality goal does not attempt to curb the ever-accelerating wealth of the richest elite, it is a significant step forward because we know that we simply cannot fight poverty without fighting inequality. Both the World Bank and the International Monetary Fund have also embraced reducing inequality as a core challenge.
Rather than treating income inequality as one among the many problems, extreme wealth and extreme poverty should be seen as two concurrent symptoms of one dysfunctional economic system. Governments must make the fight against extreme inequality central to their national SDGs strategies.
When it comes to the development sector’s effort, it is crucial that we understand the intersection of poverty and inequality, and proceed mindfully. Paying attention only to the outcomes at the bottom is purposely blind to the systemic constraints of achieving our goals. It’s technically possible to reduce poverty, even while inequality rises. But ending poverty in highly unequal economies is much harder. Inequality creates a riptide against development, constantly pulling against efforts to reduce poverty and create opportunity.
At a minimum, context analysis should increasingly include data and trends on economic inequality. Simply saying a country is experiencing high levels of growth is clearly not enough. Consider the case of Zambia, which has experienced comparatively high levels of growth – around 7 percent annually in recent years. But this growth has not translated into poverty reduction: More than 60 percent of the population lives in extreme poverty, other indicators are stagnating, and some, like children’s enrollment in primary education, are actually declining.
The case of Zambia is instructive because the sectoral composition of the growth was significant. Much of the growth has come from the mining sector, which is comparatively capital-intensive and centralized. While agriculture represents 85 percent of employment, it’s only 20 percent of the gross domestic product. Topline growth isn’t enough to deliver development and wide benefits. The composition and distribution matter.
“When it comes to the development sector’s effort, it is crucial that we understand the intersection of poverty and inequality, and proceed mindfully.”
For many years, the development sector has pushed for better health and education outcomes. In the long term, improved health and education are only sustainable and widely shared if supported with public resources. This means budgets, which means revenues. The ability of states to play an active role in the provision of quality health and education is critical – and depends on states’ ability to generate revenues.
But a thicket of difficult issues emerges. Elites and corporations resist taxation; government officials have poor incentives and oversight to collect revenue; and funds, once collected, are poorly managed and money disappears or is diverted to other uses.
Hidden wealth and uncovering our dream world
As much as $7.6 trillion of personal wealth is being hidden in offshore accounts. If tax would be paid on the income that this wealth generates, an extra $190 billion would be available to governments every year, to spend on roads, schools, hospitals. Tax dodging by multinational companies deprive the world’s poorest countries an estimated $100 billion in tax revenue every year.
Extreme inequality is not inevitable – it is the consequence of political choices. I know we all share a vision for a world where getting sick or losing a job does not create a crisis for a household, and where every child gets an education and a chance to fulfill her potential. Such a world could exist if corporations pay their fair share of taxes and work for the good of the majority, not just their shareholders. Where the planet is preserved and sustained for our children and their children’s children. That’s what the SDGs promise. It is not an impossible dream; it is in fact a practical possibility. But we cannot do it in our business-as-usual mode. And we cannot do it without tackling inequality. Each one of us, and maybe a couple of those 62, must join the global fight against inequality.
(Ray Offenheiser is president of Oxfam America).
