Oxfam has just released a hard-hitting report, Survival of the Richest, which sheds light on global – and UK – trends in wealth distribution. As the richest continue to get even richer, a growing proportion of the population are now getting poorer year-on-year.
These trends pose a threat to our economies, our societies and our democracies which we cannot afford not to tackle:
- We are witnessing simultaneous growth in extreme wealth and extreme poverty;
- As well as needless suffering, this threatens democracy;
- To fix it, we need genuinely progressive taxation.
Simultaneous growth in extreme wealth and extreme poverty
Oxfam’s report shows that the super-rich have seen extraordinary gains in the last two years - for every $1 of new global wealth earned by a person in the bottom 90%, each billionaire gained roughly $1.7 million (£1.4 million).
The report highlights how, “In the two years up to December 2021, the richest 1% grabbed almost two-thirds (63%) of the $42 trillion (£34 trillion) of new wealth created.” In other words, the remaining 99% of the population received only around 33%. (In a completely equal world, of course, the 99% would have had a 99% share in the wealth created.)
In the UK, this has resulted in a situation where the wealthiest 1% own more wealth than the bottom 70% of the population and the wealth of the very rich is almost beyond comprehension.
Politicians have promised for years that extreme wealth would be good for everyone: in Anglo-Saxon countries, this was known as the ‘trickle-down theory’. But the opposite has happened: wealth concentration has been at the expense of the rest of the population. Oxfam found that 95 food and energy corporations more than doubled their profits in 2022. They made $306 billion (£251 billion) in windfall profits, and paid out 84% - $257 billion (£211 billion) - of that to shareholders. Oxfam’s research found that excess corporate profits have driven at least half of inflation in Australia, the US and the UK.
And in some poorer countries the impact has been even worse: people living in extreme poverty are more affected by the increase in food prices because they spend about two-thirds of their resources on food. Additionally, the rise in food prices has hit several low-income countries harder than the world average, for example with food price inflation in Ethiopia at 44% compared to the global average of 9%.
Globally, at least 1.7 billion workers live in countries where inflation is now outpacing wages, and over 820 million people – roughly one in ten people on Earth – are going hungry.
The extremes of wealth, in other words, are not a positive thing for society, or even a private matter of no concern to anyone but the owners of that wealth - they are a source of poverty and suffering, even in a growing economy. This is mass impoverishment in action.
As Danny Sriskandarajah, Oxfam GB chief executive said: “The current economic reality is an affront to basic human values. Extreme poverty is increasing for the first time in 25 years and close to a billion people are going hungry – but for billionaires, every day is a bonanza.”
As well as needless suffering, this threatens democracy
Making these huge amounts of money is about playing a game: the game of capitalism. Like any game, of course, ability to play the game depends on skill and effort. Unlike most other games, ability to play the game of capitalism is also heavily determined by the social circles you move in (“it’s not what you know, it’s who you know”) and by the amount of money you have available as you start the game.
It is also strongly influenced by whether or not you are in a position to rewrite the rules of the game in your own favour. These dynamics are summarised in the diagram below:
Making money from business investments requires a) that you are aware of an investment opportunity and have access to the individuals who control it; b) that you have capital to invest and c) that you either have the skill to manage the investment yourself or can buy these skills in. Starting with a large amount of capital is a big advantage in playing this game. It helps you with all three requirements.
The top part of the diagram illustrates these dynamics and shows that there are two critical self-reinforcing chains of cause and effect. These dynamics – although they are self-reinforcing and tend to lead to the phenomenon of the rich getting richer faster than the poor can hope to – do not pose a direct threat to democracy. The bottom part of the diagram is less obvious and is where the challenges to democracy arise.
There are four key levers of power which are easier to pull if you are extremely rich:
- Access to elite education; which gives
- Access to social circles of the rich and powerful;
- Access to policymakers and politicians;
- Ownership of major media outlets.
Mixing in the social circles of the rich and powerful gives access to politicians and policymakers and enables one – especially, as the 99% Organisation points out, if one is also a major political donor – to have a direct influence on policy drafting as well as on the way that legislators will vote on draft bills which are presented to the house.
With extreme wealth comes the option to own major media outlets, which strengthens access to politicians and policymakers and also gives the owner control of the dominant narrative in society and therefore the ability to influence the votes of millions.
The media empire of Rupert Murdoch, for example, has included the UK newspapers The Sun, The News of the World, The Times and The Sunday Times as well as a large shareholding in BSkyB. In the United States, among others, he controlled The New York Post, 20th Century Fox (including Fox News), DirecTV, Intermix Media, and Dow Jones which owns The Wall Street Journal, Barron’s Magazine and SmartMoney.
These media outlets have not been shy of trying to influence political outcomes. On Saturday 11 April 1992, The Sun famously claimed to have determined the result of the then recent general election in the United Kingdom.
All this enables the wealthiest individuals to shape policy in their own interests, for example by encouraging the government to issue contracts on highly favourable terms, to sell public assets at below intrinsic value, to create tax breaks and perpetuate loopholes, and to reduce regulation.
It allows them to undermine democracy. And they do.
To fix it, we need progressive taxation
Many countries claim to have progressive tax systems already. The UK for example says its system is progressive, and that claim is widely accepted. But it is an example of the fallacy of composition: while it is true that many elements of the UK tax system are progressive, the system as a whole is deeply regressive.
Our income tax rates are progressive: the more earned income you have the higher the rate of tax you pay. That is fair enough. But the overall system means that the very wealthy pay far lower rates of tax on their total economic income than the rest of us.
The 99% Organisation analysed the latest UK Budget and showed that while a single parent earning £30,000 would pay around 13% of economic income in tax and a professional earning £100,000 would pay around 38%, a billionaire might pay as little as 3% - or even less if they do not realise so much of their capital gains.
A growing number of the wealthy are themselves now calling for action on tax to address this unfairness: Ian Gregg, former managing director of Greggs and the son of its founder, is a supporter of Patriotic Millionaires UK and Tax Justice UK, who are campaigning for a wealth tax in the UK.
Gregg says: “I can never be happy with an economy that fosters such division in society for our children and grandchildren. Now, more than ever, the wealthiest must contribute more. For me, paying more tax would be a small price to pay to start the process of making society fairer, and reducing inequalities in both wealth and opportunity.”
If these issues concern you, take a look at the 99% Organisation and join us.
Mark E Thomas is the founder of 99% and author of 99%: Mass Impoverishment and How We Can End It. He has spent most of his career in business; for many years he ran the Strategy practice at PA Consulting Group. He is a Visiting Professor at IE Business School and has a degree in Mathematics from Cambridge University.