World’s Top 1% Obtained 82% of Wealth Generated in 2017

What a horrifying report this is on the status of global inequality. It’s easily one of the most disturbing reports on economic inequality ever released, as it shows that the world economic system has overall been structured to benefit the top 1 percent to an extreme degree.

In 2017, a new billionaire was created every two days and while 82 percent of all wealth created went to the top 1 percent of the world’s richest while zero percent—absolutely nothing—went to the poorest half of the global population.

That troubling information is included in Oxfam’s latest report on global inequality—titled Reward Work, Not Wealth (pdf)—released Monday. In addition to the above, the report details how skyrocketing wealth growth among the already rich coupled with stagnant wages and persistent poverty among the lowest economic rungs of society means that just 42 individuals now hold as much wealth as the 3.7 billion poorest people on the planet.

“The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system,” Winnie Byanyima, Oxfam’s executive director of Oxfam International. “The people who make our clothes, assemble our phones and grow our food are being exploited to ensure a steady supply of cheap goods, and swell the profits of corporations and billionaire investors.”

Among the report’s key findings:

  • Billionaire wealth has risen by an annual average of 13 percent since 2010 – six times faster than the wages of ordinary workers, which have risen by a yearly average of just 2 percent. The number of billionaires rose at an unprecedented rate of one every two days between March 2016 and March 2017.
  • It takes just four days for a CEO from one of the top five global fashion brands to earn what a Bangladeshi garment worker will earn in her lifetime. In the US, it takes slightly over one working day for a CEO to earn what an ordinary worker makes in a year.
  • It would cost $2.2 billion a year to increase the wages of all 2.5 million Vietnamese garment workers to a living wage. This is about a third of the amount paid out to wealthy shareholders by the top 5 companies in the garment sector in 2016.
  • Dangerous, poorly paid work for the many is supporting extreme wealth for the few. Women are in the worst work, and almost all the super-rich, nine out of ten, are men.

The report comes just as the world’s economic and political elite are set to open the World Economic Forum, held annually in Davos, Switzerland. And why the global elite argue the summit’s focus is addressing the world’s most pressing problems, Oxfam found that the amount of new wealth which went to the world’s top one percent in 2017 was roughly $762 billion—a figure large enough, the group points out, to end extreme global poverty seven times over.

What the report ultimately exposes, Mark Goldring, Oxfam GB chief executive, told the Guardian, is a “system that is failing the millions of hardworking people on poverty wages who make our clothes and grow our food.”

“For work to be a genuine route out of poverty we need to ensure that ordinary workers receive a living wage and can insist on decent conditions, and that women are not discriminated against,” he added. “If that means less for the already wealthy then that is a price that we—and they—should be willing to pay.”

Not just cataloging and lamenting the metrics of inequality, the new report also puts forth a number of policy solutions that should be embraced by people and governments worldwide to reduce levels of inequality and lift billions of people out of extreme poverty. They include:

  • Limit returns to shareholders and top executives, and ensure all workers receive a minimum ‘living’ wage that would enable them to have a decent quality of life. For example, in Nigeria, the legal minimum wage would need to be tripled to ensure decent living standards.
  • Eliminate the gender pay gap and protect the rights of women workers. At current rates of change, it will take 217 years to close the gap in pay and employment opportunities between women and men.
  • Ensure the wealthy pay their fair share of tax through higher taxes and a crackdown on tax avoidance, and increase spending on public services such as healthcare and education. Oxfam estimates a global tax of 1.5 percent on billionaires’ wealth could pay for every child to go to school.

Though Oxfam has been calculating global inequality on an annueal basis for more than a decade, the anti-poverty group notes that this year’s report used new data from Credit Suisse and a separate kind of model. Specifically, Oxfam noted, the fact that the world’s 42 richest billionaires have as much wealth as the poorest bottom half “cannot be compared to figures from previous years – including the 2016/17 statistic that eight men owned the same wealth as half the world – because it is based on an updated and expanded data set published by Credit Suisse in November 2017.  When Oxfam recalculated last year’s figures using the latest data we found that 61 people owned the same wealth as half the world in 2016 – and not eight.”

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Wrenching Back Power from the Corrupt Billionaire Class

A strikingly profound op-ed for the new year. Also, a basic point of economics that most economists don’t like to talk about is that reducing the rents high-income individuals receive is typically a gain for lower socioeconomic groups.

Here is where we are as a planet in 2018: after all of the wars, revolutions and international summits of the past 100 years, we live in a world where a tiny handful of incredibly wealthy individuals exercise disproportionate levels of control over the economic and political life of the global community.

Difficult as it is to comprehend, the fact is that the six richest people on Earth now own more wealth than the bottom half of the world’s population – 3.7 billion people. Further, the top 1% now have more money than the bottom 99%. Meanwhile, as the billionaires flaunt their opulence, nearly one in seven people struggle to survive on less than $1.25 (90p) a day and – horrifyingly – some 29,000 children die daily from entirely preventable causes such as diarrhoea, malaria and pneumonia.

At the same time, all over the world corrupt elites, oligarchs and anachronistic monarchies spend billions on the most absurd extravagances. The Sultan of Brunei owns some 500 Rolls-Royces and lives in one of the world’s largest palaces, a building with 1,788 rooms once valued at $350m. In the Middle East, which boasts five of the world’s 10 richest monarchs, young royals jet-set around the globe while the region suffers from the highest youth unemployment rate in the world, and at least 29 million children are living in poverty without access to decent housing, safe water or nutritious food. Moreover, while hundreds of millions of people live in abysmal conditions, the arms merchants of the world grow increasingly rich as governments spend trillions of dollars on weapons.

In the United States, Jeff Bezos – founder of Amazon, and currently the world’s wealthiest person – has a net worth of more than $100bn. He owns at least four mansions, together worth many tens of millions of dollars. As if that weren’t enough, he is spending $42m on the construction of a clock inside a mountain in Texas that will supposedly run for 10,000 years. But, in Amazon warehouses across the country, his employees often work long, gruelling hours and earn wages so low they rely on Medicaid, food stamps and public housing paid for by US taxpayers.

Not only that, but at a time of massive wealth and income inequality, people all over the world are losing their faith in democracy – government by the people, for the people and of the people. They increasingly recognise that the global economy has been rigged to reward those at the top at the expense of everyone else, and they are angry.

Millions of people are working longer hours for lower wages than they did 40 years ago, in both the United States and many other countries. They look on, feeling helpless in the face of a powerful few who buy elections, and a political and economic elite that grows wealthier, even as their own children’s future grows dimmer.

In the midst of all of this economic disparity, the world is witnessing an alarming rise in authoritarianism and rightwing extremism – which feeds off, exploits and amplifies the resentments of those left behind, and fans the flames of ethnic and racial hatred.

Now, more than ever, those of us who believe in democracy and progressive government must bring low-income and working people all over the world together behind an agenda that reflects their needs. Instead of hate and divisiveness, we must offer a message of hope and solidarity. We must develop an international movement that takes on the greed and ideology of the billionaire class and leads us to a world of economic, social and environmental justice. Will this be an easy struggle? Certainly not. But it is a fight that we cannot avoid. The stakes are just too high.

As Pope Francis correctly noted in a speech at the Vatican in 2013: “We have created new idols. The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking any truly humane goal.” He continued: “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalised: without work, without possibilities, without any means of escape.”

A new and international progressive movement must commit itself to tackling structural inequality both between and within nations. Such a movement must overcome “the cult of money” and “survival of the fittest” mentalities that the pope warned against. It must support national and international policies aimed at raising standards of living for poor and working-class people – from full employment and a living wage to universal higher education, healthcare and fair trade agreements. In addition, we must rein in corporate power and prevent the environmental destruction of our planet as a result of climate change.

Here is just one example of what we have to do. Just a few years ago, the Tax Justice Network estimated that the wealthiest people and largest corporations throughout the world have been stashing at least $21tn-$32tn in offshore tax havens in order to avoid paying their fair share of taxes. If we work together to eliminate offshore tax abuse, the new revenue that would be generated could put an end to global hunger, create hundreds of millions of new jobs, and substantially reduce extreme income and wealth inequality. It could be used to move us aggressively toward sustainable agriculture and to accelerate the transformation of our energy system away from fossil fuels and towards renewable sources of power.

Taking on the greed of Wall Street, the power of gigantic multinational corporations and the influence of the global billionaire class is not only the moral thing to do – it is a strategic geopolitical imperative. Research by the United Nations development programme has shown that citizens’ perceptions of inequality, corruption and exclusion are among the most consistent predictors of whether communities will support rightwing extremism and violent groups. When people feel that the cards are stacked against them and see no way forward for legitimate recourse, they are more likely to turn to damaging solutions that only exacerbate the problem.

This is a pivotal moment in world history. With the explosion in advanced technology and the breakthroughs this has brought, we now have the capability to substantially increase global wealth fairly. The means are at our disposal to eliminate poverty, increase life expectancy and create an inexpensive and non-polluting global energy system.

This is what we can do if we have the courage to stand together and take on the powerful special interests who simply want more and more for themselves. This is what we must do for the sake of our children, grandchildren and the future of our planet.

CEO-Worker Income Discrepancy is the Worst in the U.S.

When the massive upwards redistribution of income to the top 1% over the last four decades is mentioned, CEO pay should be noted as one of the prime causes of it. Essentially, CEOs have been taking an exorbitant amount of the income share of many workers and shifting it into their own pockets.

As corporations and wealthy individuals across the United States are slated to benefit from massive tax breaks thanks to the GOP’s latest tax legislation, a Bloomberg analysis published Thursday found that chief executives of American companies already make 265 times the amount of money an average worker is paid—the largest CEO-worker income gap in the world.

“CEOs of the biggest publicly traded U.S. companies averaged $14.3 million in annual pay, more than double that of their Canadian counterparts and 10 times greater than those in India,” according to Bloomberg. While India ranked second on Bloomberg‘s CEO pay-to-average income ratio, Indian chief executives made about a tenth of their American counterparts’ incomes, averaging $1.46 million annually.

[…]

Last year’s CEO-to-worker compensation ratio, calculated by the Economic Policy Institute (EPI), was 271-to-1, with the chief executives of American companies seeing an average of $15.6 million in annual compensation. The EPI report, which was published in July, notes that “regardless of how it’s measured, CEO pay continues to be very, very high and has grown far faster in recent decades than typical worker pay,” and “exorbitant CEO pay means that the fruits of economic growth are not going to ordinary workers.”

EPI president Lawrence Mischel and research assistant Jessica Schieder found that CEO compensation rose “by 807 or 937 percent (depending on how it is measured—using stock options granted or stock options realized, respectively) from 1978 to 2016.” They argue that “exorbitant CEO compensation…has fueled the growth of the top 1 percent incomes” at the expense of “the vast majority of workers.”

“Simply put, money that goes to the executive class is money that does not go to other people. Rising executive pay is not connected to overall growth in the economic pie,” Mishel explained, as Common Dreams previously reported. “We could curtail the explosive growth in CEO pay without doing any harm to the economy.”

In response to their findings in July, Mishel and Schieder proposed the following policy solutions:

  • Reinstate higher marginal income tax rates at the very top.
  • Remove the tax break for executive performance pay.
  • Set corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation.
  • Allow greater use of “say on pay,” which allows a firm’s shareholders to vote on top executives’ compensation.

World’s Richest Become $1 Trillion Richer in 2017

The richest 500 people would still have enormous amounts of money if they together hadn’t gained $1 trillion, of course. There’s plenty that could be done to improve the lives of many millions of people with that $1 trillion too, and it’s disappointing how much of it continues to sit idle when it could be invested productively instead.

The richest people on earth became $1 trillion richer in 2017, more than four times last year’s gain, as stock markets shrugged off economic, social and political divisions to reach record highs.

The 23 percent increase on the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people, compares with an almost 20 percent increase for both the MSCI World Index and Standard & Poor’s 500 Index.
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It should also be noted that the stock market measures the expected value of future corporate profits, not economic well-being for most people. The stock market is an accurate indication of how well the top 1 percent are doing, however, as they’re the people who stock ownership tends to be concentrated in.

UN Investigated Extreme Poverty in World History’s Richest Country

The poverty rates in the U.S. are absolutely shameful. Significant poverty in a wealthy country means that the wealth is being distributed improperly.

His fact-finding mission into the richest nation the world has ever known has led him to investigate the tragedy at its core: the 41 million people who officially live in poverty.

Of those, nine million have zero cash income – they do not receive a cent in sustenance.

Alston’s epic journey has taken him from coast to coast, deprivation to deprivation. Starting in LA and San Francisco, sweeping through the Deep South, traveling on to the colonial stain of Puerto Rico then back to the stricken coal country of West Virginia, he has explored the collateral damage of America’s reliance on private enterprise to the exclusion of public help.

The Guardian had unprecedented access to the UN envoy, following him as he crossed the country, attending all his main stops and witnessing the extreme poverty he is investigating firsthand.

Think of it as payback time. As the UN special rapporteur himself put it: “Washington is very keen for me to point out the poverty and human rights failings in other countries. This time I’m in the US.”

[…]

The tour comes at a critical moment for America and the world. It began on the day that Republicans in the US Senate voted for sweeping tax cuts that will deliver a bonanza for the super wealthy while in time raising taxes on many lower-income families. The changes will exacerbate wealth inequality that is already the most extreme in any industrialized nation, with three men – Bill Gates, Jeff Bezos and Warren Buffet – owning as much as half of the entire American people.

A few days into the UN visit, Republican leaders took a giant leap further. They announced plans to slash key social programs in what amounts to an assault on the already threadbare welfare state.

[…]

Trump’s undermining of human rights, combined with the Republican threat to pare back welfare programs next year in order to pay for some of the tax cuts for the rich they are rushing through Congress, will hurt African Americans disproportionately.

Black people are 13% of the US population, but 23% of those officially in poverty and 39% of the homeless.

 

Worst U.S. Economic Legislation in Decades Set to Pass

The Republican tax scam will go down in history as an utter atrocity. The interests of the general public are betrayed in favor of giant corporations and the super rich. Since the scam only has to pass the Senate now, U.S. citizens should call their senators at (202) 224-3121 and tell them to vote no.

The analysis by American for Tax Fairness (ATF)—a coalition of more than 425 groups that advocate for progressive tax reform—found that the Republicans’ plan would give more than 80 percent of tax cuts to the nation’s richest one percent while also—among other things—raising taxes on 92 million middle-class families; increasing healthcare premiums; encourage outsourcing of U.S.-based jobs; and limiting deductions for state and local taxes.

ATF’s analysis warns that the GOP’s proposed legislation:

  1. Gives 83% of the tax cuts to the richest 1% by 2027. The richest 1% of taxpayers will get one-fifth (21%) of the tax cuts in 2018, but that grows to 83% by 2027. Their tax cut will average $51,000 in 2018; the bottom 60% of taxpayers will get about a dollar day. [Tax Policy Center (TPC)]
  2. Raises taxes on 92 million middle-class families by 2027 to pay for tax breaks for the wealthy and corporations. That is more than one-half (57%) of all households making less than $200,000 a year. 69 million households making less than $100,000 a year would also pay more in taxes after the temporary tax cuts for individuals expire. [TPC]
  3. Mandates automatic Medicare cuts of at least $25 billion in 2018 and $400 billion over 10 yearsIn effect, seniors will pay for tax breaks for corporations and the wealthy as automatic spending cuts are triggered because the tax cuts add $1.5 trillion to the national debt. Automatic cuts altogether will total $136 billion in 2018 and include reductions in agriculture subsidies, student loans, military retirement and more. [Congressional Budget Office (CBO)]
  4. Increases health care premiums and leaves 13 million families without health coverage, to raise revenue for tax breaks that mostly benefit the wealthy and corporations.
  • The plan repeals a key part of the Affordable Care Act: the requirement for individuals to have health coverage if they can afford it. That makes $314 billionavailable for tax cuts. [Joint Committee on Taxation (JCT)]
  • This will lead to 13 million more people being uninsured and cause a 10% increase in health insurance premiums for people getting insured on the individual market. [CBO]
  1. Provides a corporate tax rate cut of $1.4 trillion and makes those cuts permanent, but makes tax cuts for individuals and families temporary. [JCT]
  • The corporate tax rate is slashed from 35% to 21%, and the corporate Alternative Minimum Tax (AMT) is eliminated.
  • The $1.4 trillion corporate-tax-rate cut is nearly equal to the $1.5 trillion by which the whole tax plan increases the national debt, and to the $1.5 trillion cut the Republican budget makes to Medicare ($473 billion) and Medicaid ($1 trillion). [Center on Budget and Policy Priorities (CBPP)]
  • Tax cuts that benefit working families will expire after 2025. However, one individual tax cut made permanent changes the way tax brackets are adjusted for inflation, resulting in growing tax increases over time. [CBPP]
  1. Adds $1.5 to $2.2 trillion to the national debt, jeopardizing critical services. The plan includes at least $1.5 trillion in tax cuts that are not paid for, such as by closing loopholes used by the wealthy and corporations. [JCT] Because the bill contains several budget gimmicks that obscure the true cost of the tax cuts, the cost could be as much as $2.2 trillion. [CBPP] This will balloon the national debt and further endanger funding for Social Security, Medicare, Medicaid, public education and more.
  2. Prioritizes the wealthiest taxpayers over working families with children. The plan lowers the top individual tax rate from 39.6% to 37%, giving more tax cuts to the richest 518,000 households. The GOP chose not to fully adjust changes in the Child Tax Credit so that some 24 million children in working families could fully benefit. Both of these changes would cost roughly the same amount, about $80 billion over 10 years. [Institute on Taxation and Economic Policy (ITEP), CBPP]
  3. Prioritizes wealthy business owners and real estate developers like Donald Trump. They get a net $265 billion tax cut from a new 20% deduction for “pass-through” business income combined with a tightening of rules on losses. Applied to the new 37% top individual tax rate, this 20% deduction on business income will drop the top pass-through business tax rate from 39.6% to 29.6%. More than 80% of this tax cut will go to the top 5% in 2019. Trump owns more than 500 pass-throughs. Pass-through owners—which include sole proprietorships, partnerships, LLC’s and S corporations—pay taxes due on their business income on their personal returns at individual rates. [JCT, ITEP]
  4. Kills American jobs by encouraging outsourcing and profit shifting. The plan creates a territorial tax system, which exempts foreign profits from U.S. taxes. While the plan will tax some of those offshore profits, the effective tax rate will be far below the U.S. rate. U.S. multinationals will have even more tax incentives to outsource more jobs and shift more profits offshore.
  5. Hands a $400 billion tax cut to offshore tax dodgers. American corporations have $2.6 trillion in profits stashed offshore on which they owe $750 billion in U.S. taxes. Rather than make them pay what they owe, like all the rest of us do, the tax plan will charge them only $339 billion—over a $400 billion discount. Apple will save $44 billion and Microsoft $25 billion, based on their Securities and Exchange Commission tax filings. [ITEP]
  6. Limits the federal deduction for state and local taxes (SALT), hurting the middle class. The bill caps at $10,000 the amount of state and local property and income or sales taxes that can be deducted from federal taxable income. This is one of the reasons that nearly 8 million families will see tax increases in 2018. The impact of this change will be felt especially in the 20 states that claim an average SALT deduction of more than $10,000. Limiting SALT will put pressure on state and local budgets, likely forcing cuts to education, health care, and infrastructure. [TPC, CBPP]
  7. Lets many wealthy heirs avoid paying the estate tax. The estate tax is substantially weakened, losing $83 billion and allowing very rich families to inherit wealth tax-free. Under current law, the tax only applies to estates worth over $5.5 million per person or $11 million per couple—about 5,500 estates. Under the bill, only estates worth at least $11 million per person or $22 million per couple (about 1,800 estates) would pay the tax. [JCT, TPC, CBPP]
  8. Enriches President Trump and his family. In addition to cutting the top individual income tax rate and creating a tax break for income from pass-through business entities (of which Trump owns 500), the bill preserves the many existing tax loopholes for real estate investors and even creates a new one. The final bill exempts real estate owners from a provision meant to limit abuse of the new pass-through income deduction. [ITEP]

Study: Huge Inequality Tied to Historical Revolution

The destabilizing force of extreme inequality will prompt a major backlash naturally enough. It would probably be better if a revolution was peaceful, but predicting the future is difficult enough, and a near future revolution may actually be violent.

There’s a common thread tying together the most disruptive revolutions of human history, and it has some scientists worried about the United States. In those revolutions, conflict largely boiled down to pervasive economic inequality. On Wednesday, a study in Nature, showing how and when those first divisions between rich and poor began, suggests not only that history has always repeated itself but also that it’s bound to do so again — and perhaps sooner than we think.

In the largest study of its kind, a team of scientists from Washington State University and 13 other institutions examined the factors leading to economic inequality throughout all of human history and noticed some worrying trends. Using a well-established score of inequality called the Gini coefficient, which gives perfect, egalitarian societies a score of 0 and high-inequality societies a 1, they showed that civilization tends to move toward inequality as some people gain the means to make others relatively poor — and employ it. Coupled with what researchers already know about inequality leading to social instability, the study does not bode well for the state of the world today.

“We could be concerned in the United States, that if Ginis get too high, we could be inviting revolution, or we could be inviting state collapse. There’s only a few things that are going to decrease our Ginis dramatically,” said Tim Kohler, Ph.D., the study’s lead author and a professor of archaeology and evolutionary anthropology in a statement.

Currently, the United States Gini score is around .81, one of the highest in the world, according to the 2016 Allianz Global Wealth Report.

[…]

Overall, they found that human societies started off fairly equal, with the hunter-gatherer societies consistently getting Gini scores around .17. The divide between rich and poor really began once humans started to domesticate plants and animals and switch to farming-based societies. Learning to till the land meant introducing the concept of land ownership, and inevitably, some people ended up as landless peasants. Furthermore, because these societies no longer lived as nomads, it became easier to accumulate wealth (like land) and pass it down from generation to generation.

[…]

Overall, the highest-ever historical Gini the researchers found was that of the ancient Old World (think Patrician Rome), which got a score of .59. While the degrees of inequality experienced by historical societies are quite high, the researchers note, they’re nowhere near as high as the Gini scores we’re seeing now.

“Even given the possibility that the Ginis constructed here may somewhat underestimate true household wealth disparities, it is safe to say that the degree of wealth inequality experienced by many households today is considerably higher than has been the norm over the last ten millennia,” the researchers write in their paper.

On Monday, a global report from Credit Suisse showed that modern humans are continuing the trends set by our predecessors: Now, the report showed, half of the world’s wealth really does belong to a super-rich one percent, and the gap is only growing. Historically, Kohler says in his statement, there’s only so much inequality a society can sustain before it reaches a tipping point. Among the many known effects of inequality on a society are social unrest, a decrease in health, increased violence, and decreased solidarity. Unfortunately, Kohler points out, humans have never been especially good at decreasing inequality peacefully — historically, the only effective methods for doing so are plague, massive warfare, or revolution.