17.01.2023 |

Richest 1% have captured almost two-thirds of all new wealth since 2020

Poverty and wealth are often found side by side (Photo: CC0)

Poverty has increased for the first time in 25 years and, at the same time, the richest have become dramatically richer since the pandemic began. Since 2020, the richest 1% have captured almost two-thirds of all new wealth – nearly twice as much money as the bottom 99% of the world’s population. Food and energy companies more than doubled their profits in 2022 while over 800 million people went to bed hungry. These are just some of the sad messages of a new policy paper published by development organization Oxfam on January 16th, the opening day of the World Economic Forum in Davos, Switzerland, where elites are gathering for their annual meeting in the Swiss ski resort. “Survival of the Richest” shows that billionaire fortunes are increasing by $2.7 billion a day while at least 1.7 billion workers now live in countries where inflation is outpacing wages. “While ordinary people are making daily sacrifices on essentials like food, the super-rich have outdone even their wildest dreams,” said Gabriela Bucher, Executive Director of Oxfam International. “Just two years in, this decade is shaping up to be the best yet for billionaires – a roaring ‘20s boom for the world’s richest.”

The report focuses on how taxing the rich could address the current multiple crises and skyrocketing inequality. Oxfam’s calculations are based on the most up-to-date and comprehensive data sources available. Figures on the richest people of the world are from Forbes’ World’s Billionaires List 2022, while wealth data comes from Credit Suisse’s Global Wealth Report 2022 and other sources such as the World Bank. The report shows that during the pandemic and cost-of-living crisis years since 2020, billionaires have seen their wealth increase extraordinarily. Almost $42 trillion of new wealth was created between December 2019 and December 2021. $26 trillion or 63 % was bagged by the richest 1 %, while $16 trillion or 37 % went to the bottom 99 %. This comes on top of a decade of historic gains: The number and wealth of billionaires doubled over the last decade. Between 2012 and 2021, new wealth worth 127.5 trillion was created. The top 1% captured 69 trillions of this wealth or 54% which shows that their share has increasing rapidly since the pandemic began. A comparison of Forbes’ Billionaires Lists of 2020 and 2022, with all figures adjusted to October 2022 prices using the US Consumer Price Index to account for inflation and make the numbers comparable, shows that billionaires’ wealth increased by $2.63 trillion in real terms. There are 987 days between the dates of the two lists, so the wealth of billionaires grew by $2.7 billion a day.

Supply-chain bottlenecks caused by the pandemic and the war in Ukraine, corporate behaviour, and climate change have pushed food and energy prices to an all-time high, with food prices expected to be 18% higher in 2022 than in 2021, and those for energy 59% higher. This was another blow to the world’s poorest people but the wealth of billionaires and corporations surged in 2022 with rapidly rising food and energy profits. According to the policy paper, 95 food and energy corporations have more than doubled their profits in 2022. They made $306 billion in windfall profits (defined as 10% above their 2018–2021 average net profit) and paid out $257 billion to rich shareholders. Soaring profits of companies bring fortunes for the richest since share ownership is skewed towards higher-income groups. In the US, for example, the richest 1% own 53% of shares. The Walton dynasty, which owns half of the US retailer Walmart, received $8.5 billion in dividends and buybacks over the last year. Indian billionaire Gautam Adani, owner of major energy corporations, has seen his wealth soar by 46% in 2022 to $136.2 billion at the end of October 2022. At the same time, at least 1.7 billion workers now live in countries where inflation is outpacing wages. In the US, the UK and Australia, studies have found that 54 %, 59 % and 60 % of inflation, respectively, was driven by increased corporate profits. The World Bank is speaking of the largest increase in global inequality and the largest setback in global poverty since the Second World War and announced that the world has almost certainly lost its goal of ending extreme poverty by 2030. The same applies to the hunger goal: Over 820 million people – roughly one in ten people – are currently undernourished.

Oxfam therefore calls for a systemic increase in taxation of the super-rich to claw back crisis gains driven by public money and profiteering. It says decades of tax cuts for the richest and corporations have fueled inequality, with the poorest in many countries paying higher tax rates than billionaires. Elon Musk, one of the world’s richest men, paid a “true tax rate” of about 3 % between 2014 and 2018. Oxfam compared this to a flour vendor in Uganda who makes $80 a month and pays market fees collected by the local government that amount to 40% of her profits. The report argues that in recent history, taxation of the richest was far higher. Over the last forty years, governments worldwide have slashed the income tax rates on the richest. “At the same time, they have upped taxes on goods and services, which fall disproportionately on the poorest people and exacerbate gender inequality,” the authors write. In the years after WW2, the top US federal income tax rate remained above 90 % and averaged 81 % between 1944 and 1981. Similar levels of tax in other rich countries existed during some of the most successful years of their economic development and helped to expand public services like education and healthcare. Currently, only four cents in every global tax dollar now comes from taxes on wealth. Half of the world’s billionaires live in countries with no inheritance tax for direct descendants. Rich people’s income is mostly unearned, derived from returns on their assets, yet it is taxed on average at 18 %, just over half as much as the average top tax rate on wages and salaries. “Taxing the super-rich and big corporations is the door out of today’s overlapping crises,” says Gabriela Bucher. “It’s time we demolish the convenient myth that tax cuts for the richest result in their wealth somehow ‘trickling down’ to everyone else. Forty years of tax cuts for the super-rich have shown that a rising tide doesn’t lift all ships – just the superyachts.”

Oxfam is calling on governments to introduce one-off solidarity wealth taxes and windfall taxes to end crisis profiteering. In addition, governments must permanently increase taxes on the richest 1 percent, for example to at least 60 % of their income from labor and capital, with higher rates for multi-millionaires and billionaires. Oxfam says governments must especially raise taxes on capital gains, which are subject to lower tax rates than other forms of income. Moreover, the wealth and resources of the richest 1 % needs to be redistributed by implementing inheritance, property and land taxes, as well as net wealth taxes. According to new analysis by the Fight Inequality Alliance, Institute for Policy Studies, Oxfam and the Patriotic Millionaires, an annual wealth tax of up to 5 % on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year, enough to lift 2 billion people out of poverty, fully fund the shortfalls on existing humanitarian appeals, deliver a 10-year plan to end hunger, support poorer countries being ravaged by climate impacts, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries. “Taxing the super-rich is the strategic precondition to reducing inequality and resuscitating democracy,” explains Bucher. “We need to do this for innovation. For stronger public services. For happier and healthier societies. And to tackle the climate crisis, by investing in the solutions that counter the insane emissions of the very richest.” (ab)

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