'Opportunity capture' in a world of extreme inequality

In focusing on the dangers of growing global wealth inequality, a recent Oxfam report has warned that when 'wealth captures government policymaking, the rules bend to favour the rich, often to the detriment of everyone else'.

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EXTREME economic inequality is damaging and worrying for many reasons: it is morally questionable; it can have negative impacts on economic growth and poverty reduction; and it can multiply social problems. It compounds other inequalities, such as those between women and men.

In many countries, extreme economic inequality is worrying because of the pernicious impact that wealth concentrations can have on equal political representation. When wealth captures government policymaking, the rules bend to favour the rich, often to the detriment of everyone else. The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all. Unless bold political solutions are instituted to curb the influence of wealth on politics, governments will work for the interests of the rich, while economic and political inequalities continue to rise. As US Supreme Court Justice Louis Brandeis famously said, 'We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.'

Oxfam is concerned that, left unchecked, the effects are potentially immutable, and will lead to 'opportunity capture' - in which the lowest tax rates, the best education, and the best healthcare are claimed by the children of the rich. This creates dynamic and mutually reinforcing cycles of advantage that are transmitted across generations.

Given the scale of rising wealth concentrations, opportunity capture and unequal political representation are a serious and worrying trend. For instance:

 Almost half of the world's wealth is now owned by just 1% of the population.

 The wealth of the 1% richest people in the world amounts to $110 trillion. That's 65 times the total wealth of the bottom half of the world's population.

 The bottom half of the world's population owns the same as the richest 85 people in the world.

 Seven out of 10 people live in countries where economic inequality has increased in the last 30 years.

 The richest 1% increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.

 In the US, the wealthiest 1% captured 95% of post-financial crisis growth since 2009, while the bottom 90% became poorer.

This massive concentration of economic resources in the hands of fewer people presents a significant threat to inclusive political and economic systems. Instead of moving forward together, people are increasingly separated by economic and political power, inevitably heightening social tensions and increasing the risk of societal breakdown.

Oxfam's polling from across the world captures the belief of many that laws and regulations are now designed to benefit the rich. A survey in six countries (Spain, Brazil, India, South Africa, the UK and the US) showed that a majority of people believe that laws are skewed in favour of the rich - in Spain eight out of 10 people agreed with this statement. Another recent Oxfam poll of low-wage earners in the US reveals that 65% believe that Congress passes laws that predominantly benefit the wealthy.

Dangerous trend

The impact of political capture is striking. Rich and poor countries alike are affected. Financial deregulation, skewed tax systems and rules facilitating evasion, austerity economics, policies that disproportionately harm women, and captured oil and mineral revenues are all examples of the results of such capture. Political capture produces ill-gotten wealth, which perpetuates economic inequality.

This dangerous trend can be reversed. The good news is that there are clear examples of success, both historical and current. The US and Europe in the three decades after World War II reduced inequality while growing prosperous. Latin America has significantly reduced inequality in the last decade - through more progressive taxation, public services, social protection and decent work. Central to this progress has been popular politics that represent the majority, instead of being captured by a tiny minority. This has benefited all, both rich and poor.                               

The above is extracted from the Summary of the Oxfam briefing paper 'Working for the few: Political capture and economic inequality' (Oxfam, 2014, www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-summ-en.pdf). It is reprinted with the permission of Oxfam GB, Oxfam House, John Smith Drive, Cowley, Oxford OX4 2JY, UK (www.oxfam.org.uk). Oxfam GB does not necessarily endorse any text or activities that accompany this material, nor has it approved the adapted text. Oxfam is a confederation of 17 like-minded organisations working together to find lasting solutions to poverty and injustice.

The shocking state of US inequality Paul Buchheit directs attention to the extremes of wealth concentration in the US in an increasingly unequal world. INEQUALITY is a cancer on society, here in the US and across the globe. It keeps growing. But humanity seems helpless against it, as if it's an alien force that no one understands, even as the life is being gradually drained from its victims. The recent Oxfam report on global wealth inequality reveals some of the ugly extremes that have divided our world. It also directs our attention to the Global Wealth Report compiled by Credit Suisse, and the companion Databook, which offer a shocking testament to the severity of US and global inequality. 1. The 30 richest Americans own as much as half of the US population The Oxfam report tells us that 85 individuals own as much as half the world. The US is the biggest reason for that, with 5% of the world's population and 30% of the wealth. China, India, and Africa, on the other hand, combine for about half the world's population and just 12% of the wealth. In the US, the richest 30 individuals own about $792 billion, while the bottom half of Americans own 1.1% of our country's wealth, also about $792 billion. That's 30 people owning as much as 157,000,000 people. This information is derived from the Global Wealth Databook and the Forbes 400 List. More details are provided at the Us Against Greed website. 2. The bottom half of America owns a smaller percentage of national wealth than almost all other countries and continents The 1.1% of America's wealth owned by the poorest half is less than that owned by the poorest halves of Asia (1.3% of the region's wealth), Africa (2.1%), Latin America (3.2%), India (4.5%), the United Kingdom (7.6%), and China (9.6%). It goes beyond the poorest half. The upper-middle class of America (roughly $50,000 to $200,000 in wealth) own a smaller percentage of wealth than the corresponding upper-middle classes of China and India. Of course, America's lower and middle classes have more money in absolute terms than corresponding classes in China and India. But that leads to the next topic. 3. Less mobility: North America's bottom half has less chance to move up than in any other region of the world Conservatives argue that individuals should be able to improve their economic positions with personal initiative and hard work. But economic mobility is lower in the US than in most developed countries. And lower than in many undeveloped countries. The results of a Credit Suisse wealth mobility simulation are given in the Global Wealth Databook: 'North America is...less mobile than other regions, especially over longer time horizons. Europe is next in line, followed by the middle group of Asia-Pacific, Latin America and Africa. The most mobile regions are China and India.' 4. America's middle class is further from the top than in all other developed countries As noted above, it's not just the bottom half being battered by inequality - it's most of the rest of us. The US median wealth of $44,911 is only 15% of the $301,140 mean wealth (which is greatly skewed by the wealth of the richest 10%). That ratio is less than that of any other of the 27 developed countries listed by Credit Suisse, and much less than the average OECD ratio of 35%. For the world as a whole, the median is only 8% of the mean, reflecting the fact that half the world's adults average less than $500 in wealth. The greatest shock: how little is needed to restore some sanity Extreme inequality means that people without homes are freezing to death in America. On a winter day in 2012over 633,000 people were homeless in the United States. Based on an annual single room occupancy (SRO) cost of $558 per month, a little over $4 billion would provide shelter for every homeless person for the entire year. The stock market grew by $4.7 trillion in 2013. A wealth tax of just one-tenth of 1% (one dollar out of every thousand) would have provided the $4 billion needed to shelter every homeless American for 365 days. But we have no wealth tax. And the wealth just keeps growing for the wealthiest Americans.              Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (UsAgainstGreed.org, RappingHistory.org, PayUpNow.org), and the editor and main author of American Wars: Illusions and Realities (Clarity Press). The above article is reproduced from the NationofChange.org website.

*Third World Resurgence No. 281/282, January/February 2014, pp 10-11