Davos, Inequality and Covid: Oxfam on Beating back the Billionaire Variant

January 18, 2022

     By Duncan Green     

It’s Davos time again, and here’s Oxfam’s Anthony Kamande introducing its latest blockbuster report.

In the informal settlement area of Kawangware in Nairobi, my good friend Joe is quarantining in his small room after contracting COVID-19, for the second time now. He is a nurse in one of the private hospitals in the city. The contact-intensive nature of his job means that he cannot work from home. But for now the virus he has contracted is not such a big deal for him. He’s more concerned about his financial situation, which has deteriorated severely since the pandemic hit, in part due to rising costs of essential services. What infuriates him even more, he says, is the stories he hears from the media of the companies’ mouth-watering profits, including the private hospital chain where he works. He is deeply frustrated that companies are making a killing as their workers become poorer by day. But he’s thankful he has still got a job. Hundreds of thousands of Kenyans were rendered jobless by the pandemic.

Billionaires making billions as billions become poorer

Joe’s situation, and the wider economic impacts here in Kenya, are also a snapshot of what has been happening in much of the world.  This year I have been working closely with the rest of my Oxfam colleagues on looking at how inequality has increased, and in particular how the fortunes of the very rich have evolved, and it is truly shocking.  This blog lays out some of the more dramatic findings.

The past two years of the pandemic are the best ever for the world’s billionaires. They have seen their fortunes skyrocket; the graph of their wealth resembles the graphs we are used to seeing about the exponential spread of the Omicron variant.

The ten richest billionaires- all men- have seen their wealth more than double from $700bn to $1.5 trillion between March 2020 and November 2021, according to calculations by Oxfam based on Forbes billionaires. They now own six times more wealth than the poorest 40% of the global population, some 3.1 billion people.

Taken together, the world’s billionaires saw their wealth increase by $5.2 trillion to $13.8 trillion between March 2020 and November 2021. This is more than the past 14 years combined. A new billionaire was created every 26 hrs.  To give you some idea, this means that the combined wealth of these 2660 billionaires is now about the same as the whole Chinese economy, the world’s second largest.

Yet the pandemic has battered the world’s poorest and most vulnerable people the hardest.  I see that every day here in Nairobi.  I think of my mother, back home in the village.  How can I explain to her the sheer scale of the wealth owned by these rich people, whilst ordinary people continue to suffer? Everyone has suffered, apart from the super-rich; World Bank figures show that 99% of humanity have lower incomes than they would have if Covid-19 had not happened. 

But it is the poorest who are paying the highest price as always, and particularly women and those from more marginalised groups. The ILO projects the global hours worked in 2021 were 125 million full-time jobs below the pre-pandemic level. Meanwhile, 162 million more people are estimated to have been forced into poverty (below $5.5 a day) by COVID-19 in 2021, based on the World Bank data provided to Oxfam. This means the economic impact of the pandemic will linger for an extended period. The emergence of more transmissible variants such as Omicron and the low vaccination rate in the world’s poorest countries will only make this worse.

It’s in the United States where the billionaires had an especially good time. The world biggest economy created 126 new billionaires between March 2020 and November 2021, and their wealth increased by an eye-popping $2 trillion. The US government has spent $4.6 trillion to diffuse the pandemic-induced economic and health downturn on households and businesses. It seems most of that has gone to the richest few.

In Asia-Pacific, billionaires saw their wealth rise by $1.9 trillion, or 72%. In India, their wealth more than doubled to $719 billion from $335 billion. In neighbouring China billionaires’ wealth grew by 83% to $2.3 trillion, while In Europe and UK taken together it increased by $2.3 trillion, a 46% jump.

It’s not those billionaires have suddenly worked twice as hard or invested twice as wisely during the pandemic. Rather they have massively benefited from an expansive fiscal stimulus by governments in wealthier countries coupled with lax monetary policy by the central banks. The brilliant vaccines developed in a record time rallied the stock market. Billions in public monies were pumped into the development of these vaccines. This government money has driven stocks to record highs, and with it the fortunes of the world’s richest.

The combined fortunes of the ten richest men could take them to space

Billionaires are massively contributing to climate change. But it’s the world’s poorest people who are being hit the hardest by the negative impact of climate change that they have least contributed to. The twenty richest billionaires are estimated to be emitting 8,000 times more carbon than each of the world’s poorest 1 billion people. And as the billionaires start rocketing to space, this will for sure worsen. Yet they have gained so much they do not even need rockets to go to space – we have calculated that merely sitting on their wealth could take them there. If the ten wealthiest men were to sit on their combined fortunes piled up in US dollar bills, they would be half-way to the moon!

Inequality is bad for everyone

This increasing concentration of vast amounts of wealth on the hands of the tiny few at the expense of everyone else is an economic catastrophe. I also believe it is deeply immoral. It hinders the elimination of poverty, reduction of inequality and investment in public services like health and education. It also destabilises democracies through political capture, sparking civil unrest. And it erodes public trust in institutions.

Taxing wealth for public good

It is time to deal with this billionaire variant.  To vaccinate the world against this insane concentration of wealth. To build resilient societies that can withstand future shocks, governments need to massively invest in universal public services like health. The pandemic has left a gaping fiscal hole in the public finances as governments dished out more than $16 trillion in the past two years to protect businesses and households at a time when revenue shrank sharply. Public debt is now at historical levels of $226 trillion, or 256% of global GDP.

One effective way of doing this is through a progressive wealth tax on the richest. Wealth tax is not something out of nowhere; it has been done before.

An annual progressive wealth tax at a rate of 2%, 3% and 5% for the wealth above $5 million, $50 million, and above $1 billion respectively could raise huge amounts in many countries, according to calculations by Oxfam, the Institute of Policy Studies, Fight Inequality Alliance and the Patriotic Millionaires based on the wealth of multimillionaires from Wealth X and billionaires from Forbes.

In Nigeria, this progressive tax on the wealth of multimillionaires and billionaires is enough to more than double government health expenditure. It could nearly triple health expenditure in India. Nigeria and India have some of the lowest health budgets in the world.

In my own country, Kenya it would raise US$0.9bn a year, enough to reduce households’ out-of-pocket health expenditure by 85%.

The United States would raise $928 billion a year, enough to increase the federal government health budget by nearly a third. Between them, the EU and UK would raise $480bn, enough to quintuple their combined 2020 Official Development Assistance (ODA).

Because of the failure to tax them adequately, many of the world’s richest are actually paying lower rates of tax than ordinary workers; their secretaries and drivers are paying more tax than them.  It is simple common sense to turn this around and make them pay their fair share.

Anthony Kamande is Oxfam International’s Inequality Research Coordinator. He is part of the team forming the Peoples Vaccine Alliance.

January 18, 2022
Duncan Green