Whether in Asia, Africa or North America, it’s been a profitable polycrisis for billionaires

January 18, 2023

     By Duncan Green     

Guest post from Anthony Kamande on Oxfam’s Davos Inequality Report 2023

I’m having supper with my friend Reuben, a teacher who still hasn’t received last month’s salary (equivalent to around $167) and is struggling with the cost of living. I tell him that if the 1,890 richest Kenyans, those with wealth over Ksh600 million ($5 million), paid as little as 3% taxes on their net wealth, that could pay for 100,000 teachers (including him), triple his pay and make his temporary job both permanent and pensionable. “This world, no balance,” he says..   

Reuben is a high school teacher in Lamu county in coastal Kenya employed temporarily by the school board with parents contributing towards his salary. Rent takes a quarter of this and out of the rest he has to support his mother in a rural village, who depends solely on him. The pay is unpredictable: it’s mid-January, and he has still not received his December salary.

Life has been hard as prices have surged while his pay has not increased by a single cent since he got his job two years ago. Last January, Reuben could buy his mother a packet of maize flour for Ksh 120 (around a dollar): this January he’ll have to fork out Ksh220. To make ends meet, he’s forced to borrow from friends and the many mobile loan facilities available in Kenya. He repays these once he gets his salary – then borrows again.

Reuben is not alone. Across the world, hundreds of millions of people are going to bed hungry. Billions cannot access even the most basic services such as healthcare while hundreds of millions of children cannot afford an education. The crises of the pandemic and cost of living has pushed people across the world into misery and penury.

A tiny group of winners

have nots v have yachts: Image from Oxfam’s Davos report, which has some fascinating data on superyachts (p29) (picture: Josep Monter Martinez/Pixabay)

Yet these crises have created a tiny group of winners who are increasingly becoming super-rich at the expense of us all. Billionaires’ wealth has reached a record high. Corporate greed is accelerating runaway inflation leading to erosion of workers’ pay. This tiny group of the super-rich is dangerous for our economic development, democracy and social cohesion.

As the globe’s richest people and elite gather in Davos , Oxfam is again sounding an alarm about our deeply divided world. In this blog, I want to highlight how billionaires across the globe, many in Davos this week, have massively benefited from current crises – and also contributed to the ongoing cost of living crisis that is hitting the average person hard.

With 90 million people pushed into extreme poverty and global inequality increasing by the largest margin since 1945, 2020 was undoubtingly the most turbulent year in recent history because of the pandemic. So far about 20 million people have died of covid-19. Alongside this, we’ve faced rocketing food and energy prices because of the disruption caused by the pandemic, climate change disrupting food production, the Ukraine conflict and corporate greed.

How to profit in a polycrisis

Corporate profiteering accounts for more than half the inflation in Australia, the US and Europe. Food and energy companies are having a field day. Between them, the biggest food and energy companies saw their profit margin increase by an eye-popping 256% in 2022 compared to the 2018-2021 average. A staggering 84% of the $306 billion windfall profit these companies made went to their shareholders as dividends. Low-income earners who spend two-thirds of their income on food are the ones who are severely hit by this greed.

Billionaires also got a massive bonus from Covid 19 pandemic in 2020. In most cases, billionaires were one of the main beneficiaries of the generous stimulus packages introduced by governments in the rich world. Between March 2020 and March 2021, the world’s billionaires added $5 trillion to their wealth, equivalent to the total wealth of Africa, a continent of 1.4 billion people. For every dollar that went to the bottom 90% of the global population, billionaires got $1.7 million.

For every dollar that went to the bottom 90% of the global population, billionaires got $1.7 million.

Yes, billionaires did experience some losses in 2022 but that was small compared to their gains in the previous two years of the pandemic. With a combined wealth of $11.8 trillion at the end of November 2022, the world’s richest people were $2.6 trillion richer than they were before the pandemic. The world’s 81 richest people have the same wealth as the poorest half of the population, some 4 billion people. But the poor are becoming poorer: 70 million more people were living in extreme poverty in 2022 compared to the pre-pandemic projection.

Doing very well in India and the US

The combined wealth of Indian billionaires has risen from $312.6 billion in March 2020 to $796 billion in November 2022, a staggering 155% increase in nominal terms. On the other hand, millions of Indians continue to suffer from poverty. In 2020 alone, 56 million Indians were pushed into extreme poverty, accounting for 62% of the global new poor.

Billionaires in the US were 1.4 trillion (without accounting for inflation) richer at the end of 2022. The US accounts for 37.5% of total global billionaires’ wealth. Yet about 140 million people are poor or low-income in the US, according to Poor People’s Campaign.

Big gains in Africa, Latin America and the Caribbean

Closer home in my own region Africa, 20 billionaires with a combined wealth of $84 billion were 41% richer at the end of 2022 than before the pandemic. The three richest men in the region have more wealth than 700 million Africans. Those in Latin America and the Caribbean, with $398 billion, were 40% richer. The two richest men there have more wealth than the bottom half of the LAC population, some 331 million people. In Asia, billionaires were 47% wealthier than before the pandemic at the end of 2022 having added $1.11 trillion, while the Pacific’s were 74% richer. In the Middle East, the richest there saw their wealth increase by 72%.

Make billionaires extinct 

This extreme concentration of wealth is dangerous to us all as it is used to influence and drive public policy for the selfish gains of just a few people. It is also an existential threat to our planet: a billionaire emits a million times more carbon than an average person, according to Oxfam analysis.

The world needs to act now and tax the richest to reduce their wealth and influence, save our planet and raise revenue for investing in public goods such as education to employ teachers like Reuben. 

Two scenarios for billionaire wealth between now and 2030

In the first scenario, billionaire wealth continues to grow at the same rate it has over the last decade. In the second, taxes and other measures reduce billionaire wealth back to where it was 10 years ago (see details below). (Source: Oxfam analysis of Forbes World’s Billionaires list.)

As we set out in our report for Davos, one way to do this is via a one-off solidarity wealth tax to stop billionaires and corporations benefiting from our crises. We can also increase taxes on income of the richest and tax the net wealth of the richest. For example, a tax rate of 12.8% on the net wealth of billionaires would have kept billionaires’ wealth constant for the last five years. If we wanted to halve the current wealth of the billionaires and take it to its 2012 level, we would need a tax rate of 17.8% (see graph above). Inheritance taxes would help break up the aristocracy of wealthy families.

Our governments, have a choice: either oversee the exploitation of billions of people by the billionaires or do the right thing and tax the super-rich.

January 18, 2023
Duncan Green