#dnaEdit: Inequality hurts

As billionaires and politicians take stock of world economic affairs at Davos, they should seriously be concerned about the rising inequality graph across the board. Ahead of the economic summit, the anti-poverty charity Oxfam, underlined through its research how alarming and unabated the global inequality trend is. If this trend of skewed wealth distribution continues, then by next year 1% of the world’s population will have more wealth than the other 99%. The Oxfam research showed that the share of global wealth owned by elite groups has jumped from 44% in 2009 to 48% in 2014, while 80% of the people currently own just 5.5%. One in nine people don’t have enough to eat and more than 1 billion people live on less than $1.25 a day. In several advanced economies with historically low inequality rates, economic disparities have widened over the last seven years.

Describing the increased concentration of wealth as dangerous, Winnie Byanyima, executive director of Oxfam International, has urgently called for remedial policies. Yes, the privileged elite will resent being taxed more or being asked to subsidise the underprivileged. Recall the acrimonious debate in the US over Obamacare — the universal health insurance policy that the President finally managed to push through in the teeth of opposition. But regardless of such challenges, remedial measures must be taken to tackle inequality, one of the biggest issues facing us this century.

Even as the onus of bridging the gap rests on policymakers and governments, most of them tend to preserve the present economic structures. The good thing is that since the 2008 Wall Street mayhem and the downward global economic spiral, inequality — which prior to the crash had little currency in public discourse — has moved up the political agenda. The realisation, reluctant though in some influential quarters, is that the widening socio-economic gap is creating an arsenal of grievances which could manifest themselves through acts of violence.

Consider in this context, the latest forecast by the International Labour Organisation. The ILO believes that the challenge of lowering unemployment levels to the pre-financial crisis period is “as daunting as ever.” Since 2008, more than 61 million jobs have been lost. Unemployment is expected to rise until the end of the decade. The ILO predicts that by 2019, more than 212 million people will be out of work, up from 201 million at present.

Read this gloomy unemployment prediction alongside the stark inequality data and you find a world increasingly beset with tension and collision between less than a handful of people with too much wealth and the vast majority with too little. Hardly a wonder then that French economist Thomas Piketty’s 700-page tome on economic inequality became a bestseller last year. Piketty’s Capital in the Twenty-First Century, which became the focal point of animated conversations and debates, argued that invested capital, in the stock market and in real estate, will multiply faster than income. Piketty has identified inequality as a structural feature of capitalism.

Oxfam’s research corroborates Piketty’s thesis. Not only has the wealth of the richest 80 doubled between 2009 and 2014, more wealth has been inherited and leveraged by the rich to further their own interests. More than a third of the 1,645 billionaires listed by Forbes inherited their riches — or at least part of them — while 20% invested in the financial and insurance sectors. This economic group saw its wealth increase by 11% in the 12 months to March 2014.

To reverse this unacceptably high inequality rate governments must clamp down on tax dodging by corporations and rich individuals and invest in universal, free public services such as health and education. Last and not least, Piketty’s proposal of a global tax on capital must be taken seriously and acted upon.