For the next several days, media pundits, politicians and anti-poverty organizations will continue to discuss a new Oxfam International report released Monday that suggests more than half of the world’s wealth will be owned by the one percent by 2016.
According to the report, the world’s wealthiest people saw their share of the planet’s money grow from 44 percent in 2009 to 48 percent in 2013. Furthermore, the top 80 billionaires have $1.9 trillion, which is the same to the bottom 50 percent; the 80 top billionaires saw their wealth jump by $600 billion, or 50 percent, in the past four years; and the bottom 50 percent experienced a $750 billion decline in their in four years.
Winnie Byanyima, Oxfam’s executive director, argued that the healthcare and financial services industry has spent about $1 billion – in the European Union that number is around $200 million – in lobbying money to have favorable legislation and less of a tax burden.
Her recommendation is for governments to crack down on corporate tax avoidance and to allocate a greater distribution of wealth to education, healthcare and equal pay legislation.
“It is time our leaders took on the powerful vested interests that stand in the way of a fairer and more prosperous world,” said Byanyima. “Business as usual for the elite isn’t a cost-free option – failure to tackle inequality will set the fight against poverty back decades. The poor are hurt twice by rising inequality – they get a smaller share of the economic pie and because extreme inequality hurts growth, there is less pie to be shared around.”
What about the central banks?
Although the report’s validity and methodology have come into question, the biggest omission from the study is the Federal Reserve and other central banks’ vast money printing mechanisms that has greatly benefitted the affluent and the well-connected while diminishing the purchasing power of the impecunious.
The creation of new money is always given to the top one percent, public officials and corporations. Unfortunately, when that freshly printed money is funneled throughout the economy then the rest of the population suffers greatly.
Here is what Jörg Guido Hülsmann of the Mises Institute wrote about inflation helping the rich:
“The famous economist Josef Schumpeter once presented inflation as the harbinger of innovation. As he saw it, inflationary issues of banknotes would serve to finance upstart entrepreneurs who had great ideas but lacked capital. Now, even if we abstract from the questionable ethical character of this proposal, which boils down to subsidizing any self-appointed innovator at the involuntary expense of all other members of society, we must say that, in light of practical experience, Schumpeter’s scheme is wishful thinking. Credit expansion financed through printing money is in practice the very opposite of a way to combat the economic establishment. It is the preferred means of survival for an establishment that cannot, or can no longer, sustain the competition of its competitors.”
The chart below shows the dramatic increase of the money supply in the U.S.:
Meanwhile, the European Central Bank (ECB) will move forward with an exponential increase in euros. The ECB will soon push ahead with its $500 billion quantitative easing plan in order to spur economic growth, borrowing and inflation – the eurozone is concerned about deflation.
As blogger Notayesmaneconomics wrote, the wealthiest of people control most of the equities:
“So what have we learnt? That such analysis has a litany of problems. But that we do these days have more availability of information which means that we know more about this than we did. So was it always true? Probably. There is an element of irony in the impact of the credit crunch reducing inequality but we are left with the thought that whether it was deliberate or by chance that policies like QE have increased inequality since and are likely to continue doing so. Something to think about as we see them take the stage at the World Economic Forum at Davos from Wednesday.”
On an international level, the U.S. exports its inflation, which further hinders the poor.
When it comes to government policy, the redistribution of wealth has been a disaster, and raising taxes on the wealthiest of Americans and corporations will only lead to greater offshore operations, higher prices and/or more government waste. Why do people want the government to have more money when all it does is squander it on foreign adventures and bad solutions to common problems?
The Oxfam report never lambasts monetary policies nor its money printing schemes. What it should promote instead of more government intervention and questionable decisions like equal pay legislation is more capitalism, more free markets and less government. When the governments gets out of the way and provides an environment of low (or zero) taxes, sound money, zero public funding and a business-friendly climate then the impoverished can climb the economic ladder.
The top 10% have 75% of the wealth while the poorer half in the U.S. now have just 1%. We need tax reform to reverse the decline of family wealth through full employment, higher salaries and lower taxes on workers. Economic reform from the bottom up!