Oxfam is out with its newest report showing the widening chasm between the richest human beings and everyone else. Just 62 people have more wealth than the bottom half of human beings, about 3.6 billion people, the international anti-poverty organization estimates. And the top 1 percent now have as much wealth as the bottom 99 percent.
Oxfam released its report just ahead of the annual gathering of billionaires at the World Economic Forum in Davos, a ski resort in the heart of a long-time favored haven of the exploitive superrich, Switzerland. But expecting the billionaires to take the lead in reducing inequality makes as much sense as expecting toddlers think about their long-term best interests. And therein lies the problem with the mere documenting of income and wealth inequality, which I’ve been doing for more than two decades.
In fact, bankers the world over, from Davos to Hong Kong, should lift flutes of Cristal, a favorite of oligarchs and kings, to toast Oxfam for severely understating just how much the richest of the rich have stashed away untaxed.
Tax havens are a big problem, Oxfam claims, quite rightly. But its report put out a figure that is deeply flawed and captures just a third of the total wealth hidden offshore. Oxfam cited research based on a single International Monetary Fund data set, showing $7.6 trillion of wealth hidden in tax havens. But in 2012 James S. Henry, former chief economist at McKinsey, the world’s top consulting firm, showed the figure is at least $21 trillion, a number derived from multiple official reports that include hard assets as well as the money the IMF data shows.
Oxfam’s report also produced some nice charts showing how some top wealth holders such as Warren Buffett are tied to the financial and pharmaceutical sectors. But that’s relatively useless information unless one understands how these sectors rely on the legal creation of the corporate form — itself a kind of government favor — taxpayer subsidies, favorable accounting rules and other official favors.
Oxfam researchers predicted these stark inequality figures in previous studies. They could be confident of such advance observations because wealth must continue to pile up at the very top under current government rules. And it is government, of course, that makes the rules governing economic activity, liability and taxes.
The trend cannot continue forever. The narrowing of growth in income and wealth at the top will, in time, mean that select handful will gather up all the gains and then what interest would everyone else have in working for their benefit? People will put up with not being rewarded for their efforts for a long, long time, but in the end history shows the result is always the same: peaceful reform or bloody revolution.
What’s missing in all the news reports about Oxfam’s study on the increasing concentration of wealth at the top are explanations for why each year the richest of the rich get a larger and larger share of the wealth pie while workers see their slice diminish. Why is wealth concentration proceeding apace?
The answer is simple: government policy.
The superrich are getting super richer because around the world governments of all kinds have quietly put in place rules under which the rich must get richer over time and workers must see their share of economic output decline. I say quietly because most of these rules are complex, subtle and often dependent on putting together two or more seemingly unrelated government rules — issues that seldom make the daily news.
For instance, in China, with its strange blend of communist dictatorship and capitalist enterprise, the rich benefit from government’s ruthless suppression of workers, escaping the costs of environmental and safety laws as corruption pervades the party from the county level on up.
In Haiti, the poor cannot get ahead because the brutal thugs who run the place steal from them in every way possible, including bloated money-transfer charges that rake off about $13 for every $100 sent from abroad and then force Haitians to take cash, exposing them to banditry.
In England, tax rules let those in the City of London enjoy untaxed riches by right while everyone else is levied to support the infrastructure the richer Londoners require.
In America complicated webs of subsidies take from the many to enrich people as varied as Buffett, the baseball player Alex Rodriguez and his employers as well as the top executives running utilities that get to charge customers for taxes that never go to government. I wrote a trilogy documenting the subtle techniques of the upward redistribution of wealth — “Perfectly Legal” (taxes), “Free Lunch” (subsidies) and “The Fine Print” (restraining competition) — and yet I find new techniques all the time.
Why do these trickle-up structures persist? The bottom 99.9 percent are not able to use their numbers to address the problems created because the rich have unequal access to those in power.
The politicians, elected or self-anointed, have rewritten the laws so that they can legally line their pockets. The system includes lifting limits on campaign contributions as well as jobs for friends and family in return for writing new rules that favor the already rich. Republican presidential candidate Donald Trump keeps reminding the public of this each time he says he gave to politicians to enlarge his fortune. Worse, the courts have now joined in with decisions narrowly interpreting economic crimes and reversing convictions for insider trading that are slowly turning the American criminal justice system into a safety net for economic predators among the rich.
As you continue to struggle to make ends meet while the super wealthy add more riches by the hour than you will earn in a lifetime, just remember: Those riches not only come at your expense, they come with your implicit permission if you vote for politicians who write the rules to favor the already rich.