Deborah Hardoon, Senior Researcher Oxfam GB
Our analysis on wealth inequality projects that by next year, 2016, the top 1% of people will have more wealth that the rest of the world combined. It’s crazy that the wealthiest people are getting an increasing share of global wealth rather than it being used to support the lives and livelihoods of the poorest people. In a world where still a billion people live in extreme poverty, is this a future that we want or that our societies can sustain?
You might wonder how we came to this ominous projection for next year, so let’s take a look at the data. We now have wealth data from Credit Suisse for the years 2000-2014 for wealth shares of all deciles plus the top 5% and 1%.
The first thing to notice is the share of global wealth going to the poorer ends of the distribution are just tiny. The bottom 50% own less than 1% of global wealth. Less than 1%. Wealth is important, it’s the home that your family sleeps in, it’s the savings you have should you need to pay for a medical emergency, it’s the value of the cows and the machinery that sustain your livelihood. The 3.5bil people in the bottom 50%, 90% of who live in Asia, Africa and Latin America, collectively have less than 1% of this important source of financial security and assets that can support and sustain families and livelihoods. The bottom 10% have negative net wealth, that’s debt, as we discussed here, even people with a decent income that are included in the group are vulnerable to income shocks when in debt and the cumulative debt of this group is just a quarter of 1 % of the total global wealth.
The share of wealth of the top 10% completely dwarfs that of all other deciles put together. Three quarters of global wealth is concentrated in the top 5% and as for the top 1%, that group of about 70 million people, people with wealth that ranges from $800,000 to the $76bil of Bill Gates, collectively have had between 44% and 49% of the global share of wealth every year for the last decade. They are pretty close to having more than half of global wealth already. The wealth of individuals at the top of the distribution that goes beyond providing financial security and supporting livelihoods, it becomes wealth that begets wealth, where the interest on wealth alone can generate incomes in the millions, where wealth is synonymous with power and influence.
Let’s have a look at how the share of wealth of the top 1% has evolved over time. Just from eyeballing the chart below, it’s clear that a single linear (or otherwise) trend does not fit the data 2000 -2014 very well and in fact you can see a clear inflexion point in 2009/2010. If you break this chart down to two periods, 2000-2009 and 2010-2014, you get a much better fit for both periods (check out the data in the excel file and test it for yourself).
So why the inflexion? The global crisis wiped out vast amounts of wealth as asset prices dropped, banks collapsed, house prices dropped and home owners were left negative equity, employment rates plummeted and many businesses collapsed. Much of the impact of the crisis was felt in the richest countries, where most wealth is concentrated (77% of the top 1% live in North America and Europe). We expect that economic trends may change after a shock of this scale, including trends on the distribution of wealth. The distributional aspects of the shock itself are important (was it the poorest people that suffered most or the richest) but also which income groups feel the impact of the policy responses put in place to manage the recovery (think austerity measures and the squeeze on public services). The Credit Suisse wealth data suggests that during the period of the last 5 years, the top 1% have disproportionately benefited, increasing their share of global wealth. This is consistent with an analysis of how income shares have evolved post crisis, this report finds that the top 1% of American’s captured 95% of the income gains from the first three years of the recovery.
The findings are clear, obscene wealth in the hands a few with more wealth just can’t be justified when so many billions of people are struggling. If trends continues as they have done in the past 5 years, where the proceeds of growth and increasing global wealth are captured by the very top leaving less and less for the rest of us, what does that mean for fighting poverty? For equity? For justice? For politics? This projection is a massive warning that if we leave economic distribution unchecked, if we let the next few years play out as the last few have, we risk even scarier levels of wealth inequality. We need to make sure that this projection fails to materialise, that some bold steps are taken to introduce some powerfully progressive policies so that we see our world become more fair and equal. That’s what we are asking for. I really don’t want to have to say ‘I told you so’.