Widening gap between the rich and the poor: A matter of grave concern

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Safi H. Jannaty

JUST prior to the World Economic Forum Annual Meeting at Davos, an idyllic ski resort, Oxfam published its annual report for the year 2018 that reflected continued glaring disparities and the widening gap between the rich and the poor across the globe.

A close comparison of Oxfam’s annual reports of the past five years reveals shocking facts and figures. In the year 2014, a total of 85 billionaires, who could easily be accommodated in a train carriage, had wealth equal to what was at the disposal of the bottom half of all the people in the world. The ratio then fell to 62 rich people versus half of the world’s poor in 2015. From 44 people in 2017, the figure has fallen to 26 people who now have wealth that equals the amount held by a mammoth 3.8 billion people forming the fifty percent bottom rung.

It is hard to understand the impact of such disparity. Amidst so much prosperity, half of the world population lives on less than US$5.50 a day. This alarming disparity is more blatant in some emerging countries. As per the latest Oxfam report, just nine wealthy persons in India own wealth which equals the amount held by half of the Indian population and the top 10 percent rich hold 77.4 percent of the total wealth of the nation. No wonder, a whopping 130 million Indians who form the bottom 10 percent of the population have remained in debt since 2004.

The gap between the rich and poor has become so wide that one of the obstacles in eliminating extreme poverty is now extreme wealth. What is more worrisome and disturbing is not just the continuous rise in the wealth of a few individuals, but also the rise in the number of people around the world who are forced to live in penury and severe poverty. Globally, the fortunes of billionaires rose by 12 percent or $ 2.5 billion a day in 2018, whereas the poorest half of the world’s population saw their wealth decline by 11 percent. This grave inequality in the distribution of wealth has rightly warranted the international charity to use the term “obscene” to denote such inequality and the concentration of wealth in the hands of a few.

Oxfam executive director, Winnie Byanima, rightly asserted that “it is morally outrageous that a few individuals are amassing a growing share of India’s wealth while the poor are struggling to eat their next meal or pay for their child’s medicine”. Ironically, though the poor and the deprived sections in India decide the fate of political parties and leaders; yet, they neither benefit nor taste the fruits of economic progress. They continue to remain in the lower echelon of the economy while capitalists and bureaucrats rule the roost.

Of course, we do not need any Robin Hood character to set the equation right. A tiny percent of the wealth of the rich could do wonders. The Oxfam report claims that a half percent extra tax or contribution by the one percent of the world’s richest people would be more than enough to educate 262 million children who are out of school and provide health care to save the lives of 3.3 million of the world’s poor. The simplest, easiest and most non-discriminatory step in alleviating poverty is ensuring guaranteed free access to good education and decent health care, both being core fundamental rights. India accounts for the largest number of people who are pushed into poverty due to medical expenses incurred by individuals and family members. Over one hundred million people could be lifted out of extreme poverty every year, if health care was publicly funded and treatment was provided to the poor without charge.

There are various factors that have contributed to such a concentration of wealth, which includes highly regressive tax structures. Moreover, tax rates have been lowered in many jurisdictions and when one considers VAT and tax on personal income, the rich are paying a lower percentage of tax than the poor in many countries. The Oxfam report asserted that the situation was compounded by industrial levels of tax dodging by the super-rich and corporations. The super-rich are hiding at least $7.6 trillion from the tax authorities, avoiding an estimated $200 billion in tax. This very figure of $200 billion is enough to wipe poverty from the face of the earth.

Yes, communism did not survive and was bound to fail since it was not in tune with ingrained human nature and that resulted in a change in the world economic order. Even the staunchest supporters of communism were forced to adopt capitalism or a free economy in one form or the other. However, unfortunately, countries that liberated and liberalized their economies failed to curtail corruption and nepotism. Post liberalization, public policy has evolved in a manner which has been more conducive and favorable to the “have lots” groups and has excluded the “have-nots” from benefiting from the advantages of a free economy leave alone encouraging or inspiring them to participate in it. It allowed or rather enabled people who had money and clout to capitalize and multiply their wealth geometrically. For instance, in the case of India, the rich have easy access to capital through banks or financial institutions; yet, micro-financing, which could change the lives of millions living in poor and squalid condition, is either scarce or not accessible to people without influence and means. The same situation applies in many African and Latin American countries.

The panacea lies in governments, especially in the developing and underdeveloped countries, allocating the maximum possible portion of their budget for the education sector. Doubtlessly, literacy and education are great weapons in fighting against corruption and bribery which accelerate the gap between the rich and the poor. Once nations overcome the menace of corruption and bribery, it will be easy to eliminate poverty, as the resources meant for the poorer sections of society will reach them and help to lift them out of destitution and penury.

Rich people like Bill Gates and Warren Buffet have earmarked their wealth for charitable purposes, but unless they transfer that wealth from their names to charities or charitable institutions whether run by themselves or others, they will have to carry the stigma of hoarding their wealth. On the other hand, the majority of billionaires and especially the new ones are still busy amassing wealth and clinging to it. Governments and NGOs will have to devise methods and means to make the rich understand their obligations toward society and the long-term benefits in having a balanced economy and an equitable society. Needless to say, the more transparent the fiscal system becomes, the more it convinces people to pay due taxes to the government, as they wish to see the money that they pay spent for the betterment of society and not end up in the deep pockets of corrupt politicians and bureaucrats. This will have a domino affect and help stimulate the economy.

The payment of lower than legally mandated wages, the employment of child labor in labor intensive industries including those that involve hazardous work and the exploiting of the poor and landless laborers for tilling land are all means of extending poverty or keeping people in the shackles of deprivation and indigence. Furthermore, corporations are exploiting human labor in different forms; they are not concerned with the damage that they cause to the environment and do not understand or fulfill their corporate social responsibilities. They are increasingly concerned about one stakeholder, namely, shareholders and their focus is on satiating the desire and demands of that stakeholder.

Again, none could object to individuals and corporations earning profits or amassing wealth since without the enterprise and desire for the fruits of success, development and progress in different arenas, including the technological sphere, would be stymied. Every nation, individual and enterprise has an undisputed right to own wealth and money. However, they also have a duty to the societies in which they live and they need to fulfill their obligations, which includes avoiding tax evasion or parking wealth in tax havens to avoid the payment of taxes, the exploitation of human labor and causing damage to the environment.

Safi H. Jannaty,

Dammam



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