x Abu Dhabi, UAEThursday 27 July 2017

Extreme wealth is economically and socially inefficient

Governments must work in concert to reverse the polarising effects of decades of 'trickle-down' economic policy.

US President Barack Obama famously declared during his 2008 campaign that "the old trickle-down theory has failed us": the idea that tax breaks and other benefits provided by the state to businesses and the wealthy ultimately leads to prosperity for everyone is deeply flawed and must be abandoned in favour of an economic model that emphasises fairness.

No one understands the dangers inherent in trickle-down economics, one of the most famous proponents of which is the failed US presidential candidate Mitt Romney, better than charitable organisations trying to tackle poverty.

Ahead of the World Economic Forum's annual meeting this week in Davos, Switzerland, Oxfam declared that the increasingly bloated super-rich are undermining human progress and boldly called for serious redistributive measures to be taken by governments to address the problem of rapidly growing economic inequality.

The campaigning NGO has challenged governments to meet a 2025 deadline for ending extreme wealth by reversing a two-decade rich people "feeding frenzy" trend in most countries, returning inequality to 1990 levels through what it terms "a global new deal".

In a statement entitled The Cost Of Inequality: How Wealth and Income Extremes Hurt Us All, Oxfam said the net income of the planet's 100 wealthiest people in 2012 was US$240 billion (Dh882bn), enough to not just eliminate extreme poverty but eliminate it four times over.

The organisation says that globally, the incomes of the top one per cent have increased 60 per cent in just 20 years, and that the growth in income for the top 0.01 per cent has been even greater.

Barbara Stocking, Oxfam's chief executive, said the wealth gap was "economically inefficient, politically corrosive, socially divisive and environmentally destructive".

She added: "We can no longer pretend the creation of wealth for a few will inevitably benefit the many - too often the reverse is true.

"Concentration of resources in the hands of the top one per cent depresses economic activity and makes life harder for everyone else - particularly those at the bottom of the economic ladder.

"From tax havens to weak employment laws, the richest benefit from a global economic system which is rigged in their favour.

"It is time our leaders reformed the system so that it works in the interests of the whole of humanity rather than a global elite.

"We need a global new deal to reverse decades of increasing inequality. As a first step world leaders should formally commit themselves to reducing inequality to the levels seen in 1990."

The World Economic Forum, a Swiss non-profit foundation "committed to improving the state of the world", shares Oxfam's concerns, citing in its Global Risks 2013 report severe and widening income disparity as one of the world's most urgent problems - along with systemic financial failure, government debt and crises in the water supply.

Oxfam's goal of reversing this socially and economically destructive trend is extremely laudable. However, it can only be achieved if the world's governments make a strong and concerted effort to bring in progressive taxation regimes, clamp down on tax havenry and other avoidance schemes that rob billions of dollars in vital revenue from public coffers, effectively tackle official corruption, take steps to cut the ludicrously inflated bonuses awarded to executives regardless of their performance, improve labour protection, and hold those who run institutions such as banks accountable for wrongdoing.

Sadly, that is about as likely to happen as a Bangladeshi garment factory employee showing up to work behind the wheel of a Lexus.

* Paul Muir