Eight men own more than 3.6 billion people do: our economics is broken
today, eight people have the same wealth as the poorest half of the world’s population. Stop and think about this. It is a mind-boggling concept.
Last year we said we would have needed a double-decker bus to transport the 62 people we thought owned the same as the poorest 3.6 billion on the planet. In 2017, thanks to more accurate data, we find that in fact this group would fit in a single golf buggy.
Today nearly 800 million people – one in nine – across the world will go to bed hungry or undernourished. The adults will wake up uncertain when they will next eat, whether they will have work, fearful for their health and the costs that illness in the family might bring. The eight men – yes, they’re all men – and their fellow billionaires will wake up having slept rather better, and their wealth, invested across the world, will have increased by countless millions even as they slept.
It would be easy to vilify the eight, to make each individual a poster boy of the growing chasm between the richest and the rest. But painting these individuals as the villains would be unfair. The eight include some of the world’s largest philanthropists and those, such as Warren Buffett and Bill Gates, who have spoken out against the shocking scale of inequality in the world. These eight men are not themselves the cause of the poverty so many still live in. But they are the most powerful representatives and beneficiaries of an economic system in which wealth accrues more wealth; where wealth means power and influence, which in turn leads to laws and practices that help the rich get richer.
So this is not an exposé of eight people, but of a broken economics. Narrowing the gap between the richest and the rest requires us to take on a more challenging task than asking eight men to change their behaviour. It requires us to create a more human economy; one that does not result in 1% of the world’s population owning the same wealth as the other 99%. One that encourages and rewards enterprise and innovation, yes, but one that also offers everyone, regardless of background, a fair chance in life and ensures when individuals and businesses succeed, they do so for the benefit, rather than at the expense, of others.
Too often today, our economy rewards rather than discourages bad behaviour. Tax avoidance costs poor countries more than $100bn annually that could be used to provide clean water, lifesaving medicines or education. Rich countries, including the UK, lose countless billions more. Yet governments, anxious to defend their own corporate sectors and perceived national interests, have failed to adequately respond to companies’ use of tax loopholes, corporate power and new technology to avoid paying their fair share. Small, taxpaying businesses are forced to operate at a competitive disadvantage against multinationals, encouraging them to find their own dodges in a desperate effort to level the playing field.
Nowhere is the old proverb “money begets money” more apparent than in how companies seem determined to stuff the pay packets of their top executives, whatever the economic weather. Here in the UK, a FTSE 100 director can expect to pocket about £5.5m a year. A leading UK CEO now earns almost 130 times the wage of their average employee, up from just 10 or 20 times as recently as the 1980s.
Meanwhile, those without economic power feel the pain: the producer in a developing country, the low-paid UK worker, the woman juggling work and childcare, are squeezed until their pips squeak, all in the name of returning as much money as possible to predominantly wealthy shareholders. Last autumn, the Institute for Fiscal Studies warned that their fellow Britons were in the midst of decade of lost wage growth, the worst for 70 years. Justifying such a growing divide in terms of merit will be hard. A recent study by CFA, the global association of investment professionals, found the link between the pay and performance of 350 top executives to be negligible.
In a survey of 700 experts, published ahead of its annual gathering in Davos this week, the World Economic Forum pinpointed inequality as the number one threat to the global economy during the year ahead. It also cited it as a key factor in continuing extreme poverty, political instability, violence and the polarisation of societies. Yet there appears little hope of substantive change being proposed by leaders at WEF. In the short-term at least, GDP growth will remain their answer to all ills.
We have made huge progress in reducing global poverty, and wealth creation has played a major part. But the real incomes of the world’s very poorest have gone up by just $3 a year over the last 25 years. We need to recognise that economic growth and wealth creation are not in themselves enough to ensure decency and dignity for all.
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