Can we fight poverty by ending extreme wealth?

Posted by Olga Khazan on January 20, 2013 at 8:00 am

The Washington Post

http://www.washingtonpost.com/blogs/worldviews/wp/2013/01/20/oxfam-poverty-income-inequality/

In a sign that the “Occupy” and “99 percent” movements that swept the United States in recent years have taken on increased global relevance, Oxfam International this week called for “a new global goal to end extreme wealth by 2025,” as a way to stem income inequality and continue the fight against poverty.

In a press release, the group wrote that the anti-poverty movement needs to include a new, anti-extreme-wealth component:

In the last decade, the focus has been exclusively on one half of the inequality equation – ending extreme poverty. Inequality and the extreme wealth that contributes to it were seen as either not relevant, or a prerequisite for the growth that would also help the poorest, as the wealth created trickled down to the benefit of everyone.

Oxfam does have a point. The movement against income inequality has been gaining momentum as the world’s rich have continued to amass larger shares of their countries’ fortunes. In the United States, according to the group, the share of national income going to the top 1 percent of the population has increased to 20 percent, from 10 percent in 1980.

Globally, 1 percent of the population have seen their incomes rise by 60 percent in recent years, according to Oxfam. In China, where the top 10 percent earn nearly 60 percent of the country’s income, Internet users regularly take to social networks to criticize public officials thought to be flaunting status items.

“The top 100 billionaires added $240 billion to their wealth in 2012- enough to end world poverty four times over,” Oxfam argues.

The World Economic Forum also recently rated “severe income disparity” as one of its top global risks for 2013.

Oxfam’s idea is basically the opposite of the trickle-down theory: Rather than creating jobs and lifting others out of poverty, the group says, super-rich minorities cause social unrest and depress demand for goods and services, limiting growth and innovation as a result. It’s an argument that’s also been echoed recently by several vocal billionaires.

To be fair, many wealthy donors, such as Bill Gates and Warren Buffet, play a major role in aid efforts around the world and have pledged to give away much of their wealth to charity. But overall, studies by the Congressional Research Service and others have shown that lower taxes for the wealthy don’t necessarily result in increased economic growth.

Oxfam has these recommendations for how income inequality can be alleviated:

Closure of tax havens around the world;

A reversal of “the trend towards more regressive forms of taxation”;

A global minimum corporation tax rate;

Increased investment in free public services and safety nets for people out of work or ill.

The group also suggested some measures that have been at the center of some of the fiercest policy battles in the United States and elsewhere:

“Limits to bonuses, or to how much people can earn as a multiple of the earnings of the lowest paid, limits to interest rates, limits to capital accumulation are all only recently-abandoned policy instruments that can be revived. Progressive taxation that redistributes wealth from the rich to the poor is essential,” Oxfam continued.

Those tactics sound good, but they’d require something else that unfortunately the most unequal countries also lack: governments willing to risk angering their wealthiest citizens in order to improve life for the poorest.