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Updated: May 16


KUALA LUMPUR, Malaysia, Aug 28 2024 (IPS) Oxfam expects the world’s first trillionaire within a decade and poverty to end in 229 years! The wealth of the world’s five richest men has more than doubled from 2020, as 4.8 billion people became poorer.


The 2024 Oxfam report entitled Inequality Inc. warned, “We’re witnessing the beginnings of a decade of division” as billions cope with the “pandemic, inflation and war, while billionaires’ fortunes boom”.


“This inequality is no accident; the billionaire class is ensuring corporations deliver more wealth to them at the expense of everyone else”, noted Oxfam International’s Amitabh Behar.


Driving inequality


Summarising the report, Tanupriya Singh noted gaps between rich and poor, and between wealthy nations and developing countries had grown again for the first time in the 21st century as the super-rich became much richer.


The Global North has 69% of all wealth worldwide and 74% of billionaire riches. Oxfam notes contemporary wealth concentration began with colonialism and empire.


Since then, “neo-colonial relationships with the Global South persist, perpetuating economic imbalances and rigging the economic rules in favour of rich nations”.


The report notes, “economies across the Global South are locked into exporting primary commodities, from copper to coffee, for use by monopolistic industries in the Global North, perpetuating a colonial-style ‘extractivist’ model”.

Inequalities within rich nations have grown, with marginalised communities worse off, giving rise to rival ethno-populisms and vicious identity politics.


Seventy per cent of the world’s largest corporations have a billionaire as principal shareholder or chief executive. These firms are worth over $10 trillion, which exceeds the total output of Latin America and Africa.


The incomes of the rich have grown much faster than for most others. Hence, the top 1% of shareholders own 43% of financial assets worldwide – half in Asia, 48% in the Middle East, and 47% in Europe.


Between mid-2022 and mid-2023, 148 of the world’s largest corporations made $1.8 trillion in profits. Meanwhile, 82% of 96 large corporations’ profits went to shareholders via stock buybacks and dividends.


Only 0.4% of the world’s largest companies have agreed to pay minimum wages to those contributing to their profits. Unsurprisingly, the poorer half of the world earned only 8.5% of world income in 2022.


The wages of almost 800 million workers have not kept up with inflation. In 2022 and 2023, they lost $1.5 trillion, equivalent to an average of 25 days of lost wages per employee.


In addition to income inequality, the 2024 Oxfam Report noted workers face mounting challenges due to stressful workplace conditions.


The gap between the incomes of the ultra-rich and workers is so huge that a female health or social worker would need 1,200 years to earn what a Fortune 100 company CEO makes annually!


Besides lower wages for women, unpaid care work subsidises the world economy by at least $10.8 trillion yearly, thrice what Oxfam terms ‘tech industry’.


Monopoly power


Oxfam notes that monopoly power has worsened world inequality. Thus, a few corporations influence and even control national economies, governments, laws, and policies in their own interest.


An International Monetary Fund (IMF) study found monopoly power responsible for 76% of the fall in the labour share of US manufacturing income.


Behar noted, “Monopolies harm innovation and crush workers and smaller businesses. The world hasn’t forgotten how pharma monopolies deprived millions of people of COVID-19 vaccines, creating a racist vaccine apartheid while minting a new club of billionaires”.


Between 1995 and 2015, 60 pharmaceutical companies merged into ten Big Pharma giants. Although innovation is typically subsidised with public funds, pharmaceutical monopolies price-gouge with impunity.


Oxfam notes the Ambani fortune in India comes from monopolies in many sectors enabled by the Modi regime.


Ambani’s son’s recent extravagant wedding celebrations flaunted extreme wealth concentration worldwide.


The 2021 Oxfam report estimated that “an unskilled worker would need 10,000 years to earn what Ambani made in an hour during the pandemic and three years to earn what he made in a second”.


Unsurprisingly, the 2023 Oxfam Report noted, “India’s richest 1% own around 40% of the country’s wealth, while over 200 million people continue to live in poverty”.


Fiscal subordination


Corporations have increased their value through a “sustained and highly effective war on taxation … depriving the public of critical resources”.


As many corporations increased their profits, the average corporate tax rate dropped from 23% to 17% between 1975 and 2019. Meanwhile, around a trillion dollars went into tax havens in 2022 alone.


Of course, falling corporate tax rates are also due to “the broader neoliberal agenda promoted by corporations and their wealthy owners, often alongside Global North countries and international institutions such as the World Bank”.


Meanwhile, pressures for fiscal austerity have grown as government tax revenue has declined relatively for decades. High government indebtedness with corporate tax evasion and avoidance have exacerbated austerity policies.


Underfunded public services have adversely affected consumers and employees, especially health and social protection. Higher interest rates have worsened debt crises in developing nations.


With governments fiscally constrained from sustaining public services, privatisation advocates have become more influential, gaining greater control of public resources by various means.


Private corporations profit from discounted public asset sales, public-private partnerships and government contracts to deliver public policies and programmes.


“Major development agencies and institutions… have found common ground with investors by embracing approaches that ‘de-risk’ such arrangements by shifting financial risk from the private to the public sector”, the report states.


Access to essential public services should be universal. Insisting on private profit-making considerations deprives marginalised communities of access, worsening inequalities.

 

Related IPS Articles

·                   COVID-19 Compounding Inequalities

·                   The Best Law Capital Can Buy

·                   Meritocracy Legitimizes, Deepens Inequality

·                   Financialization Increases Inequality

·                   Inequality and Its Many Discontents

·                   Neoliberal Reforms Strengthening Monopoly Power and Abuses

·                   Globalization, Inequality, Convergence, Divergence

·                   Tackling Inequality Talk Is Easy

 

Siti Maisarah Zainurin will join a Malaysian government research institute after completing work at Khazanah Research Institute.

 

Available online here: Global Poverty Grows as Super-Rich Gets Richer Faster

 
 

KUALA LUMPUR, Malaysia, Aug 14 2024 (IPS) - When history repeats itself, the first time is a tragedy; the next is a farce. If we fail to learn from past financial crises, we risk making avoidable errors, often with irreversible, even tragic consequences.


Between rock and hard place


Many people worldwide suffered greatly during the 2008-2009 global financial crisis (GFC) and the Great Recession. However, the experiences of most developing nations were significantly different from those of the global North.


Developing nations’ varied responses reflected their circumstances, the constraints of their policymakers, and their understanding of events and options.


Hence, the global South reacted very differently. With more limited means, most developing countries responded quite dissimilarly to rich nations.


Hard hit by the GFC and the ensuing Great Recession, developing countries’ financial positions have been further weakened by tepid growth since. Worse, their foreign reserves and fiscal balances declined as sovereign debt rose.


Most emerging market and developing economies (EMDEs) mainly save US dollars. The few countries with large trade surpluses have long bought US Treasury bonds. This finances US fiscal, trade, and current account deficits, including for war.


Vagaries of finance


After the GFC, international investors – including pension funds, mutual funds, and hedge funds – initially continued to be risk-averse in their exposure to EMDEs.


Thus, the GFC hit growth worldwide through various channels at different times. As EMDE earnings and prospects fell, investor interest declined.


But with more profits to be made from cheap finance, thanks to ‘quantitative easing’, funds flowed to the Global South. As the US Fed raised interest rates in early 2022, funds fled developing nations, especially the poorest.


Long propped up by easy credit, real estate and stock markets collapsed. With finance becoming more powerful and consequential, the real economy suffered.


As growth slowed, developing countries’ export earnings fell as funds flowed out. Thus, instead of helping counter-cyclically, capital flowed out when most needed.


The consequences of such reversals have varied considerably. Sadly, many who should have known better chose to remain blind to such dangers.


After globalisation peaked around the turn of the century, most wealthy nations reversed earlier trade liberalisation, invoking the GFC as the pretext. Thus, growth slowed with the GFC, i.e., well before the COVID-19 pandemic.


Markets collapse


Previously supported by the Great Moderation’s easy money, stock markets in EMDEs plunged in the GFC. The turmoil arguably hurt EMDEs much more than rich nations.


Most rich and many middle-income households in EMDEs own equities, while many pension funds have increasingly invested in financial markets in recent decades.


Financial turmoil directly impacts many incomes, assets and the real economy. Worse, banks stop lending when their credit is most needed.


This forces firms to cut investment spending and instead use their savings and earnings to cover operating costs, often causing them to lay off workers.


As stock markets plummet, solvency is adversely impacted as firms and banks become overleveraged, precipitating other problems.


Falling stock prices trigger downward spirals, slowing the economy, increasing unemployment, and worsening real wages and working conditions.


As government revenues decline, they borrow more to make up the shortfall.


Various economies cope differently with such impacts as government responses vary.


Much depends on how governments respond with countercyclical and social protection policies. However, earlier deregulation and reduced means have typically eroded their capacities and capabilities.


Policy matters


Official policy response measures to the GFC endorsed by the US and IMF included those they had criticised East Asian governments for pursuing during their 1997-1998 financial crises.


Such efforts included requiring banks to lend at low interest rates, financing or ‘bailing out’ financial institutions and restricting short selling and other previously permissible practices.


Many forget that the US Fed’s mandate is broader than most other central banks. Instead of providing financial stability by containing inflation, it is also expected to sustain growth and full employment.


Many wealthy countries adopted bold monetary and fiscal policies in response to the Great Recession. Lower interest rates and increased public spending helped.


With the world economy in a protracted slowdown since the GFC, tighter fiscal and monetary policies since 2022 have especially hurt developing countries.


Effective counter-cyclical policies and long-term regulatory reforms were discouraged. Instead, many complied with market and IMF pressures to cut fiscal deficits and inflation.


Reform finance


Nevertheless, appeals for more government intervention and regulation are common during crises. However, procyclical policies replace counter-cyclical measures once a situation is less threatening, as in late 2009.


Quick fixes rarely offer adequate solutions. They do not prevent future crises, which rarely replay previous crises. Instead, measures should address current and likely future risks, not earlier ones.


Financial reforms for developing countries should address three matters. First, needed long-term investments should be adequately funded with affordable and reliable financing.


Well-run development banks, relying mainly on official resources, can help fund such investments. Commercial banks should also be regulated to support desired investments.


Second, financial regulation should address new conditions and challenges, but regulatory frameworks should be countercyclical. As with fiscal policy, capital reserves should grow in good times to strengthen resilience to downturns.


Third, countries should have appropriate controls to deter undesirable capital inflows which do not enhance economic development or financial stability.


Precious financial resources will be needed to stem the disruptive outflows that invariably follow financial turmoil and to mitigate their consequences.


Related IPS Articles

·                   US Fed- Induced World Stagnation Deepens Debt Distress

·                   Developing Countries’ Government Debt Crises Loom Larger

·                   Needed Global Financial Reforms Foregone yet Again

·                   Developing Countries Need Monetary Financing

·                   Inflation Phobia Hastens Recessions, Debt Crises

·                   Finance Drives World to Stagflation

·                   Financialization at Heart of Economic Malaise


 
 
  • Jul 24, 2024
  • 4 min read

KUALA LUMPUR, Malaysia, Jul 24 2024 (IPS) - Many low-income countries (LICs) continue to slip further behind the rest of the world. Meanwhile, people in extreme poverty have been increasing again after decades of decline.


Falling further behind


World output more than doubled from $36 trillion in 1990 to $87 trillion by 2021 (in constant US dollars), but this growth has not been evenly distributed, causing most LICs to fall further behind.


Many of the world’s poorest economies have had meagre growth since the 1960s. As most developing countries have made progress, income gaps among nations have declined.


World economic stagnation adversely affects most countries and people, especially developing countries relying on commodity demand and prices. As much of the world grew, most LICs fell further behind.


Hundreds of millions are stuck in extreme poverty, with incomes per capita in many post-colonial countries barely changing. A World Bank paper argues the poor are especially worse off.


Many poor nations have not caught up, let alone diversified their colonial-type economies. Meanwhile, many poor nations remain mired in conflict, deepening their stagnation.


Poverty has risen due to poor progress as populations grew. Another World Bank report found lower growth correlated with conflict deaths and institutional fragility. Unsurprisingly, these countries often had the world’s highest poverty rates.

Worse, global warming disproportionately harms poor tropical nations and their populations much more. Climate change is expected to push well over a hundred million into extreme poverty by 2030.


Left behind

Paper co-author Paul Collier identified 58 countries in Africa, Asia and Latin America, with about 1.4 billion people in 2021, as the ‘Bottom Billion’. Collier argues most still face problems and have failed to progress since.


These nations have long suffered from persistent poverty, low growth, and failure to develop. Their plight has been exacerbated by civil conflict, geographic constraints, and, often, the inability to use their natural resources to accelerate economic development.


Since the 1980s – not the 1960s and 1970s, as the Bank paper claims – the Bottom Billion countries have failed to grow, falling behind instead. By contrast, the few former LICs that sustained high growth now enjoy per capita outputs at least thrice that of other Bottom Billion countries.


Except for these few notable exceptions, most of the 58 Bottom Billion countries remain LICs or have become lower-middle-income countries. Only six have achieved upper-middle-income country status in the past decade, mainly due to rapid growth thanks to oil and gas.


Although the Bottom Billion countries exist in all regions, about two-thirds (38 of 58) are in SSA. They account for 77% of the Bottom Billion population. Over half have abundant natural resources, but most have not used their mineral wealth to sustain economic progress.


In 2012, the IMF classified 34 of the 58 Bottom Billion countries as ‘resource-rich’, with non-renewable resource exports and revenue often exceeding 20% of their total exports and government revenue, respectively. But most still experience lacklustre growth, if any.


Since 1990, Sub-Saharan Africa (SSA) averaged barely 0.8% annual per capita income growth. Meanwhile, global growth rates doubled as regions like East Asia registered more than 6% yearly per capita growth rates.


Anaemic growth meant that the average incomes of Africans and other slow-growing LICs slipped further behind the rest of the world. Using the World Bank’s global poverty line, the number of poor Africans grew by tens of millions.

If current growth and poverty trends persist, many slow-growing or stagnant LICs, mainly in Africa, will be unable to end extreme poverty, let alone catch up with the rest of the world.


Poorest worst off


Conventional growth models imply that countries lagging behind should grow faster than those already ahead. East Asian industrialisation – supposedly emulating earlier European growth – supports this notion.


Growth in many LICs has slowed since the turn of the century. The paper finds that “The Bottom Billion fared worst of all”, as per capita output barely rose.


The poorest Bottom Billion did not experience convergence by catching up with the others. While some studies suggest overall income convergence, the world’s poorest are relatively worse off.


Now, the Bottom Billion are ‘falling behind’ while those in extreme poverty may be rising again. Incomes of the world’s poorest countries and people are likely to fall behind, even if only relatively, despite some convergence among countries.

The situation has worsened since 2022. In addition to the commodity-price collapse since 2015, the COVID-19 pandemic, the Ukraine and Gaza wars, and geopolitically driven unilateral sanctions have ensured protracted stagnation.

Bottom Billion countries lack the policy and fiscal space to cope with, let alone address, the impending debt crises. The situation has been exacerbated by tighter credit with high interest rates set by the US Fed.


Despite decades of recognising LIC characteristics, the World Bank has yet to develop strategies, policies and means to overcome their poverty. It is unclear why the Bank has endorsed the Bottom Billion designation, although it has not enhanced our understanding of poverty.


Related IPS Articles

·                   Land Grabs Squeeze Rural Poor Worldwide

·                   Chronicle of a Catastrophe Foretold

·                   Global South Stagnating under Heavier Debt Burden

·                   Onerous Debt Making Poorest Poorer

·                   Rich Nations, IMF Deepen World Stagnation

·                   Out of Africa: Rich Continent, Poor People

·                   Neoliberal Finance Undermines Poor Countries’ Recovery

·                   Poor Lives Matter, but Less

·                   Social Protection Necessary to Quickly End Poverty, Hunger


Available online here: More Poverty for the Poor

 
 

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About Jomo

Jomo Kwame Sundaram is Research Adviser, Khazanah Research Institute, Fellow, Academy of Science, Malaysia, and Emeritus Professor, University of Malaya. Previously, he was UN Assistant Secretary-General for Economic Development, Assistant Director General, Food and Agriculture Organization (FAO), Founder-Chair, International Development Economics Associates (IDEAs) and President, Malaysian Social Science Association. 

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