A month ago, Oxfam released a report on the increasing gap between the super rich and poor. Rebecca Thorning Wine takes a look at the report and the power structures that enable the gap to widen as well as the possible mentality behind billionaires.
On Monday January 20, 2014, Oxfam released a report on the growing global threat of economic inequality. Some of its major findings were that 85 of the wealthiest individuals now own the same as the poorest 3.5 billion people in the world, half the world’s wealth is acquired by one percent of the population, and that seven out of ten people reside in countries where economic disparity has widened over the past 30 years. The report was released just in time for the World Economic Forum in Davos, and asked that those empowered enable change, pledge to enforce a ‘living wage’ within companies that they control, and support the taxation of wealth – among a long list of other recommendations.
The following is a summary of how the Oxfam report contextualised the state of economic disparity in the US, Europe, India, Pakistan, and Africa.
Power structures that rig the game in the US
Oxfam took a look at how money in politics effectively skews representation and increases inequality in the US. Since the 1970s corporations have successfully weakened regulations of money in politics through lobbying, which as a result have helped to create policies with tax loopholes that favour these same corporations. In 2010, President Barack Obama signed the Dodd-Frank bill that attempted to increase regulation in order to prevent a second crash. However, lobbyists for the financial district have spent over a billion dollars in an attempt to delay the implementation of the bill.
Europe and inequality
As a result of regressive taxes and excessive spending cuts in education, healthcare, social security and diminishing labour rights, the combination of these actions has led to economic inequality in Europe. Recently the IMF has admitted that these measures have hindered growth and recovery, and have been detrimental to the hope for growth and equality.
The roots of corruption and power in India
India is a case where half of the country’s dozen billionaires have acquired their wealth in ‘rent-thick’ sectors. These sectors include real estate, telecommunications, construction and mining, “where profits are dependent on access to scarce resources, made available exclusively through government permissions and therefore susceptible to corruption by powerful actors – as opposed to creation of wealth”
Tax loopholes in Pakistan
Pakistan’s parliament is made up of the country’s richest elites who use their position to advance their own interests through the creation of tax loopholes and non-disclosure laws. For example, 10 million people qualify to pay taxes yet only 2.5 million are registered to do so. Furthermore, the average income of a parliament member is $900,000, with the richest member earning $37 billion, yet only 61% of lawmakers paid income tax in 2010. The Oxfam report draws the conclusion that, without a real tax base, the government cannot adequately provide its citizens with any form of basic services like education, healthcare and a functional infrastructure – thus economic disparity is only ever reinforced.
Continuing inequality in Africa
As new natural resources are being discovered in Africa, exports of oil, natural gas, metals, and minerals are behind booming growth in Tanzania, Zambia, the Democratic Republic of Congo, Mali, and Namibia. Yet poverty and inequality remains intact in these countries. Oxfam cites a study that in fact proves a correlation between the level of resources in African countries, and the level of inequality determined by the GINI coefficient. The report therefore concludes that due to weak regulations, corporations can ally themselves with political actors which results in a decrease in the emphasis on poverty reduction.
Is it just human nature?
85 billionaires are not solely responsible for these policies put in place, but it begs the question: how can they actively try and grow their unequivocal wealth and power, in the face of such inequality. Paul Piff, who studies the psychology of wealth at University of California, Berkeley, created a study of the game Monopoly, and what happens when the game is engineered so that one player wins, in attempt to answer this question.
They had 100 pairs of strangers come in and flip a coin where the winner received extra privileges throughout the game (like getting extra money for passing ‘Go’ and being able to always roll twice in a row). Then, through hidden cameras they watched the players’ behaviour, and as the game unfolded dramatic differences occurred. The rich players showed signs of dominance by smacking their pieces as they moved across the board, and became more boisterous and rude towards the losing player. At the end of the game, when questioned about why they won, the rich players talked about how they had bought different properties, but did not mention that the flip of the coin had allowed them to receive far more opportunities to win.
After Piff and his colleagues had carried out dozens of studies across the country, and surveyed thousands of people, they found that as an individual’s wealth increases so does their feeling of entitlement, and that their ability to empathise decreases. They are then able to moralise greed to be good as well as the preservation of self-interest.
Another study done by three psychological researchers, Michael W. Kraus, Stéphane Côté and Dacher Keltner in 2010, looked at how social class might be an indication to what degree an individual can empathize with others. There were three parts to the experiment, the first looked at how participants processed emotions based on pictures. What they found was the more upper class the participant; the less able they were in correctly identifying emotions. The second experiment found that upper class participants were less able to identify emotions in the context of a job interview. The last experiment found that lower socioeconomic status participants were more equipped to identify 36 sets of emoting eyes. The researchers thus concluded that rich people suffer from empathy deficits, ill-equipped to pick up on subtle emotional cues.
In Paul Piff’s Ted Talk about his study, he quotes Bill Gates: “Humanity’s greatest advances are not in its discoveries – but in how those discoveries are applied to reduce inequity”. In line with this, Oxfam calls for a redistribution of power and stronger social schemes to increase upward mobility for the poor. Piff further states that reminding the rich of the effects of poverty can increase their likeliness to help the poor. With income inequality functioning as a global threat, this needs to be a daily reminder.
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