We Are Experiencing a Crisis of Global Inequality That Is More Than Just Deeply Unjust, It Is Bad for Us All

18/01/2016 09:35 | Updated 18 January 2016

Aicha was 20, and her son Issifou was 18 months. Oxfam met them at a training session for mothers on how to test for signs of malnutrition in their children, such as measuring their upper arm. With a measurement of just 113mm, Issifou was very malnourished.
"When my child is hungry I offer him what food I have at home. If I have no money, sometimes my neighbours will help me out. I get by on about 1000cfa (£1.09) a week." Aisha said.

And then: "I really pity myself when I look at rich people. I feel a kind of injustice. Some are rich, many are poor. I think things need to change."

Aicha's sense of injustice is well founded. Today just 62 people own the same wealth as that of half the global population - three and a half billion people. Those 62 have seen their wealth increase by half a trillion dollars since 2010, whilst the wealth of the poorest 50% has fallen by a trillion in that time. On the one hand, you have people increasing their wealth by as much as half a million dollars a minute; on the other, people are living on 10 cents a day.

In fact we are experiencing a crisis of global inequality that is more than just deeply unjust, it is bad for us all. Inequality has been shown to impact on the durability of economic growth and increases the chances of future financial shocks; it undermines social cohesion and equality for women; and it increases political instability. In a surprising echo to Aicha's words, the self-proclaimed zillionaire Nick Hanauer wrote in 2014 that "if we don't do something to fix the glaring inequities in this economy, the pitchforks are going to come for us".

But of course it is those at the bottom who have the most to fear. In September governments committed to a global goal to eradicate extreme poverty by 2030, but World Bank analysis shows that this will be impossible to do unless we tackle inequality. In fact, had inequality within countries not grown between 1990 and 2010, an extra 200million people would have escaped poverty.

The lesson to learn from the last 30 years is that extreme wealth is not disconnected from poverty - they are two sides of the same coin. Oxfam's report today explains how we have built an economy that increasingly works to suck wealth up, so the rise of the mega-rich necessarily pushes the poor further behind. Economic and policy changes in recent decades - including deregulation, privatisation, financial secrecy and globalisation, especially of finance - have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth.

Politicians who want to address inequality need to forget any blind faith in trickle-down economics and realise that they need to actively create the economy that their people want. Good places to start include increasing minimum wages towards living wages; transparency on pay ratios; and breaking the link between business and politics that ties wealth and power so closely together.

But top of the list has to be putting an end to the era of tax havens. It was recently estimated that about $7.6trillion dollars of global wealth was hidden offshore - depriving governments of $190billion in tax revenues. On top of this we know that corporate investment in tax havens almost quadrupled between 2000 and 2014. When rich individuals and companies dodge taxes the results are twofold: Governments either have less to spend on schools and hospitals and housing, or they have to make the tax revenues up from the rest of the population who cannot so easily carry their cash off to the Caymans.

This puts tax havens at the heart of a secretive global financial system that is directly fuelling inequality and holding back the fight against poverty.

Eighteen years ago the OECD's 'Harmful Tax Competition' report proposed that countries should 'consider terminating their tax conventions with listed tax havens'. Unfortunately, OECD member countries that operate in or practice as tax havens, together with other powerful members that are home to the world's largest companies, succeeded in blocking further progress at that time.

Here, David Cameron used the UK-hosted 2013 G8 to lead efforts to increase the transparency surrounding company ownership in an effort to counter the network of secret shell companies used to hide money. But so far the reaction to the new requirements from the UK's own crown dependencies and overseas territories - the British Virgin Islands et al - has been to dig in their heels. And the PM has yet to force them to move.

Last year G20 governments did agree steps to curb tax dodging by multinationals through the so-called BEPS agreement, however these measures will do little for the poorest countries and chose to largely ignore the problems posed by tax havens.

The endurance of tax havens is testament to just how valuable they are to global elites: they serve no other purpose than to help the richest get richer. But this makes them the perfect litmus test for the increasing number of political voices calling for action on inequality. We need to do more than talk about the growing gap between rich and poor or the problem of tax dodging. Aicha is right, things need to change.

Katy Wright is the Head of External Affairs at Oxfam