Is it the best of times, or the worst of times? From an economic perspective, it depends on where you’re reading this. Global wealth increased by £7.3 trillion in the year up to June. More than 80 per cent of this new prosperity was enjoyed by the top one per cent of the population. Meanwhile, the poorest half got no increase.
Let’s be clear, there have been huge strides towards ending extreme poverty in recent decades. Business and private investment have played an important role, alongside other factors including support for public services – especially basic education – improved agricultural productivity, and in some places, raising minimum wages. But progress could be even faster if we did more to break down the barriers still holding back the poorest.
We need profit to drive investment. But our economies disproportionally reward wealth rather than hard work. Despite small gains, millions of people who make our clothes and grow our food struggle to survive on meagre incomes. The typical worker saw their average wages rise 2 per cent a year between 2006 and 2015, while billionaire wealth rose by an average of 13 per cent annually.
Work hard, goes the mantra, and you can climb the ladder to a better future. But the truth is, the ladder is steeper and the rungs further apart the lower down you are. Around the world, people find their efforts just aren’t enough for them and their families to live decently, save, or provide a route out of poverty.
This isn’t just a “poor country” problem. Oxfam has spoken to workers in US poultry factories who use nappies because they’re denied toilet breaks. In Bangladesh, a garment worker would have to work a lifetime to earn what the CEO of one of the top five fashion retailers makes in just four days.
So why aren’t workers getting a fair share of the wealth they help to create?
One issue, as our report describes, is the relentless pressure to maximise profits, which sees supply-chain costs squeezed and a global race-to-rock-bottom on wages. In Nigeria, for instance, the minimum wage would need to be tripled to ensure decent living standards. Jobs are outsourced to countries where people are unable to negotiate for better conditions. A raw deal for women, who consistently earn less than men, is also key. At current rates it will take 217 years to close the global gap in pay and employment opportunities between women and men.
If this sounds like a lot of bad news, well, the good news is we know what’s needed to transform our economies so they work for everyone. We just need the political will to do it.
Governments should act to ensure workers are guaranteed a living wage, bargaining power and decent conditions, and end discrimination against women. They should crack down on tax avoidance and plough the proceeds into increased funding for schools and hospitals. Look at Iceland, which has made it illegal to pay men more than women, or Ecuador, which ensures its minimum wage is a living wage.
It’s also time to rethink corporate models and the government policies that shape them so that business can help solve inequality. As Unilever CEO Paul Polman said recently: “businesses have been created to serve society […] profits alone cannot be an objective.” Some companies are structured to distribute power, risk and reward more fairly between everyone they impact. Phone giant Huawei shares its profits with employees, while multinational cooperative Mondragon ensures the highest-paid receive no more than nine times more than the lowest.
There is an increasing recognition that something has to shift. The Financial Times says capitalism needs a new social contract, the Prime Minister wants an economy for the many not the privileged few, and the IMF is urging action to tackle harmful inequality. It’s clearer than ever the current system requires a reboot.
If that means the most wealthy getting a little less, that is a price we should all be willing to pay. We could soon see the world’s first trillionaire. Wouldn’t it be better to devote more of our resources to break other records; to end extreme poverty by 2030, to prevent infants dying of malnutrition?
Elites in Davos will discuss how to create “a shared future in a fractured world”. A genuine shared future means building an economy that works directly to end poverty, not one that hopes for it as a side-effect of growth. A future that is the best of times – for everyone.
Mark Goldring is the chief executive of Oxfam GB.
Content from our partners
Related
