Just before the annual gathering of the global elites last January (at the Swiss mountain resort of Davos), the anti-poverty charity Oxfam released an eye-opening report that showed the world’s 85 richest billionaires hold as much wealth as 3.5 billion of humanity’s poorest half. That shocking statistic quickly went globally viral. Now there's a new report.
Last week the 72-year-old organization launched a new campaign called "Even It Up" with a new 136-page report showing that the combined wealth of the world’s top 85 multi-billionaires is increasing at the rate of a half million dollars a minute.
The reports says: “Oxfam’s decades of experience in the world’s poorest communities have taught us that poverty and inequality are not inevitable or accidental, but the result of deliberate policy choices.”
Of their many recommendations, the Even It Up campaign called on governments to start taxing financial transactions and to clamp down on offshore tax havens. In 2013, Oxfam estimated that the world was losing $156 billion a year in tax revenue as a result of wealthy individuals hiding their assets in offshore tax havens (usually islands).
In other areas — such as taxing wealth — Oxfam is recommending a 1.5 percent tax on individual wealth above $1 billion. Oxfam calculates that would raise enough money to fill the annual gaps in funding needed to get every child into school and to deliver health services to the world’s poorest countries.
Some of Oxfam’s other recommendations also target the engine of inequality: the modern multinational corporation. Even It Up urges governments to steer procurement contracts to companies that pay their top executives no more than 20 times the pay that goes to their typical workers.
Oxfam UK chief Mark Goldring says, "Governments around the world have been guilty of a naive faith that wealth going to those at the top will automatically benefit everyone. That’s not true."
In other words, trickle down doesn't. In the meantime, these mega-rich people have been divorcing themselves from the rest of humanity entirely by buying their own private islands.
In their latest issue of the Candy GPS Report (produced in partnership with Deutsche Asset & Wealth Management), they write:
"We focus on island real estate around the world. Surrounded by water and finite in number, islands encapsulate much of what is desired by ultra-high-net-worth individuals. They are both exclusive and rare, where the best properties carry a significant price premium over their mainland counterparts. Our research looks in depth at these markets and pinpoints the hot spots around the globe. We also look at the sustainability of these islands and the rise of private planes that are putting them within easy reach."
Such as the new $100 million Aerion AS2 private jet, which will seat 11 elitists and provide the ultra-mega-wealthy with a deluxe dining room and shower facilities. The supersonic plane will take just four hours to cross the Atlantic from New York to London. This may suffice for the time being, until some day, the mega-rich can completely isolate themselves by living on another planet — when Virgin Galactic isn't just sending them into lower Earth orbit for "kicks" at $250,000 a pop (or about 30 seconds of income for some people).
As an aside: Hedge fund multi-billionaire Bill Ackman just bought a penthouse that tops Manhattan’s newest tower: the 90-story One57 for a cost of $90 million — an all-time record for a New York condo. In the meantime, the apartment will go vacant until he can flip it for a profit. Although, Ackman told the New York Times, he might hold a few parties there.
In other words, trickle down doesn't. But many Americans still naively believe it does, and today they will AGAIN vote for more of the same — because "marketing, media and money can get any entire population to vote against their own interests."
Rupert Murdoch concerned about inequality?
Treasurer Joe Hockey and billionaire Rupert Murdoch recently made impassioned speeches expressing their deep concern about the problem of rising inequality — the rich are getting richer, while the poor are suffering from stagnant or even declining real wages...Hockey and Murdoch were arguing that lower taxes and smaller government are the best ways to address inequality.
If QE and monetary policy didn’t cause rising inequality, what did then? Technology has shifted the nature of work dramatically over the past century — from farms to factories to office buildings. It has also increased the returns to certain specialized skills and cognitive ability. This technological change has greatly improved standards of living. However it has left many people who do not have higher-education degrees with stagnant real wages or long-term unemployment. As a result, inequality has increased. This skill-biased technological change has been going on for a while, as has the resulting rise in inequality. [But] we could give everyone in the world a PhD, but there would still be a lot of inequality.
Instead, fiscal policy, rather than monetary policy, can reduce inequality via progressive taxes. Current Fed chairwoman Janet Yellen said as much in a recent speech on inequality, targeting inheritance in particular as a source of persistent gaps in economic opportunities for the rich and poor.
Countries with higher and more progressive tax rates have less inequality, but still grow just as fast or faster than countries with lower taxes and more inequality...So next time a Treasurer, a billionaire or anyone else tries to argue that QE is responsible for rising inequality and the best solution is lower taxes, I recommend being more than a little skeptical.
Paul Ryan wii make inequality much worse
After winning re-election last night, Paul Ryan [as expected] said he would seek the chairmanship of the the House Ways and Means Committee (the chief tax-writing committee.)
From Paul Ryan's website on tax reform: "Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax." (The death tax is the inheritance tax.)
Economic shampoo cycle (bubble, bust, repeat)
Jared Bernstein (Joe Biden's former economic adviser) writes: The economic shampoo cycle (bubble, bust, repeat) is underway. He mentions that there was a hostile takeover bid by a hedge fund. The deal fell apart, but the hedge fund still walked away with over $2 billion in profit.
He leaves these two links:
New York Times (Nov. 17, 2014): Ackman Has Luck of a Loser, to the Tune of $2.2 Billion
New York Times (Nov. 17, 2014): One of the biggest booms ever in mergers and acquisitions is currently underway (billions spent on buying other companies instead of raising wages).
Top incomes soared as tax rates fell
By David Cay Johnston
"Each of the top 400 paid tax at the same rate as a single worker making $80,000 in 2010 ... These figures from an IRS report released Friday show how much government policy has helped those at the top amass even larger fortunes thanks to lower tax rates. It also shows how far the United States has moved away from the ancient principle of progressive taxation ... The annual top 400 report by the IRS significantly understates incomes at the very top in America because Congress lets some people defer reporting their income — and therefore paying their taxes — for years or even decades. These deferrals are the equivalent of a zero interest loan from the government of the amount of tax deferred. Several dozen Americans, disclosure documents show, earn annual incomes of $1 billion or more. But they do not show up in the top 400 reports because Congress does not require them to report their full incomes or pay taxes immediately. For cash to live on these people typically borrow against their assets, paying interest rates of 2 percent or less."
This might be worth digging into further. DCJ is thorough and finds the most telling pieces of financial data so if he's writing about it, it's worth looking at. He's awesome.