I wrote two columns last month on the topic “income inequality.” The first was on the 2024 Oxfam Report which said there has been a dramatic increase in extreme wealth since 2020. Billionaires are now 34 percent richer than they were at the beginning of this decade and their wealth grew three times as high as the rate of inflation. The world’s richest one percent own 43 percent of all global financial assets. The report also showed that corporations have increased their monopoly several times.
One important report is the link between extreme wealth and corporate power. Oxfam wrote: “Sharply increasing billionaire wealth and rising corporate and monopoly power are deeply connected. The profits of mega corporations are in turn used to benefit shareholders at the expense of workers and ordinary people. This paper reveals how corporate and monopoly power has exploded inequality – and how corporate power exploits and magnifies inequalities of gender and race as well as economic inequality.”
The other column I wrote was basically on how to measure economic inequality using the GINI Coefficient. In countries where the income inequality is high, the result is a rise in populist politics. It does not matter whether the country is rich or poor but income inequality is the deciding factor in the rise of populism. A good example is the United States, which is the wealthiest country in the world and yet has the highest rate of income inequality. The result is the rise of a populist individual called Donald Trump whose main message is that the ordinary American must rise against the “deep state,” a term used to describe the ruling elite in the country.
In the Philippines, I believe that the popularity of Duterte is the result of his constant attack on the so-called ruling elite.
According to the Oxfam Report, there are four ways that corporate power fuels inequality. The report states that increasing monopolization has supercharged corporate power, which is directed at one primary goal above all others, which is increasing returns to shareholders. Corporations used their power in ways that drive and further entrench inequality. The Oxfam Report looks at these four ways.
First is rewarding the wealthy, not the workers. Corporations drive inequality by using their power to force wages down and direct profits to the ultra-wealthy. Furthermore, corporations have used their influence to oppose labor laws and policies that could benefit workers such as fighting minimum wage increases and putting restrictions on unionization.
Second is by dodging taxes. Corporations and their wealthy owners also drive inequality by undertaking a sustained and highly effective war on taxation. Abuse of tax havens and incentives result in tax rates that are lower and often close to zero.
Third is privatizing public services. Corporate power is relentlessly pushing into the public sector and segregating access to vital services such as education, water, health care. Privatization can drive inequalities in vital public services, entrenching the gaps between rich and poor and excluding and impoverishing those who cannot pay, while those who can pay are able to access good health care and education.
Fourth, corporate power is driving climate breakdown. Many of the world’s billionaires own, control, shape and financially profit from processes that emit greenhouse gases.
Oxfam devoted a chapter on how to increase the level of equality and to rein in corporate power. The report outlines three practical steps.
First, revitalize the state. A strong, dynamic and effective state is the best defense against corporate power and a remedy to correct market failures. A strong state is the provider of public goods, the regulator of private enterprises, the lead investor for several sectors and a maker and shaper of markets.
Second, the government should guarantee “inequality-busting services such as health care and education.” The government should support people’s right to energy, transportation, housing and other public infrastructure. There should be no dividend payments or share buybacks before living wages are paid.
Increase taxes on the income and wealth of superrich individuals and corporations. There should be permanent taxation of the wealthiest, which should reduce the wealth of the richest and the number of superrich people which could lead to reducing their dominant influence on politics and policy.
Increase taxes on dividends and capital gains. Taxes need to rise on income from stocks, shares and other revenues that the rich disproportionately rely on at rates as high as those on income from work. Oxfam recommends a minimum 60 percent tax on income from capital. Steps should be taken to curb tax avoidance by forcing corporations to become completely transparent.
The third Oxfam proposal is to reinvent business. The future of business lies in business structures that have dual goals of financial sustainability and social purpose. One way is by providing financial support to employee-owned businesses, including worker cooperatives. Another method is to prevent concentration of ownership of corporations.
In the scenarios described by Oxfam, the question is who will implement these radical changes. The ruling elite, no matter how philanthropic, will resist any attempts to erode their power and wealth. One possible solution that I support is democratic socialism, which has been espoused by politicians in the United States as Senators Elizabeth Warren, Bernie Sanders and Rep. Alexandria Ocasio-Cortez.
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Email: elfrencruz@gmail.com