Inequality: All talk and no action

A slum in Delhi, India
A slum in Delhi, India (photo: Rachel Palmer/Save the Children)

The World Economic Forum held in Davos has become the yearly inequality moment. It turns out that the gathering of the richest people on the planet is a great time to release reports that show just how rich they are. Oxfam has again taken the limelight, highlighting that if current trends continue the richest 1% will own more than everyone else by 2016. The statistic has gained considerable attention, but as great as it is for inequality to get so much attention, I have to say that I’m bored of the superficial media circus. After seeing the issue rise and rise again up the agenda, I’m now keen to see it put on the action list.

Cue President Obama. At the heart of his State of the Union message this year was a plan to raise taxes on wealthy Americans’ investments and financial institutions and use that money to foot the bill for free community college tuition and new tax credits for childcare and two-worker households. Obama is already facing the predictable backlash, accused of undermining economic growth prospects and waging class war – it does not seem to matter that the OECD has shown that inequality undermines growth or that his proposal would benefit the majority.

This is an illustration of why, when it comes to inequality, we’re all talk and no action. I was asked in an interview on Monday why we should care about how much the rich have, and one of the major reasons is the impact that wealth concentration can have on policy-making. Turkey’s don’t vote for Christmas – and minus the few Gates and Buffet’s who do argue for higher taxes – rich people are using their money to ensure that they don’t get taxed more.

And this is where addressing inequality becomes important for the work of Save the Children and other charities fighting poverty. While great progress has been made on poverty and child mortality, inequality is acting as a block on ‘getting to zero’ in two key ways. The first is related to tax. Tax pays for much needed public services such as health and education. If rich people hide their money in tax havens then we simply can’t provide the services that will reduce child mortality or have the cash transfer programmes that have been so successful in reducing poverty. The money hidden in tax havens in Latin America and Caribbean would be enough for 32 million people to be lifted out of poverty. That is, all people living in poverty from Bolivia, Colombia, Ecuador, El Salvador and Peru.​

The other way in which inequality is undermining our ability to address poverty is related to growth. There are problems with current models of growth, not least because of the climate implications. However, growth has helped to reduce poverty – but more so where there’s been an effort to make growth inclusive. Countries with high and growing levels of wealth concentration at the top highlight a skewed economic model where assets and money are hoarded rather than spent on creating jobs and investing in infrastructure. We’re never going to solve the world’s problems if we keep waiting for this wealth to trickle down.

In the ideal world every CEO and politician at Davos would pledge to tackle inequality. After all, these are the very people who could agree to pay their taxes, introduce a higher minimum wage through their supply chains, and ensure the required investment in public services. If this was to happen Davos would be worthy of the media circus.

 

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