Power and wealth

Power and wealth

Nikola Popovski

At the beginning of each year in the already famous town of Davos in Switzerland a gathering takes place in the form of a forum of the rich and powerful, which is pretentiously called the World Economic Forum. Yes, according to the attendance and structure of the participants, this gathering is both ‘world’ and a ‘forum’, but we can doubt that it is also ‘economic’. This is, above all, a gathering of the extremely wealthy and powerful people in the world. But this year the forum seemed to have lost its brilliance and looked more like the title of Procol Harum’s legendary song “Whiter Shade of Pale”. It was not attended by any of the most influential people in the world – above all, the leaders of the world’s largest and economically, politically and militarily powerful nations, nor the richest or most famous of wealthy individuals in the world. Normally, in such conditions the media and public interest in the gathering was slightly lower than the traditional one.

However, certain interesting analyzes and information leaked from this year’s Davos gathering. One of the information that received great media coverage was the one from the Oxfam organization that last year, the wealth of the 26 richest people in the world is equal to the wealth of the poorer half of the world’s population, or about 3.85 billion people. It is important to note that Oxfam International is actually a confederation of 20 non-governmental charities founded in 1942 and committed to reducing global poverty, which has a long and very credible history of research on the issue.

Considering that such assessments in the world are regular, maybe we should also express some satisfaction because the assessment in 2015, published in January 2017, showed that the eight richest people in the world own wealth that is equal to the poorer half of the world’s population? Not at all. The situation is virtually unchanged. The wealth of all billionaires in the world just last year increased by about $ 900 billion, an increase of about $ 2.5 billion per day, but at the same time, the wealth of the poorest approximately 3.85 billion people fell by about 11 percent. These are divergent trends.

Although the World Bank proudly stated last year that extreme poverty in the world (living with 1.9 or less US dollars a day) in 2015 dropped to the historically lowest level of 10 percent of the world’s population or 736 million people, that does not mean that the gap in wealth is decreasing. The extremely poor population that is below the edge of subsistence is decreasing, but the differences grow because the extremely wealthy are getting rich extremely fast, and there is no noticeable progress in the middle class. In the last 30 years, their position has basically not changed. Half of the world’s population continues to live with consumption that is less than $ 5.5 per day, making only one percent of the population (76 million people) now own more wealth than the rest of the world.

But while the media presentation of that naked fact of the over-wealth of the richest may have aroused the public’s wonder and surprise, the connoisseurs of the situation were not at all surprised, but only familiarized themselves with the latest, up-to-date, relevant information that has long been known. Oxfam constantly investigates and emphasizes such data in order to raise awareness and alert the world about the consequences of the terribly uneven distribution of income and wealth in the world. The richest man in the world – the founder of Amazon, Jeff Bezos, according to Forbes magazine, currently has a fortune of about $ 114 billion, the equivalent of the 11-year GDP of our Macedonia, for example, and a residential building with a height of 190 meters in which the richest Indian and 19th richest man in the world live, Mukesh Ambani is estimated at about $ 1 billion and is the most expensive private house in the world. In summary, the number of billionaires in the world in the last decade has doubled and now their number is 2,208 with a tendency of further rapid growth.

Hence it is no coincidence that in Oxfam’s latest report of January 2019, simply called “Public good or private wealth?”, They added a longer subheading which reads: “General health, education and other public services reduce the gap between rich and the poor, and between women and men. Better taxation of the richest can help pay for them.” It is evident that in the long run something must be done. One of the recommendations is that the low taxation of wealthy companies and individuals should be cut off and raised at a more justified level. For illustration – in our country and in the wider Balkan region the taxation of corporations remains proportionate, ie non-progressive and on average amounts to about 10-14 percent of the profits.

If an additional example takes two completely distant and different countries, similar or even shocking data will come to light, which is that the poorest 10 percent of the population pay a far higher effective tax rate than those 10 percent that are the richest, that is, the poorer pay relatively larger taxes. For clarification, the effective tax rate represents the ratio between the de facto paid tax and the total income generated by the individual. Namely, in Brazil, the poorest 10 percent of the population pay an effective tax rate of their 32 percent income versus the richest 10 percent who pay an effective tax rate of 21 percent. In the economically developed United Kingdom, the poorest 10 percent pay an effective tax rate on their income of 49 percent versus the richest 10 percent who pay an effective tax rate of 32 percent. Such examples are not far from us, but on the contrary, they are increasingly common in the practice of all countries in the world.

The situation in which the consequences of economic growth in the world in a lucrative sense relate more to the few richest individuals in the world, even if they are several thousand, it becomes alarming to the extent that the World Bank does not seem to be able to fulfill its purpose to eliminate extreme poverty in the world by 2030. On the contrary, the extreme wealth may appear to be additionally triggered, and economic science, and not only that, has long since acknowledged that inequality can be a serious destabilizing factor.

Therefore, what is a problem and what the participants in the Davos gatherings rarely mention or most often avoid mentioning, is the situation with the distribution of public goods in each individual economy and the world as a whole. On the top of such public goods, in addition to security, are certainly education and health, as well as pension protection, and sometimes other types of social protection. As top public goods they usually should and must be state-owned, not private, with a general population coverage, free from various benefits, but also predictable and responsive to the needs. Many believe that in this respect taxation of wealth, and not just of income, should have a much greater role in the increasingly unfair and economically unequal world.

Views expressed in this article are personal views of the author and do not represent the editorial policy of Nezavisen Vesnik