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Wealth of 62 richest same as 3.6bn people combined

Cape Town - The global economic system is broken and is failing the majority of people. Instead of an economy that promotes the prosperity of all the world's inhabitants, the global financial system has created an economy that benefits only the richest 1% of people on the planet.

This is according to a report by Oxfam, which shows that the richest 1% of people on Earth now have more wealth than the rest of the world combined.

"Although world leaders have increasingly talked about the need to tackle inequality, the gap between the richest and the rest has widened dramatically in the past 12 months," said Oxfam. It added that the prediction it made ahead of last year's World Economic Forum meeting in Davos that the top 1% would soon own more than the rest of us by 2016, actually came true a year early, in 2015.

According to Oxfam's calculations, in 2015 just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure has slipped from 388 individuals as recently as 2010.

The wealth of the richest 62 people has increased by 44% in the five years since 2010 – a rise of more than half a trillion dollars ($542bn), to $1.76trn. At the same time, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.

Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while the top 1% has received half of that increase. The average annual income of the poorest 10% of people in the world has increased by less than $3 each year in almost a quarter of a century, while their daily income has gone up by less than a single cent every year.

While applauding the fact that the number of people living below the extreme poverty line has halved between 1990 and 2010, Oxfam points out that rising inequality has denied an extra 200 million people an escape from poverty. "That could have risen to 700 million had poor people benefited more than the rich from economic growth," said Oxfam.

Being sucked up instead of trickling down

It simply cannot be denied that the big winners in our global economy are those at the top, said Oxfam. "Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate." And chances are slim of these riches ever benefiting anyone else: "an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments", said Oxfam.

And that's not all: the spike in economic inequality also heightens existing inequalities, said Oxfam. It cited recent findings by the International Monetary Fund that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.

Another factor is the role played by the gender gap. Oxfam pointed out that 53 of the world’s richest 62 people are men.

Oxfam has also found that the poorest people are most susceptible to climate change, yet they created only about 10% of total global emissions. "The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%," said Oxfam.

The evil of tax avoidance

Oxfam singled out tax avoidance as a mushrooming concern. "A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades."

This has been underpinned by the dominant world view that low taxes for rich people and firms are essential for economic growth "and are somehow good news for us all".  An army of highly paid professionals in the private banking, legal, accounting and investment industries ensures that the system is maintained.

"It is the wealthiest individuals and companies – those who should be paying the most tax – who can afford to use these services and this global architecture to avoid paying what they owe. It also indirectly leads to governments outside tax havens lowering taxes on businesses and on the rich themselves in a relentless ‘race to the bottom’," said Oxfam.

"This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases."

Well-heeled Africans play their part in lost tax revenues, with almost a third (30%) of rich Africans’ wealth – a total of $500bn – sitting pretty in offshore tax havens. "It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school," said Oxfam.

Global inequality cannot end until "world leaders end the era of tax havens once and for all", said Oxfam. "Inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority.

"It is time to reject this broken economic model," said Oxfam.

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