The South African Federation of Trade Unions welcomes the Oxfam report – “Public Good or Private Wealth” – which has been published to coincide with the World Economic Forum in Switzerland, where the planet’s richest exporters gather to plan how to get even richer.
The report closely echoes SAFTU’s own viewpoint, and advocates many of our demands for measures to reverse the yawning chasm between rich and poor, which even the capitalist class themselves fear will lead to a social explosion.
Oxfam confirms that inequality is widening even faster than ever, in South Africa and throughout the world, where last year 26 people owned the same amount as the 3.8 billion poorest half of humanity, 3.8 billion people, even fewer 43 richest people the year before.
The wealth of the world’s billionaires increased by $900 billion (R12.43 trillion), or $2.5bn a day, in the last year, while the wealth of the poorest half fell by 11%.
Since 2008, the number of billionaires has doubled, says the report, and the rich and big corporations are paying lower taxes than they have in decades. At the same time, 3.4 billion people are living in poverty on less than $5.50 a day, and women are often hardest hit as men hold 50% more of the world’s wealth than women.
Based on data from Swiss bank Credit Suisse and the Forbes List of billionaires, Oxfam claims that between 2017 and 2018 the wealth of the super-rich grew by $2.5 billion per day on average, while the bottom half of the world’s population saw their wealth dwindle by $500 million a day over the same period.
“Our economy is broken, with hundreds of millions of people living in extreme poverty while huge rewards go to those at the very top,” Oxfam added. “Governments face a stark choice today — a choice between a life of dignity for all their citizens or continued extreme wealth for a tiny few”.
Unsurprisingly the report was immediately attacked by right-wing, free market economists, who claimed that it is based on misleading figures by including debt as part of the definition of poverty, despite many wealthy, or potentially wealthy people having big debt burdens.
This, they say, makes it appear that a hypothetical middle class person in the developed world with a mortgage equal to their pension is exactly as poor as, for example, a small-scale farmer who just lost a crop to drought and has nothing to fall back on.
On this “net wealth” basis, the bottom 50% of the world, according to Credit Suisse has almost no wealth at all, while with the bottom 10% have “negative wealth” of $750 million due to debt.
Oxfam replied to these critics by releasing a technical note which admitted that the problem with “net wealth” existed, but insisted that its “main finding is not in question. If you cut out the bottom 10% and its “negative wealth” altogether, you still end up with the next-poorest 40% having 49.8% of the wealth of the top 1%.
“It is clear that, at the aggregate level, the negative wealth at the bottom of the distribution is completely dwarfed by the wealth at the top of the distribution”.
Oxfam’s report also includes a new set of statistics based on recent work done by the World Bank’s Christoph Lakner and City University of New York’s Branko Milanovic, which attempts to calculate global income inequality, instead of wealth, from 1988 to 2008, when global income doubled to $26 trillion in those 20 years, but 44% of that accrued to the top 5% of the global population.
The Oxfam report confirms everything that SAFTU has being saying about inequality in South Africa and agrees with Ronald Wesso, research and policy leader at Oxfam Southern African, that “South Africa is emblematic of the problem”.
The federation also broadly agrees with Oxfam’s solutions:
SAFTU supports the idea of a wealth tax even more strongly in the light of Oxfam’s report that 30% of private wealth in the world may be held offshore, depriving governments on the continent an estimated $15bn in tax revenues
Oxfam confirms SAFTU’s view in the level of tax evasion by the world’s rich, who are hiding at least $7.6 trillion from the tax authorities, avoiding an estimated $200bn in tax revenues.
“While millions of refugees are refused a safe haven, the richest can buy citizenship in any one of a number of countries offering minimal taxes and scrutiny of their wealth”.
“Multinational companies exploit loopholes in tax codes to shift profits to tax havens and to avoid taxes, costing developing countries an additional estimated $100bn of lost corporate income tax,” it said, adding that the impact of inequality was devastating and 262 million children would not be allowed to go to school.
In South Africa, says Dick Forslund, senior economist at the Alternative Information and Development Centre, illicit outflows by big corporates are hampering the country’s economic growth prospects. “It is not only the government that gets hurt by companies avoiding tax, but it also hurts the wages of workers”.
Support for Forsland’s concern about rising capital transfers as a major cause of inequality has come from an unlikely source. Right-wing, pro-capitalist economist Mike Schüssler, says that “South Africa attracts far less fixed investment as a percentage of GDP than any other emerging market.
Foreign direct investment (FDI), he explains, is simply the difference between what the home country receives in fixed investments from foreign countries and what it invests in other countries.
According to data from the UN Conference on Trade and Development (Unctad) for 2017, South Africa was the third biggest exporter of capital as a percentage of GDP in the world.
FDI, he says, is vital to maintain and strengthen economic growth, integrate countries into the global economy, boost technological innovation and know-how, enhance skills transfer and contribute to the creation of decent work… It is one of the most important factors in creating jobs in many countries and governments fall over themselves to attract it.
It is a long-term investment and a good indicator of confidence in a developing country, says Schüssler, It has had the closest relationship with job creation in the formal sector in South Africa since 1967. In larger developing countries, FDI makes up well over 35% of investment stock.
But only the tax havens of Luxembourg and the Netherlands export more net FDI as a percentage of GDP than South Africa.
South Africa, he adds, has larger outward fixed-investment stock as a percentage of GDP than Switzerland. Of 157 countries analysed, only 22 are net exporters of fixed direct investment and only four are emerging markets, and some of these are at war.
In US dollars, South Africa is the ninth-largest net exporter of FDI at $120.3 billion (R1.7 trillion as at the end of 2017). The country has more net outward FDI stock (fixed capital stock) than Finland, Norway and Ireland combined.
“The above is not a quick survey or a spreadsheet by a think tank,” says Schüssler, “It represents real money flows and investments into productive investment. The labour numbers come from the International Labour Organisation.
“Using the average emerging market as a measure (average is taken as 12% of GDP as calculated), SA should have had R2.2 trillion in extra fixed investments by the end of 2017. The result of the outflow of FDI is the 10 million unemployed who are the real victims of this tragedy.”
Schüssler of course is a staunch defender of the capitalist system which is responsible for the crisis he is describing. It is his beloved free market which allows all this capital to flow out of the country and cause the crisis of mass unemployment, poverty and inequality.
And it is the neoliberal economic policies of successive ANC governments, including the present one, which have left the economy in the hands of international monopoly capital and their credit rating agencies.
SAFTU supports all the recommendations in the Oxfam report, but recognises that they will never be fully implemented without a fundamental transformation of the economy, through the nationalisation of the banks, mines and key industrial monopolies under democratic workers and community control.
Only then will the people South Africa be able to direct investment out of the tax havens and into job-creating, and wealth-generating economic growth.
The Oxfam report however will give new confidence to SAFTU and its allies to forge ahead with their campaign of mass action including the mass stairway on 26-27 March to demand action to end the crisis of unemployment, poverty and inequality.