Corporate power is out of control: here are four ways it pushes up inequality
Corporate power is out of control: here are four ways it pushes up inequality
Whether they are funnelling billions of profits to wealthy shareholders rather than workers, or dodging taxes that could pay for decent health and schools, companies must be held to account for driving our global inequality crisis. Anthony Kamande shares key insights from Oxfam’s Davos 2024 report, Inequality Inc.
On Christmas eve last year, my cousin Lucy came to me in tears. Her son had excelled in exams and won a place at a public high school. Unfortunately, all his dedication is about to go down the drain as she has no money for school fees (many public schools in Kenya still charge fees). As someone whose family also struggled to pay for my education, I understand well how depressing this is for Lucy and her son.
Sadly, the issue is not unique to Lucy’s son: countless children from developing countries are being robbed of their dreams of an education because of underfunded schools. That has created a perfect opportunity for those who want to cash in: in Kenya, private schools have surged as part of a bigger global trend, the commercialisation of essential public services. It is a lucrative business practice that is creating and perpetuating inequality.
“There is an urgent need to recreate and repurpose the private sector in every country, so it is not solely based on maximising shareholder returns.”
As the world’s wealthiest people and business leaders gather in Davos this week, Oxfam’s report, Inequality Inc., shows how corporate power is a driving force of rising inequality, and how it stands in the way of providing essential public services such as education and ending poverty. It then goes on to spell out how things should change: how corporations could instead work for the common good.
HOW CORPORATE POWER IS CREATING AND EXACERBATING INEQUALITY
Corporations and monopoly power are behind the massive gains of the world’s wealthiest people. In our report we reveal that seven out of the ten biggest corporates in the world have a billionaire CEO or a billionaire as the principal shareholder.
The unfair distribution of the company profits is hugely concentrating economic power in the hands of the few. Oxfam’s report shows that for the year to June 2023, 148 of the world’s biggest 200 companies made a record $1.8 trillion in net profit. But most of these profits were returned to the rich shareholders and wealthy executives; for every $100 of profit made by 96 of the 200 world’s biggest companies, $82 was returned to rich shareholders in the form of dividends and share buybacks (where a corporate uses profits to drive up the price of its shares).
The report identifies four ways corporations and monopoly power drive inequality and climate meltdown.
1. Rewarding the wealthy instead of workers Corporations are forcing down workers’ wages in the race to maximise profits for their wealthy shareholders and executives. Over the past couple of years, companies have been directing their profits to the wealthy instead of distributing them fairly, resulting in a decrease in workers’ wages. Indeed, for the past two years, nearly 800 million workers around the world saw a $1.5 trillion cut in their pay, effectively handing corporates a month of free labour. The falling unionisation, precariousness in the labour market, and corporate use of their power to oppose policies and laws that benefit workers have given the wealthy the upper hand.
2. Tax avoidance and evasion Tax evasion, and avoidance, and lobbying for low corporate taxes is the second way corporations keep as much money in their pockets as possible. Since 1980, corporate tax has fallen in most countries. This has particularly impacted poorer countries like Kenya where substantial revenue is derived from corporate tax. Yet governments need this tax money to provide quality, accessible and universal essential services, such as education to Lucy’s son. But without sufficient tax revenue, that becomes challenging. To keep themselves afloat, governments have resorted to irresponsible borrowing, which, again, corporations and their wealthy owners are profiting from by lending at bankrupting interest rates, worsening the situation.
3. Privatisation of essential public services The wealthy are enriching themselves by robbing the poor through commodifying and commercialising essential public services such as education, healthcare, water, and other public infrastructure. This further entrenches inequality as only those with money can afford these services, while the rest, like Lucy’s son, suffer.
4. Driving climate breakdown The richest are the biggest emitters of greenhouse gases. However, it is the poorest and those least able to withstand the most harmful effects of climate change who bear a disproportionate burden of the harms climate change causes. Unfortunately, the big contributors to climate change are also in charge of shaping the green transition, often blocking progressive policies that could protect our planet.
The result of all of this is ever greater inequality, as the world’s wealthiest grow ever wealthier while billions at the bottom are lose out. And our new report shares some eye-popping statistics that reveal just how wide the gulf now is between the world’s rich and the rest.
FIVE BILLIONAIRES VERSUS FIVE BILLION PEOPLE
In 2023, the world’s billionaires had a sumptuous year. Between them, the wealthiest people on earth added US$1.2 trillion in 2023 alone in real terms, a massive jump to their already colossal wealth. If they distributed this gain to everyone on earth, you would get about $150. In my rural village, that is a decent sum to keep a family going for up to three months.
The richest of the rich were the happiest lot. As of the end of November 2023, the five wealthiest men were $465 billion richer in real terms than they were in 2020, having more than doubled their wealth. That gain is enough to end global extreme poverty 11 times over. On the other hand, billions of the world’s poorest people lost out, with five billion people’s wealth falling since 2020.
THREE WAYS STATES MUST ACT TO CURB CORPORATE POWER
So how can we ensure corporations work for the benefit of humanity rather than blocking progress on poverty and inequality? In the report, we suggest governments have a duty to intervene here – and suggest three practical ways they can do this:
The state should urgently reclaim its crucial responsibility as the provider of essential public services, such as education, water and other public infrastructure. It should reinvent and empower public institutions. And it should improve accountability and transparency in public institutions to improve efficiency, service delivery and public trust.
Governments have a duty to regulate corporations more to make them part of an economy that works for everyone. They should break up corporate monopolies, a considerable hindrance to innovation, job creation and competitive prices. They should also empower workers by implementing progressive labour policies, including supporting unionisation and setting up a living wage or minimum wage, which would ensure fairer distribution of companies’ profits. Finally, adequately taxing corporations and wealthy people will help dilute their power and influence and provide governments with much-needed resources for public services.
There is an urgent need to recreate and repurpose the private sector in every country, so it is not solely based on maximising shareholder returns. Governments have a crucial role to play here. They should support new business models that put workers and community first and those that protect our environment. Governments can use numerous tools, such as procurement and financial support to prop up such new businesses.
Without urgent action to rein in corporate power, it will be impossible to end poverty, protect our planet from destruction and secure our democracy and public institutions from elite capture. The state must urgently reclaim its responsibility for improving people’s lives and act to make companies deliver public as well as private good. Then, hopefully, Lucy’s son and billions like him will get the decent education that they deserve.
Author: Anthony Kamande, Inequality Research Coordinator at Oxfam International.
You can also find this blog posted on Views and Voices.
Read the full report: Inequality Inc.: How corporate power divides our world and the need for a new era of public action.