(Davos) With extreme wealth also comes extreme political clout which results in extreme human suffering, said Winnie Byanyima, Executive Director of Oxfam International at a panel session this week in Davos.
Byanyima helped set the tone for this year’s World Economic Forum by releasing the comprehensive report on Monday that disclosed the world’s richest one percent are on track own more than half the world’s wealth by next year.
It is fair to say the report stunned the decision-makers and opinion-leaders ensconced in this small Swiss ski town. It has been a hot topic at many panel sessions and in informal gatherings.
Byanyima, who is also Co-Chair of Davos, was speaking this morning at a panel session on global economic growth, inequality and the role of technology. She noted that in the United States businesses spent $400 million during 2013 to lobby political decision-makers to pass laws and shape the market in their favor. “Extreme wealth takes over the role of public decision-making.” she said. And while this is going on, said Byanyima, many thousands in the developing world die of Ebola and malaria.
Other panelists included Martin Sorrell, CEO of the massive advertising and marketing conglomerate WPP, Christine Lagarde, Managing Director of the International Monetary Fund, and Mark J. Carney, Governor of the Bank of England and former Governor of the Bank of Canada.
Martin Sorrell said people like him were critical to growth. “I founded a company with two people, which now employs 179,000 people in 111 countries and invests $12bn in human capital each year. I make no apology for that whatsoever.” But no one was asking him to apologize. It is not wealth creation that is the issue, just the manner in which it is distributed.
“Excessive inequality is not good for sustainable growth,” Lagarde from the IMF said, adding that inequality had worsened since the financial crisis. “Distribution per se matters,” she said, because “if you increase the income share of the poorest it has a multiplying effect on growth.”
The amount of money currently tied up unproductively is astounding. More than $18 trillion is stashed in tax havens, and $7 trillion on balance sheets remains uninvested.
“Let the companies stop lobbying and put the money into medicine,” Byanyima proposed. Calling for global tax reform, she said that the revenues derived from fair taxation could be ploughed back into the economy to create jobs and lift people from poverty.
Carney said that technology companies in particular should pay more tax out of a “sense of responsibility” to the system. “We should recognise that the firms that take advantage of international tax rules are technology companies,” he said. “The amount of tax that’s paid by technology companies is very small relative to the returns.”
Tax avoidance has been a hot issue in the UK. While he didn’t mention Google by name, everyone in the room knew it was one of companies he had in mind. Google UK had sales of USD $5.6 billion to UK customers, but most of this money was routed through Ireland for tax purposes, a move that saved Google a fortune.
Lagarde said that the plunge of the price of oil created the perfect opportunity to cut $2 trillion worth of energy subsidies across the world and invest it equally in job creation and education, with a special focus on women.