Corporations are fuelling inequality. Here’s how

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Amitabh Behar, Executive Director (Interim), Oxfam International

• Ongoing global challenges, including geopolitical tensions, conflict, extreme weather and economic fallouts from COVID-19, are affecting millions of people worldwide.
• Meanwhile, the world’s richest and many wealthy corporations are experiencing prosperity like never before.
• Addressing this growing inequality will require a systemic change to address exploitation, economic disparities and environmental concerns.

The problems in the world today are daunting. Many countries are locked in conflict; the frequency of extreme weather events is on the rise and, every day, we see the distress of families who have lost everything. Millions of people are still grappling with the economic fallout of the COVID-19 pandemic while contending with escalating cost of living. Five billion people are poorer than they were in 2020.

In stark contrast, the world’s richest are enjoying wondrous prosperity. New research from Oxfam shows that the five richest men have seen their fortunes more than double since 2020. Billionaires are $3.3 trillion (34%) richer compared to the beginning of this decade of crisis, with their wealth growing three times as fast as the rate of inflation.

Mirroring the fortunes of super-rich, large firms are also winning big. 148 of the world’s biggest corporations together raked in $1.8 trillion in total profits in the twelve months leading up to June 2023, a 89% jump compared to average total profits in 2017-2020. Big businesses are expected to smash annual profit records in 2023.

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The roots of inequality

Wealth also continues to reflect its sexist, colonial and neo-colonial roots. Despite representing 21% of the world population, countries in the Global North own 69% of global wealth and are home to 74% of the world’s billionaires’ wealth. Globally, men own $105 trillion more wealth than women – the difference in wealth is equivalent to more than four times the size of the US economy.

The rise in billionaire wealth and the rise in corporate and monopoly power are deeply connected. The richest people are not just the biggest beneficiaries of the global economy, but they are also exerting significant control over it. Seven out of ten of the biggest corporations on Earth now have a billionaire as CEO or principal shareholder. Together these corporations are worth $10.2—a figure bigger than the economies of Africa, Latin America and the Caribbean combined. The richest 1% of people globally own a staggering 43% of all financial assets. A new era of monopoly power is supercharging extreme corporate power, enabling a small few to control markets, and set the terms of exchange and profit without fear of losing business.

This rising trend in monopolistic corporations affects us all: from the wages we are paid, to the foods we eat and can afford, the medicines we can access and the rights we can realize. Yet such extreme corporate power is not inevitable. In 2023, the US government filed a lawsuit against Amazon, alleging that the company leveraged its monopoly power to “inflate prices, degrade quality, and stifle innovation for consumers and businesses”.

Corporate power is driven by the goal to increase returns to already rich shareholders above all else. Such unbridled power exploits and magnifies economic, gender and racial inequalities, and is hastening climate breakdown. Huge corporations are using their power to drive down wages, dodge paying their fair share in taxes and influence governments to privatize vital public services like healthcare and education.

As former US President Franklin D. Roosevelt warned, “the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself.”

We are losing the race to an equal, sustainable future free from poverty and injustice, and if this trend is not reversed, it is a recipe for disaster.

We need a “new world order”, a reimagined, human-centred economic model. We need to embrace a model that uplifts people living in poverty rather than enriching only those at the top. We must reject the idea that “trickle-down” economics works. This will require radically increasing the level of equality in the world, at both national and global levels. Oxfam supports the idea proposed by Joseph Stiglitz, that every country should aim for a situation where inequality is reduced to the point where the bottom 40% of the population have around the same income as the richest 10%, known as a Palma of 1.

The 3 Rs of addressing inequality

Every corporation has responsibility and scope to address inequality – and examples show this is possible.

Beyond this, governments must show leadership to reduce the great divide and radically reduce the gap between the super-rich and the rest of us through the 3 Rs: revitalizing the state, reigning in extreme corporate power, and reinventing business.

Firstly, a strong, dynamic, and effective state is the best safeguard against runaway corporate power and to correct market failures. All governments should end for-profit provision of public goods sectors like education and health and pursue publicly delivered goods and public options in sectors from energy to transportation.

Secondly, governments must rein in the runaway power of corporations. A good start would be breaking up monopolies and democratizing trade and patent rules. Governments could also restrict corporations from making payouts to rich shareholders until they pay living wages and invest in reducing their carbon footprints. Governments can further enforce laws that ensure that gender and racial justice are upheld, standards that support worker rights are embraced, reduce pay gaps between the CEOs and ordinary workers and radically increase taxes on the super-rich and corporations. Oxfam estimates that a wealth tax on the world’s millionaires and billionaires could generate $1.8 trillion a year.

Thirdly, embracing democratic ownership and governance into mainstream business, which would not only help tackle wealth inequalities, but would also drive business decisions that better reflect the issues that matter to society. Competitive and profitable businesses don’t have to be shackled by shareholder greed. If just 10% of every business in the US was employee-owned, it would double the share of wealth of the poorest half of the US population, including doubling the average wealth of Black households.

These recommendations are not a farfetched dream. The world is desperate for hope, for a promise that things will be better. We must rally the power of the majority to compel this change. This is vital to ensuring equality for all, on a planet that is flourishing.