Politics

Covid has made inequality even worse. The only answer: squeeze the super-rich | Simon Jenkins


Comparisons are odious, but some are sensational. According to Oxfam, the wealth of the world’s 10 richest individuals has risen by £400bn since the start of the pandemic. That sum could apparently vaccinate every adult on Earth, as well as restore the income lost in 2020 to the world’s poorest people.

These figures emerged on the opening day of the Davos World Economic Forum, which is taking place virtually this year. They have not, I suspect, been peer-reviewed. And since the economic relief so far expended by world governments amounts to a massive $12tn (£9.2tn), it is difficult to believe that another half-trillion would make that much difference. But it is hard to quarrel with the report’s conclusion that current economic policies have enabled “a super-rich elite to amass wealth in the middle of the worst recession since the Great Depression, while billions of people are struggling to make ends meet”.

Political economists on both the left and the right are coming to the conclusion that the gap between rich and poor countries, as well as between rich and poor people, is destabilising and dangerous to democracy. The so-called Gini coefficient of inequality in personal incomes and wealth fell steadily in the latter decades of the 20th century, but has risen sharply in the 21st. The world is getting less equal.

The reasons are many, but some are thought to relate to seismic innovations in technology. The surplus wealth accruing to entrepreneurs such as Jeff Bezos, Mark Zuckerberg and Elon Musk has piled up over the past nine months largely from the boom in the online economy, reflected in the rise in the stock market. Bezos has added roughly $100,000 to his wealth for every one of his Amazon employees. As was said of captains of industry in 1918: “They look as if they have done very well out of the war.”

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Vague Oxfam exhortations that we need to “shape more equal societies” are unlikely to get anywhere. Whatever Davos may pretend, the world does not have one government or one tax regime, let alone one ideology. Emotional rhetoric is rarely a good agency of reform – answers can lie only in details. Governments are piling massive debts on to future generations. Even if some means are found, as they surely must be, to write off the debts of the past exceptional year, more buoyant sources of national revenue will be required. The sources must lie in taxation.

The world’s most successful industries – largely the concern of the top 10 wealthy individuals – are still operating virtually tax-free. The reason at root is that these industries are global, while taxation is national. Tax regimes tend to be deeply conservative, continuing to undertax wealth, notably property, and overtax lower and middle incomes. Fiscal authorities, such as Britain, are also cynically indulgent towards tax avoidance and money laundering, while loading taxpayers with regressive imposts such as council tax and VAT.

The global marketplace of Apple, Facebook, Google and their sprawling dependencies is essentially left alone in space. No one country has yet had the nerve to confront it – except possibly China – despite its vast tax potential. This will end only when Europe and America take the lead and act in concert, which should be a top item on Joe Biden’s agenda.

Meanwhile, it is for governments to track down and police those who, far from not paying enough tax, pay little or none at all. They grow rich by keeping their wealth offshore and refusing to contribute to treasuries from which they and their families draw a lifetime of benefit. The billions of dollars in the world’s protected tax havens – denying national revenues estimated at $250bn a year – make the possible yield from the world’s 10 richest people look like pocket money. British taxpayers alone are reckoned to lose £8.5bn. Meanwhile, the chancellor fiddles with a damaging airport VAT change.

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There are three possible answers to the question of how to increase the contribution of the super-rich: shrug, shame or tax. Shrug is easy. It has ruled policy in Britain ever since the days of 80% surtax ended in the 1980s. Shame is dubious. Andrew Carnegie may have said “the man who dies rich dies disgraced”, but most take that risk. To be fair, Zuckerberg has tipped much of his wealth into a charity, while Bezos has delegated billions to his ex-wife. But do we really want the world’s welfare left to the whims of a rich oligarchy? As William MacAskill of Effective Altruism has argued, the random distribution of charitable wealth can be stupefyingly inefficient.

As for higher personal taxes, Oxfam argues that if Argentina can levy a one-off emergency surtax on its 12,000 richest citizens, so surely can the richer countries of the world. Thousands of companies and their owners may have been bankrupted this past year through no fault of their own. But the very rich have been able to lie low, contributing to the reported £200bn that fortunate Britons have stored up in their bank accounts this past nine months.

This pandemic is undeniably worsening the gulf between the very rich and the poor – a gulf that is not inevitable and is for democracy to remedy if it chooses. When in time of trouble some are seen to gain so grotesquely at the expense of others, something is wrong. A surtax must be the answer.



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