Inequality intricately linked with corruption

Joanna Spratt

Advocacy and Campaigns Director

Oxfam New Zealand

Our global economy is delivering an ever-increasing, inequitable distribution of wealth amongst humanity.  

  • A major contributor to inequality is ‘grand corruption’
  • Corruption, such as bribery, hurts the poorest the most.

Public good or private wealth?

Oxfam International recently released its annual inequality report Public Good or Private Wealth? It highlights how our global economy is broken. Over the last year, billionaires increased their wealth by 12 per cent, while the people who comprise the poorest half of humanity saw their wealth drop by 11 per cent.

Something is wrong when a small number of individuals can amass more wealth than they will ever make use of in their lifetimes, while billions of people struggle to make ends meet. Not only is this situation unfair, but it hurts us all.

Inequality perpetuates poverty, erodes trust, fuels crime, makes us unhappy, negates economic growth, and robs opportunity from the poorest – including shortening their lives. Inequality engenders feelings of injustice and exclusion, which can contribute to political instability and institutional fragility.

Critically, inequality fuels ever-escalating corruption and undermines efforts to reduce it.

 At a fundamental level, the fact that so few have so much, and so many have so little, erodes trust in our political leaders and systems. It causes people to doubt the institutions of the state that should be working to ensure everybody gets a fair go in life.

For example, if ordinary citizens see that those at the top are not paying their fair share in taxes, such as multinational corporations, they are then less likely to trust that the system is fair. This undermines their support of the entire tax system. The inability of governments across the world to ensure that the super-wealthy are paying their fair share of tax means that ordinary citizens lose faith in the system.

 Grand corruption

‘Grand corruption’ has, arguably, the most significant negative impact on inequality and poverty. Grand corruption is the unethical use of elite power to advance self-interests, at the expense of everyone else. Directly, it can involve elite lobbying for low taxes, resulting in ever-decreasing tax rates for wealthy individuals and corporations. The wealthy can also influence governments to act in their interests across the world.

For example, Oxfam found that multinational pharmaceutical companies had influenced the United States government to pressure developing countries on their behalf. Sanctions were threatened if health officials continued with efforts to make medicines affordable or if tax officials persisted in attempts to clamp down on pharmaceutical tax avoidance. This sort of corruption perpetuates inequality. (See Prescription for Poverty – Oxfam 2018)

Indirectly, grand corruption affects inequality because governments lose revenue such as through lost taxes. This leaves less money for education, health, social protection, and other services that support everyone, and which people who are poor rely on. For example, Oxfam found that in 2017 in the Dominican Republic, corruption was depriving the state of enough revenues to double health spending.

Fairness and transparency

The way forward is to improve fairness and transparency in the system. Not only does this help prevent and reduce inequality, but also corruption. In turn, resolving corruption will assist in reducing inequality. It is a virtuous cycle.

Oxfam is calling on governments to end the under-taxation of rich individuals and corporations. But to tax wealth more, we need to see it. We need more transparency in our global tax system, both for corporations and individuals. We need more information in the public realm so that we can make sure that the wealthy pay their fair share – and that we grow a world where everyone gets a fair go in life.

Ultimately, that will also grow trust in our societies and allow us all to flourish as equal humans on our home, the Earth.

Visit the Oxfam New Zealand website for information and to become involved in their actions.

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