At the World Economic Forum which was held recently in Davos, Switzerland, 200 millionaires from 13 different countries called for both elites and leaders to tax the super-rich, to help ease cost-of-living pressures on low-income people.
In an open letter titled “The Ultimate Cost of Wealth,” the world’s rich asserts that there is no point in meeting the global elite in Davos because they are discussing cooperation in a divided world. “We must challenge the root cause of division. This requires standing up for democracy, building cooperation, and taking action to build fairer economies right now – it’s not a problem that can be left to our children to solve,” the letter says.
This appeal came after the publication of the Oxfam charity report, which stresses the need to reduce the number of billionaires by half, by 2030, through increased taxes and other policies, to make the world more equal. The organization, which issued its annual report on inequality, on the first day of the World Economic Forum, called for a tax of up to 5% on millionaires and billionaires, saying it could generate $1.7trn annually, which would be enough to lift two billion people out of poverty.
These calls are not new, but they have gained additional traction today due to the support they have gained from groups such as World Millionaires, National Millionaires, and others. It seems that the world’s billionaires have finally realized how dangerous the current economic situation is. This is especially since economic inequality within societies has reached its climax in the aftermath of the Corona pandemic, in a way that threatens security and societal peace and inevitably warns of a global economic recession.
Studies confirm that with the beginning of 2020, while the world was groaning under the weight of the Covid-19 pandemic and the global economy facing the worst recession since World War II, billionaires were able to increase their wealth in an unprecedented way. During the years of the pandemic and the cost-of-living crisis, only 1% of the world acquired $26trn (63%) of all new wealth, while only $16trn (37%) went to the rest of the world’s population combined. Moreover, the exponential rise in the cost of basic commodities has increased the fortunes of billionaires in the food and energy sectors by an enormous amount.
Today, only 8 people have the same wealth as half of humanity. According to Forbes magazine, these eight are Bill Gates, owner of the Microsoft software company ($75bn), Amancio Ortega, owner of the Zara clothing chain ($67bn), Warren Buffett, a famous American investor ($60.8bn), and Mexican Carlos Slim, owner of telecommunications companies ($50bn), Amazon CEO Jeff Bezos ($45.2bn), Facebook founder Mark Zuckerberg ($44.6bn), Larry Ellison, former CEO of Oracle Software ($43.6bn), and former New York Governor Michael Bloomberg ($40bn).
Concerning the Middle East and North Africa region, reports have recorded an increase in the wealth of the super-rich by about $10bn since the start of the coronavirus pandemic in March 2020. This wealth is sufficient to repair the damage left by the Beirut port explosion in 2021, according to the newly published Oxfam report at the Davos Conference.
The global economic situation is very deteriorating because of this unprecedented economic disparity and the concentration of wealth in the hands of only 1% of the world’s population. The World Bank says we are probably witnessing the largest increase in global inequality and poverty since World War II. This is where entire countries face the threat of bankruptcy while three-quarters of the world’s governments plan to cut public sector spending due to austerity – including health care and education – by $7.8trn over the next five years.
In light of this unprecedented economic disparity and the imminent global economic recession, it is not surprising that the world rich are calling for taxes to be imposed on them to help the poor. This is simply because social inequality affects not only political stability but also economic growth. When material goods are concentrated in the hands of a few people, aggregate consumption also decreases. Also, studies by the International Monetary Fund confirm that the inflation of the wealth of the rich is reflected negatively on the gross domestic product. This is because the lack of purchasing power among individuals due to poverty necessarily leads to a general recession. Consequently, the biggest losers will be the rich.
In other words, a recession is a decline in growth, where there is more supply than demand. This causes a recession, falling prices, layoffs, and an increase in unemployment rates. There is also what is called stagflation. This is where there is a rise in demand accompanied by a rise in prices, which results in inflation, and this inflation also leads to stagnation in the future. This is because fighting inflation raises interest rates, and thus interest on loans goes up. This, in turn, reduces corporate profit rates, and the borrowing on which most projects are based. Also, high prices with high demand cause many economic crises. For example, higher energy prices raise shipping costs. Consequently, the prices of transporting goods rise and raise their prices, which results in a decline in purchasing power, which ultimately leads to stagnation, weakness in production, and a wave of factory closures accompanied by layoffs.
The rich have always avoided taxes and government claims. Some wealthy people around the world have also taken bolder steps by moving to countries and regions with tax systems and societies conducive to the very wealthy. But now the matter has changed, some today address their wealth managers to discuss how to preserve and consolidate them amid the global devastation and economic depression that will prevail in the world.
Certainly, the recent call at the Davos Conference for more taxation of the world’s rich by the rich themselves is not a call for humanity. But it is a call based on purely economic concerns that confirm that the spread of poverty to this extent and the bankruptcy of countries will definitely lead to a global economic recession that will negatively and strongly affect those rich people who seek nothing but to protect their wealth.
Dr Marwa El-Shinawy is an Assistant Prof. at International American University for Specialized Studies(IAUS)