The latest report from Oxfam has revealed that 8 people own the same amount of wealth than half of the world put together (enough to fit in a limousine). A year ago the same organisation revealed that it was actually 62 people who held this amount wealth, but in response to the controversy around their calculations and a lack of new data (particularly from India and China), Oxfam have now used more accurate methods and data to prove a situation even worse than feared.
These elite 8 include: Bill Gates: America founder of Microsoft (net worth $75 billion). Amancio Ortega: Spanish founder of Inditex which owns the Zara fashion chain (net worth $67 billion). Warren Buffett: American CEO and largest shareholder in Berkshire Hathaway (net worth $60.8 billion). Carlos Slim Helu: Mexican owner of Grupo Carso (net worth: $50 billion). Jeff Bezos: American founder, chairman and chief executive of Amazon (net worth: $45.2 billion). Mark Zuckerberg: American chairman, chief executive officer, and co-founder of Facebook (net worth $44.6 billion). Larry Ellison: American co-founder and CEO of Oracle (net worth $43.6 billion). Michael Bloomberg: American founder, owner and CEO of Bloomberg LP (net worth: $40 billion).
The fact that we are able to list them and their wealth in a paragraph is certainly telling. However, the problem of mass inequality is not a new one, rather something we have grown used to within the free market. Make no mistake, the rich are growing at the expense of the poor, in a broken economy that trickles wealth up to the 1% from the 99%. As Oxfam has aptly mentioned ‘the richest are accumulating wealth at such an astonishing rate that the world could see its first trillionaire in just 25 years. To put this figure in perspective – you would need to spend $1 million every day for 2738 years to spend $1 trillion.’ This is a damning blow to capitalism’s reputation as an economic system.
The reality is as Oxfam highlights; tax evasion/avoidance is in the trillions, governments continue to favour the elite, growing corruption is stripping vital wealth from society, hoarding is at an all time high, poverty continues to plague the world, and despite the rhetoric for change, a plethora of other factors continue to exacerbate inequality to levels that are unnatural and damaging. Whilst it is clear that there are many who do pay their taxes and have come to attain their wealth through legal means, they are not to be blamed for the utter demise of the poor, but rather the system in which they operate. Capitalism has given crumbs to the lower class, only to reserve the cake for the elite. In other words most of the 1% have come into such a position because the rules of the game were designed to serve them, and they are a product of a system that works to cater for their interests.
Whilst Islam would change the rules of the game to serve the people justly, let us observe 3 Islamic positions that would practically suppress this problem, creating a more balanced society:
1) Distribution, not trickle down economics: Fiscal policy towards inequality has consistently been to increase growth, so as to allow for the elite to spend/invest their wealth such that it reaches the lower class. This has been unsuccessful, as the Oxfam report clearly demonstrates. Capitalism’s economic problem, as outlined by the likes of Adam Smith, and later on by the likes of Paul Samuelson is that there are finite resources and an infinite demand for them (everyone cannot have the entire cake), so according to the capitalist to reduce inequality we must increase production (the size of the cake) to increase the number of goods available for man to consume. This constraint focus on growth and a lack of priority on distribution has caused wealth to be trapped amongst the upper class as opposed to making its way down – that is to say, trickle down economics has failed.
Contrary to capitalism, Islam builds its economic imperative upon the fact that there are finite resources but also a finite set of needs, as opposed to wants.Thus for Islamic system, to reduce the divide would not be to increase production, but to distribute existing surplus wealth (through various tools such as government expenditure/taxation) and in doing so, it would ensure that the system is unlocking wealth from the elite and that the lower class have their basic necessities – as a natural consequence society would see a massive reduction in absolute poverty and a convergence between the upper and lower class – something capitalism has consistently failed at achieving.
2) Taxing wealth, not income: Most of the gains of the 1% have been derived from their wealth as opposed to their income. In fact, even their incomes are essentially the returns to investing their capital. Yet we consistently find that capitalism naturally favours a progressive income based taxation system, albeit with major flaws; it does nothing to mitigate inequality, but everything to kindle it. As this taxation system is based on income, the rich don’t actually have to contribute much of what they own but more of what they earn, which is relatively smaller in size, thus making their contributions smaller and because this system is complicated, harsh and numerous, it is regularly exploited by the elite – allowing them to grow rapidly only to leave the poor behind.
Contrastingly, Islam would establish a wealth based taxation system that focuses on the root of the issue, which is in surplus capital that is unused and idle. This would unlock the wealth of the 1% without diminish its value, whilst distributing it to the lower class, which would be of a great benefit to them. It is also a simple system, that is neither harsh nor numerous (with a handful of low but effective taxes) – this would ensure tax receipts and minimal avoidance/aversion. Finally, unlike the free market, there are no tax loopholes (except what the sharia has defined a reason for you not to pay) and those who do not pay but are appraised to be in a position to, are acting in rebellion and would be subject to strict regulation – creating a strong deterrent, ensuring stronger receipts.
3) Inclusive finance, not exclusive: One of the reasons why the 99% do not advance relative to the 1% is due to a poor financial system that shackles them. Most of the super elite are well known for innovating and or providing a new service/good within society whilst the rest are well known for exploiting and or corruption, but both are able to be in that position by way of financial opportunity and privilege, something the rest do not possess. In fact, within the current financial system, the elite are holders of wealth and are therefore the lenders of it and the lower class are those without wealth and are therefore the borrowers of it. So the financial sector has become a place where the well-off regularly exploit the worse-off by pushing more and more private debt onto them – where the net flow of wealth trickles mainly from the bottom up by way of interest.
Islam, on the other hand, sustains a very different financial system that actually works to bridge the gap between the elite and the lower class; the key point here is that it substitutes the necessity for debt – which is the means by which the well-off exploit the worse-off, with the necessity for joint partnerships upon a profit and loss sharing basis – which becomes the means by which the upper class can work with the middle-lower class, as opposed to profiting off of them via private debt. In, other words, through financial partnerships, those with little wealth have the opportunity to gain more of it, whilst those with lots of wealth have the opportunity to increase it. Furthermore, Islam eliminates corrupted institutions along with interest, which only exacerbate the divide – as it allows for the elite to accrue unsubstantiated gains on effortless loans. In doing this, it would ensure that any debt is exchanged with a net balance for both parties as opposed to being skewed towards one.
“But seek, through that which Allah has given you, the home of the Hereafter; and [yet], do not forget your share of the world. And do good as Allah has done good to you. And desire not corruption in the land. Indeed, Allah does not like corrupters.” (Al-Qasas: 77)