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National and Global Inequality

Recent AfricaFocus Bulletins | More on illicit financial flows and tax justice

Social and economic inequality results from the intersection of different dimensions of inequality, including not only strictly economic forces but also inherited disadvantages and current discrimination along multiple other axes: race, gender, sexual orientation, disability status, and more. This reality has been theorized in the concept of "intersectionality," made prominent by feminist critical race scholars such as Kimberlé Williams Crenshaw. Yet one of the fundamental aspects of inequality often missed is that based on geography. High levels of inequality are found within cities, between urban and rural areas, and between states or regions within a single country.

Illicit financial flows, in particular, are closely linked to inequalities within countries and, most strikingly, to inequalities between countries. These two intersect to form "global inequality." And they are in turn intertwined with all the other dimensions of inequality cited by intersectional theorists.

There is abundant documentation of the stark inequalities within the United States, and new data is coming out all the time. In December 2015, the Institute for Policy Studies released a new report, "Billionaire Bonanza," comparing different sectors of the US population in terms of their wealth. Among the results:

  • America's 20 wealthiest people now own more wealth than the entire bottom half of the American population, a total of 152 million people in 57 million households.

  • The wealthiest 100 households now own about as much wealth as the entire African American population in the United States.

  • The wealthiest 186 members of the Forbes 400 own as much wealth as the entire US Latino population.

The same month, Pew Research Center released statistics on changes in household income between 1971 and 2015. A chart from this data shows households with annual earnings of $200,000 or more moving from a small share of the total to the largest single share, easily outstripping all other income segments. The share of total income going to people in the middle income range has been going down, while the share going to the top 1% keeps going up. As is often noted, these trends are fundamentally reshaping the electoral landscape through the powerful and growing influence of money in politics.

It is also increasingly recognized that income inequalities reflect not only the inequalities of economic class but also those of race, gender, ethnicity, immigrant status, and other human characteristics that can be used to shape privilege and vulnerability. How these different forces interact and what to do about them is intensely contested in both scholarly and political arenas. Less noted is how they interact with "place," and particularly with the divisions between countries at the global level.

Yet "big data" is also revealing a global pattern of inequality that is even more extreme than the inequality within any one country. One of the most insightful analysts of this reality is Branko Milanovic. His latest book, Global Inequality, both shows the dramatic rise of the global 1% in the last 20 years and traces variations in patterns of change within countries and between countries. While the middle classes in China and India are rising, inequality remains high and is even growing within countries, including rich countries in North America and Western Europe, new emerging powers such as China and Brazil, and oil-rich kleptocracies in the Middle East and Africa. The standard Gini index of incomes, which measures inequality on a scale from 0 (perfect equality) to 100 (perfect inequality), ranges from over 60 in South Africa to the low 50s in Brazil and Guatemala, the low 40s in China and the United States, and under 30 in the most egalitarian European countries such as Sweden and Norway.

But inequality between countries also means that people in different countries have different chances to be at the top of the global heap. Thus 12% of Americans are in the top 1% globally, while only the very wealthiest 1% of Russians, Brazilians, and South Africans make into the global top 1%. Africa, despite rising average growth rates and its own crop of millionaires and billionaires in many countries, remains on average the most disadvantaged continent in the global distribution of income. The "citizenship premium" means that average income in the top 10% in an African country is far below average income in the top 10% in the United States or another rich country. So too, Africans in the bottom 10% of their countries' income distributions are far worse off, on average, than people in the bottom 10% in rich countries. The disparities purely from the accident of birth are staggering.

As can be seen in the table below, calculated from Milanovic's data, if one compares selected African countries to the United States, the average income per person in the United States of $23,133 in the period just before 2010 was more than seven times the average income in South Africa. It was almost 25 times the average income in Ghana, and almost 50 times that in Nigeria. The average income of even the bottom 10% in the United States was slightly more than the average income in South Africa as a whole, and far greater than average income in other African countries. While the exact numbers may be contested, based as they are on household surveys and referring only to cash income, there can be no doubt that these contrasts are striking.


Country

Mean income (in 2005 US$)

Ratio USA Mean to Country Mean

Ratio Mean of Bottom 10% in USA to Country Mean

United States

USA

$23,133

1.00

0.14

Lowest income 10% in USA (if it were a country)

$3,283

7.05

1.00

Selected African Countries

South Africa

$3,081

7.51

1.07

Tunisia

$2,614

8.85

1.26

Egypt

$1,368

16.91

2.40

Ghana

$963

24.02

3.41

Ethiopia

$617

37.49

5.32

Nigeria

$479

48.29

6.85

Kenya

$344

67.25

9.54

Congo (DRC)

$179

129.23

18.34

Source and notes: Calculated from data downloaded from the World Income Distribution (WYD) dataset 1988-2008. For a Google spreadsheet including a wider selection of countries from the database, click here.



Most recent bulletins on illicit financial flows and tax justice

June 9, 2022  Africa/Global: Ukraine, Africa, and Our Planet http://www.africafocus.org/docs22/upd2206.php
    “An end to this terrible war based on dialogue must be the international community’s highest priority. Support to the people of Ukraine must be matched by efforts to advance Russian/Ukrainian negotiations, European security dialogue, and wider risk-reduction measures to prevent nuclear escalation.” - The Elders, May 25, 2022

May 11, 2022  Africa/Global: Debt, IFFs, and Inequality in Africa http://www.africafocus.org/docs22/ineq2205.php
    “43 African governments are facing expenditure cuts totalling $183 billion (equivalent to 5.4 percent of GDP) over the next five years, reveals new analysis from Oxfam and Development Finance International (DFI) today. If these cuts are implemented, their chances of achieving the UN’s Sustainable Development Goals will likely disappear.” - Oxfam International and Development Finance International

December 23, 2021  USA/Africa: Pandora Papers Keep Giving http://www.africafocus.org/docs21/iff2112.php
    2021 was a banner year for attention to national and international tax reforms to reduce tax evasion and avoidance, with legislation in the United States spearheaded by the FACT Coalition and a global reform deal proposed by the Organization of Economic Cooperation and Development (OECD). But the Pandora Papers also demonstrated the pervasive scale of illicit financial flows that siphon off wealth into an “offshore” world of secrecy.

May 31, 2021  Mozambique/Global: Fossil Fuels, Debt, and Corruption http://www.africafocus.org/docs21/moz2105b.php
    “The scandal of Mozambique’s “hidden debts” has already cost the country at least 11 billion US dollars, and has plunged an additional two million people into poverty, according to a detailed study of the costs and consequences of the debt published on Friday by the anti-corruption NGO, the Centre for Public Integrity (CIP), and its Norwegian partner, the Christian Michelsen Institute. The term “hidden debts” refers to illicit loans of over two billion US dollars from the banks Credit Suisse and VTB of Russia in 2013 and 2014 to three fraudulent, security–linked Mozambican companies – Proindicus, Ematum (Mozambique Tuna Company), and MAM (Mozambique Asset Management).” - report by Centre for Public Integrity (Mozambique) and Christian Michelsen Institute (Norway)

March 8, 2021  USA/Global: Taxing the Tech Giants http://www.africafocus.org/docs21/dig2103.php
    “How should we determine the corporate tax a big tech company should pay in each country where they operate? There are many ways that this could be calculated, but most recommendations suggest looking at their sales, their assets and the number of employees they have in each country. In the absence of transparent reporting, collecting such data is not easy, but we can get a useful estimate through looking at a proxy indicator: the number of users they have in each country. For example, in just 20 developing countries there are nearly 1.5 billion internet users accessing Google, about 900 million people using Microsoft on their desktops and over 750 million Facebook users. For these companies, the number of users is a good indicator of both their sales and their assets.” - ActionAid

February 22, 2021  Africa/Global: The Inequality Virus http://www.africafocus.org/docs21/ineq2102.php
    “COVID-19 has been likened to an x-ray, revealing fractures in the fragile skeleton of the societies we have built. It is exposing fallacies and falsehoods everywhere: The lie that free markets can deliver healthcare for all; The fiction that unpaid care work is not work; The delusion that we live in a post-racist world; The myth that we are all in the same boat. While we are all floating on the same sea, it’s clear that some are in super yachts, while others are clinging to the drifting debris.” – António Guterres, UN Secretary General

December 14, 2020  Africa/Global: State of Tax Justice 2020 http://www.africafocus.org/docs20/tax2012.php
    “Of the $427 billion in tax lost each year globally to tax havens, the State of Tax Justice 2020 reports that $245 billion is directly lost to corporate tax abuse by multinational corporations and $182 billion to private tax evasion. Multinational corporations paid billions less in tax than they should have by shifting $1.38 trillion worth of profit out of the countries where they were generated and into tax havens, where corporate tax rates are extremely low or non-existent. Private tax evaders paid less tax than they should have by storing a total of over $10 trillion in financial assets offshore.” - Tax Justice Network, November 2020.

June 8, 2020  Africa/Global: Thinking Post-Covid-19 http://www.africafocus.org/docs20/post2006.php
    “Calls for debt relief—or more timid debt service moratorium—are drops in the ocean. Something much more ambitious and radical should be envisaged. This crisis allows us to think big. … [F]or these exceptional times, we need exceptional solutions. This virus does offer Africa an opportunity to exercise agency and embark on a more robust structural transformation process. Building on the gains of the last few years and the resilience of its population, there will probably be no better time to fast-track change.” - Carlos Lopes, former Executive Secretary of the United Nations Economic Commission for Africa

February 24, 2020  USA/Global: National and Global Inequalities Are Intertwined http://www.africafocus.org/docs20/iff2002.php
    The recession that began in 2008 brought new life to the public debate on class and racial inequality in the United States. The #OccupyWallStreet demonstrations in 2011 may have left no institutional legacy, but they shined a spotlight on a yawning wealth gap and the role of the “one percent.” #BlackLivesMatter and related movements challenged complacency on entrenched racism … Public awareness of inequality, like awareness of climate change, was rising even before President Trump took office. But his administration’s sharp turn toward denial and regression on both issues has spurred active opposition and cut into the complacency of conventional Democratic Party politics.

October 9, 2019  Africa/Global: Targeting Corporate Shell Games http://www.africafocus.org/docs19/iff1910.php
    “Across the world, citizens who want their governments to implement policies to reduce inequalities, address climate change and looming ecological disaster, provide better public services and amenities, ensure social protection, generate quality employment and so on, are always confronted with one question: where is the money? We are constantly told that governments cannot afford the necessary expenditure; that running fiscal deficits will lead to financial chaos and crisis; and that raising taxes will simply drive away investment. But this is not just misleading; it is simply wrong. Governments are constrained in their resources because they tolerate widespread tax evasion and avoidance. ” - Professor Jayati Ghosh, Jawaharlal Nehru University

August 12, 2019  Africa/Global: #MauritiusLeaks Reveals Tax Dodges http://www.africafocus.org/docs19/iff1908a.php
    “Based on a cache of 200,000 confidential records from the Mauritius office of the Bermuda-based offshore law firm Conyers Dill & Pearman, the investigation reveals how a sophisticated financial system based on the island is designed to divert tax revenue from poor nations back to the coffers of Western corporations and African oligarchs, with Mauritius getting a share. The files date from the early 1990s to 2017.” - International Consortium of Investigative Journalists

August 12, 2019  Africa/Global: Tax Avoidance 101 http://www.africafocus.org/docs19/iff1908b.php
    Aircastle Ltd., a Connecticut-based global company specialized in leasing airplanes, is not alone among large American companies lowering their taxes through creative accounting, which also include well-known giants such as Amazon and Apple. But the recent revelations on Aircastle´s use of Mauritius as a tax haven provide a helpful window into how such tax dodges can make use of off-shore companies set up primarily for that purpose.

Complete listing of bulletins on illicit financial flows, tax justice, and debt, 2003-present