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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

January 8, 2019  Mozambique/Global: Who Pays for Transnational Corruption? http://www.africafocus.org/docs19/moz1901.php
    The line-up of those involved in this $2.2 billion fraudulent loan deal, now implicated in a case in the U.S. District Court of the Eastern District of New York, is multinational. The five named individuals indicted include the former Minister of Finance of Mozambique, a Lebanese businessman representing Privinvest (an international shipping conglomerate in Abu Dhabi), and three London-based bankers, citizens of New Zealand, Great Britain, and Bulgaria, employed at the time of the loans by the giant Swiss bank Credit Suisse. Three more names are redacted in the indictment and 5 others, three Mozambicans and two additional employees of Privinvest, are cited but not named in the text of the indictment.

November 12, 2018  Africa: Why Mining is Hard to Tax http://www.africafocus.org/docs18/tax1811.php
    "In Africa as elsewhere in the world, while energy companies might be somewhat undertaxed, mining companies typically are greatly under-taxed. Indeed, it is only a slight exaggeration to say that, with a few significant exceptions, notably Botswana’s diamond mines, mining in Africa is barely taxed at all. One reliable source indicates that contemporary African governments collect about 55% of the total value of energy production in tax revenue, but only 3% of the value of mining production." - Taxing Africa

November 12, 2018  Africa: Africa Mining Vision http://www.africafocus.org/docs18/amv1811.php
    The Africa Mining Vision (AMV) was adopted by Heads of State at the February 2009 African Union summit following the October 2008 meeting of African Ministers responsible for Mineral Resources Development. An action plan was adopted in December 2011, and the African Minerals Development Centre (https://www.uneca.org/amdc) launched in December 2013. The lead role in developing the vision was taken by African professional staff at the United Nations Economic Commission for Africa (UNECA), in consultation not only with African governments but also with civil society organizations and specialists on the mining sector.

October 16, 2018  Africa/Global: Drug Company Profits vs. Public Health http://www.africafocus.org/docs18/drug1810.php
    "Oxfam examined publicly available data on subsidiaries of four of the largest US drug companies and found a striking pattern. In the countries analyzed that have standard corporate tax rates, rich or poor, the corporations’ pretax profits were low. In eight advanced economies, drug company profits averaged 7 percent, while in seven developing countries they averaged 5 percent. Yet globally, these corporations reported annual global profits of up to 30 percent. So where were the high profits? Tax havens. In four countries that charge low or no corporate tax rates, these companies posted skyrocketing 31 percent profit margins." - Oxfam, September 2018

October 1, 2018  Africa/Global: Professionals Enabling Corruption http://www.africafocus.org/docs18/iff1810.php
    "Lifting the veil of corporate secrecy reveals a simple principle: Offshore is actually a set of professional services that specialize in enabling businesses and individuals to effectively retreat from legal, regulatory, and public scrutiny, empowering them vis-a-vis those who have remained 'onshore' without access to such services." - Hudson Institute

June 4, 2018  West Africa/Global: Tax Evasion without Borders http://www.africafocus.org/docs18/wa1806.php
    "On paper, the company that engineered and built the [$50 million mineral sands] processing plant [in Senegal] was SNC Lavalin-Mauritius Ltd, a local division of SNC Lavalin [Canada]. In reality, SNC Lavalin-Mauritius wasn’t involved. It was a shell, created for the specific purpose of helping the engineering giant avoid tax payments. The company had no construction equipment and no office of its own. It operated from inside the Mauritius office of the offshoring law firm Appleby, which helped SNCLavalin create the shell company." - West Africa Leaks

March 12, 2018  Africa/Global: Charting Where They Hide the Money, 2 http://www.africafocus.org/docs18/fsi1803b.php
    "Overall, the City of London and [its] offshore satellites constitute by far the most important part of the global offshore world of secrecy jurisdictions. Had we lumped them together, the British network would be at the top of our index, above Switzerland." - Tax Justice Network

March 12, 2018  Africa/Global: Charting Where They Hide the Money, 1 http://www.africafocus.org/docs18/fsi1803a.php
    "Switzerland, the United States and the Cayman Islands are the world’s biggest contributors to financial secrecy, according to the latest edition of the Tax Justice Network’s Financial Secrecy Index (FSI). ... Kenya, which this year set up its own tax haven in the form of the Nairobi International Financial Centre, is an example of how interests of western financial service lobbyists have successfully lured governments into a race to the bottom. Kenya, which has been assessed for the first time in the 2018 FSI, has an extremely high secrecy score of 80/100." - Tax Justice Network

January 15, 2018  Africa/Global: World Trends in Inequality http://www.africafocus.org/docs18/ineq1801.php
    "The divergence in inequality levels has been particularly extreme between Western Europe and the United States, which had similar levels of inequality in 1980 but today are in radically different situations. While the top 1% income share was close to 10% in both regions in 1980, it rose only slightly to 12% in 2016 in Western Europe while it shot up to 20% in the United States. Meanwhile, in the United States, the bottom 50% income share decreased from more than 20% in 1980 to 13% in 2016." - World Inequality Report, 2018

January 15, 2018  South Africa/USA: Inequality is Extreme and Still Rising http://www.africafocus.org/docs18/sa-us1801.php
    "I came here because of my deep interest and affection for a land settled by the Dutch in the mid-seventeenth century, then taken over by the British, and at last independent; a land in which the native inhabitants were at first subdued, but relations with whom remain a problem to this day; a land which defined itself on a hostile frontier; a land which has tamed rich natural resources through the energetic application of modern technology; a land which once imported slaves, and now must struggle to wipe out the last traces of that former bondage. I refer, of course, to the United States of America." - Robert F. Kennedy, University of Cape Town, June 6, 1966

December 11, 2017  Africa/Global: Paradise Papers, Plus http://www.africafocus.org/docs17/iff1712.php
    The Paradise Papers investigation, based on a leak of 6.8 million documents from the offshore law firm Appleby, is the largest of recent revelations of the hidden world of financial manipulation used by both multinational corporations and rich (high net worth) individuals from around the world. Like the Panama Papers investigation that won the 2017 Pulitzer Prize, it is based both on "big data" analysis and on collaborative investigative reporting by teams of hundreds of journalists. But it is based on the records of only one offshore law firm, albeit one of the most prominent. Despite the size of the leak, it still reveals only the tip of the iceberg.

September 25, 2017  Africa/Global: How Women Lose from Tax Injustice http://www.africafocus.org/docs17/iff1709.php
    A new report from the Association for Women in Development (AWID), authored by Dr. Attiya Waris in Nairobi, makes a powerful case that women lose disproportionately from illicit financial flows, which reduce the tax base and deprive states of the resources to invest in critical public goods, and that addressing this issue is key to efforts to combat gender inequality. The point should not be surprising, but too often the impact of tax evasion and tax avoidance is cloaked in jargon that makes it less visible than cases such as overt discrimination against women in employment and wages. In contrast, this report stands out for its clarity. AfricaFocus strongly recommends the full version, which is available on-line at http://tinyurl.com/ych3zce3

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