news analysis advocacy
 

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

July 17, 2017  Congo (Kinshasa): Inga Dam Mirage Recedes, Again http://www.africafocus.org/docs17/inga1707.php
    The latest projections for the Inga 3 hydroelectric project on the Congo River to become operational, cited in press reports last week, are 2024 or 2025. But even if the project is financed and constructed, says a new report, the project will likely provide only minimal electric power for the people of Democratic Republic of the Congo and burden the country with more unsustainable debt.

July 10, 2017  Africa/Global: Following the Money http://www.africafocus.org/docs17/iff1707.php
    "As an important tool in our fight against corruption, tax evasion, terrorist financing and money laundering, we will advance the effective implementation of the international standards on transparency and beneficial ownership of legal persons and legal arrangements, including the availability of information in the domestic and crossborder context." - G20 Summit Communiqué, Hamburg, July 8, 2017

June 6, 2017  South Africa: #Guptaleaks - Will Heads Roll? http://www.africafocus.org/docs17/saf1706.php
    "The Guptas have until now escaped investigation from the state agencies because they have purchased indemnity. You have to hand it to the Guptas; the way they went about capturing the state is quite impressive. Not only did they buy the president and his son, they targeted key people in government that could act as their minions. When people were resistant to their agenda, they scouted for bootlickers and had them appointed. They paid off people in the security agencies to make sure they would not be bothered with criminal investigations." - Daily Maverick, June 5, 2017

May 24, 2017  Nigeria: Corruption Undercuts Boko Haram Fight http://www.africafocus.org/docs17/nig1705.php
    "Nigeria's corrupt elites have profited from conflict; with oil prices at a record low, defence has provided new and lucrative opportunities for the country's corrupt kleptocrats. Former military chiefs have stolen as much as US $15 billion – a sum equivalent to half of Nigeria's foreign currency reserves – through fraudulent arms procurement deals." - new report on "Weaponizing Tranparency"

April 17, 2017  Africa/Global: New Reports Show Massive Tax Losses http://www.africafocus.org/docs17/tax1704.php
    On April 15, "tax day" in the United States, tens of thousands of demonstrators in over 200 communities around the country marched to demand that President Trump make public his tax returns ( http://taxmarch.org/home/). Protesters also denounced his use of taxpayer funds for his personal profit and military escalation while his administration continues its assault on spending for urgent public needs at home and around the world. There is no sign that the President will comply with the demand for transparency. But the award of a Pulitzer Prize last week to the international consortium that exposed the Panama Papers was only one indicator that the drive to expose tax evasion, tax avoidance, and corruption around the world will continue.

April 3, 2017  South Africa: Rising Outcry for Zuma to Go http://www.africafocus.org/docs17/sa1704.php
    "We call on Ministers and leaders of the ANC who care about the future of democracy and the Constitution to speak up and call on the President, in the best interests of the country, to step down. We call on the parliamentary leadership of the ANC, supported by all opposition parties, to insist that parliament be recalled immediately to debate a motion of no-confidence, proposed by the ANC leadership in parliament. We call on all members of Parliament to unite and support a motion of no-confidence." - Statement by the Nelson Mandela Foundation and the Ahmed Kathrada Foundation, March 31, 2017

March 28, 2017  Liberia: Mining, Displacement, and the World Bank http://www.africafocus.org/docs17/lib1703.php
    "The roots of the New Liberty Gold project stretch back before 1995, when a resource extraction license was issued by former warlord turned president Charles Taylor to a mysterious company called KAFCO. The permit changed hands a few times and, today, Avesoro holds its permit via a wholly-owned subsidiary, Bea Mountain Mining Corp – a company created in 1996 by Keikurah B. Kpoto, one of Taylor's closest associates. In 1998, foreign interests bought Bea Mountain Mining. The beneficiaries of the sale were well hidden. According to a document IRIN procured, three quarters of its capital belonged to a company incorporated in the British Virgin Islands. The rest was held by owners of bearer shares." - IRIN investigative report, March 21, 2017

February 28, 2017  Africa/Global: Open Data for Tax Justice http://www.africafocus.org/docs17/tax1702.php
    "Multinational companies typically publish global, consolidated accounts - and international accounting standards now allow these to roll into one all financial information on the substance of their economic activities, or at best to provide regional figures. This means that country-level information on profits, revenues, taxes, borrowings and employees, for example, are not provided. ... As the name suggests, the longstanding proposal for country-by-country reporting (CBCR) would make multinational companies break down and publish their results for each country. This is essential for citizens to know what companies and their affiliates are doing where they live, and what contributions they are making." - Open Data for Tax Justice announcement

February 7, 2017  Africa/Global: Transparency Setback, African Agendas http://www.africafocus.org/docs17/iff1702.php
    In the world of large multinational corporations, secrecy is more than the rule rather than exception. Despite this reality, there have been some advances in recent years, including U.S. legislation and regulations requiring disclosure of payments by U.S. oil, gas, and mining companies to foreign governments. Last week, the U.S. Congress revoked this Security and Exchange Commission rule, a year before it was actually to be implemented. Although comparatively little noticed in comparison to the tumult around White House actions, this was an indication that the Republican Congress as well was determined to reverse even modest steps to fight corporate corruption and other similar abuses.

January 23, 2017  South Africa: State Capture & Energy Policy http://www.africafocus.org/docs17/saf1701.php
    "Eskom, accused of overly cozy ties with the Guptas featured heavily in the report, with 916 mentions. ... it's Eskom's chief executive, Brian Molefe, who comes out looking the worst. According to cell phone records, Molefe had 58 phone calls with the eldest of the Gupta brothers, Ajay Gupta, between August 2015 and March 2016, just before the Guptas purchased South Africa's Optimum coal mine for 2.15 billion rand ($160 million). Eskom, which prepaid the Gupta's Tegeta Exploration and Resources 600 million rand for coal, had been accused of helping to finance the Guptas' coal mine deal through preferential treatment." - Quartz Africa

November 28, 2016  Africa/Global: Overcoming the Shadow Economy http://www.africafocus.org/docs16/iff1611.php
    "Knowledge of beneficial ownership of companies and bank accounts is fundamental, both to ensure taxation and also to prevent and prosecute crime and the money laundering that so often is associated with it. ... Corporations, trusts, and foundations are creations of the state--and as such, they have no inalienable rights. They are created to facilitate societal welfare, and to ensure that they do so, they need to be globally regulated--regulated in ways which ensure full knowledge of beneficial ownership and full compliance with all tax laws." - Joseph Stiglitz, in testimony to European Parliament Panama Papers inquiry

October 18, 2016  Ghana: New Debt Trap http://www.africafocus.org/docs16/gh1610.php
    "Ghana is in a debt crisis. Despite having had significant amounts of debt canceled a decade ago, the country is losing around 30% of government revenue in external debt payments each year. Such huge payments are only possible because Ghana has been able to take on more loans from institutions such as the International Monetary Fund (IMF), which are used to pay the interest on debts to previous lenders, whilst the overall size of the debt increases. "

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