Corporate-driven inequality refers to the phenomenon where economic disparities and social inequalities are exacerbated by the actions and policies of corporations. Read here to learn more about it.
A recent report on inequality revealed that corporate and monopoly power intensifies disparities in gender and race.
Since 2020, the richest five men in the world have doubled their fortunes. During the same period, almost five billion people globally have become poorer.
This type of inequality is often associated with the concentration of wealth and power within a small number of large corporations, leading to imbalances in economic opportunities, resources, and societal outcomes.
Corporate driven inequality
A huge concentration of global corporate and monopoly power is exacerbating inequality economy-wide. Seven out of ten of the world’s biggest corporates have either a billionaire CEO or a billionaire as their principal shareholder.
- Sharply increasing billionaire wealth and rising corporate and monopoly power are deeply connected.
- The profits of mega-corporations are in turn used to benefit shareholders, at the expense of workers and ordinary people.
- Corporations drive inequality by using their power to force wages down and direct profits to the ultra-wealthy.
- In 2022, the International Labour Organization (ILO) warned that the historic decline in real wages could increase inequality and fuel social unrest.
- Corporations and their wealthy owners also drive inequality by undertaking a sustained and highly effective war on taxation.
- Privatization can drive and reinforce inequalities in vital public services, entrenching gaps between rich and poor, excluding and impoverishing those who cannot pay while those who can pay can access good healthcare and education.
- Privatization can also drive inequalities based on gender, race, and caste.
- Corporate power is driving climate breakdown, in turn causing great suffering and exacerbating inequalities, including along lines of race, class, and gender.
To end extreme inequality, governments must radically redistribute the power of billionaires and corporations back to ordinary people. A more equal world is possible if governments effectively regulate and reimagine the private sector.
What contributes to Corporate driven inequality?
Several factors contribute to corporate-driven inequality:
- Income Disparities: Large corporations, especially in the financial and technology sectors, are often criticized for excessive executive compensation, leading to significant income gaps between top executives and average employees.
- Wealth Concentration: The concentration of ownership in major corporations can lead to the accumulation of wealth among a small group of shareholders, widening the wealth gap in society.
- Tax Avoidance: Some corporations engage in tax avoidance strategies, such as shifting profits to low-tax jurisdictions, and reducing their overall tax contributions. This deprives governments of resources that could be used for social welfare programs.
- Labor Exploitation: In certain industries, corporations may exploit low-wage labor, contributing to income inequality. This is particularly evident in sectors with a high prevalence of precarious employment.
- Market Monopolies: Corporations that engage in anti-competitive practices or monopolistic behavior can stifle competition, limit consumer choice, and concentrate economic power, contributing to inequality.
- Corporate Lobbying: Corporations with significant resources may engage in lobbying activities to influence government policies and regulations, potentially leading to preferential treatment and unequal access to opportunities.
- Supply Chain Exploitation: Global corporations may exploit low-wage labor and lax environmental regulations in developing countries, contributing to global economic disparities.
- Technological Impact: The adoption of automation and artificial intelligence by corporations can lead to job displacement, affecting lower-skilled workers more severely and exacerbating income inequality.
- Environmental Injustices: Corporations, particularly in industries with high environmental impact, may contribute to environmental injustices, disproportionately affecting marginalized communities.
- Prioritizing Shareholders: Some corporations prioritize stock buybacks to increase share prices, benefiting shareholders, including executives, over investing in employee wages, benefits, or research and development.
- Corporate Influence on Education: Corporate involvement in education, such as shaping curriculum or influencing educational policies, may exacerbate educational inequalities by favoring certain skill sets aligned with corporate interests.
- Corporate Influence on Healthcare: Corporations in the pharmaceutical and healthcare industries may contribute to healthcare disparities through pricing strategies that limit access to essential medications and treatments.
- Corporate Media Influence: Concentration of media ownership in a few corporations can shape public discourse, influencing perceptions and potentially reinforcing existing social and economic hierarchies.
What can be done for containment?
The richest governments have a particular responsibility, given their disproportionate influence in setting global rules and norms. The role of the Brazilian-led G20 and the efforts of Global South nations at the UN offer vital opportunities for multilateral action to tackle national and global inequality.
A strong and effective state is the best bulwark against corporate power. Governments need to take a proactive role in shaping their economies for the common good. They must:
- Guarantee inequality-busting public services including healthcare, education, care services, and food security.
- Invest in public transport, energy, housing, and other public infrastructure.
- Explore a public monopoly or a public option in sectors that are prone to monopoly power and key to tackling extreme inequality and driving a rapid transition away from fossil fuels.
- These could include public energy, public transport (where the infrastructure investment costs mean there can only be one efficient provider), and other sectors where there is a significant national benefit.
- Improve public institutions’ transparency, accountability, and oversight (including state-owned enterprises).
- Strengthen, finance and staff regulatory capacity to enforce regulations to ensure that the private sector serves the common good.
Governments need to regulate corporations and prevent injustices across their supply chains, nationally and internationally. They must:
- They must stop the monopoly over knowledge by democratizing trade and ending the abuse of patent rules (for example, by Big Pharma over medicines) that drive inequality.
- Empower workers and communities. Corporations must pay living wages and commit to ensuring climate and gender justice: dividend payments and buybacks should be banned until this is guaranteed.
- Radically increase taxes on corporations and rich individuals. This includes a permanent wealth tax and a permanent excess profit tax.
Governments can use their power to reinvent and repurpose the private sector. They must:
- Use their power to create and promote a new generation of companies that do not put shareholders first – including worker and local cooperatives, social enterprises, and fair-trade businesses – owned and governed in the interest of workers, local communities, and the environment.
- Provide financial support to equitable businesses. They can also use tax and other economic instruments such as public procurement to prioritize equitable business models.
Corporate-driven inequality is a complex and multifaceted issue with deep-rooted economic, social, and political implications.
Addressing this form of inequality requires a combination of regulatory measures, corporate responsibility initiatives, and societal awareness to ensure that the benefits of economic growth are more equitably distributed across all segments of society.
Policymakers, civil society, and corporate leaders are critical in shaping a more inclusive and fair economic landscape.
Related article: Gender pay parity
-Article by Swathi Satish