Are Poverty and Inequality the Defining Challenges of Our Time?
It would appear so
We are delighted to be the first sponsors of Philanthropy Impact Magazine and to partner with an organisation that so closely aligns with our non-profit, private client and philanthropic specialisms. The answer to the question above is: It would appear so, according to…
• A recent poll conducted by J. P. Morgan Private Bank and the Beacon Awards which found that ‘global poverty is top of the agenda for the next generation of philanthropists’ (J.P. Morgan Press Release 29 April 2015)
• The debate amongst political parties prior to and during the election
• Numerous articles in the media
• The popularity of Thomas Piketty and his book Capital in the Twenty-First Century
• The articles in this magazine
As can be seen in the articles in this magazine it matters to the Governor of the Bank of England, Mark Carney; to economists such as Vicky Pryce; to philanthropists such as Gina Miller, Grant Gordon and others; to trusts such as Trust for London and Barrow Cadbury Trust; and of course to charities such as those in the human rights arena, international issues, and so on.
The facts are clear. For example in the UK:
Equality of Opportunity
• The correlation between parents’ earnings and their children’s was higher in UK than anywhere in the developed world
• Although the arrival of mass education and opening of universities and professions to meritocracy led to increased social mobility throughout the 20th Century, this is now in reverse.
Income Inequality Is One of the Defining Challenges of Our Time
• The wealthy are becoming wealthier and the poor are becoming poorer. The share of income held by the top 1% of the UK population has grown: in 1910 it was 22%, in 1980 it was 6%, and in 2010 it was 15% – According to Thomas Pikkety, this will peak
when the rate of return on capital exceeds the growth rate of the economy (growth of capital outstripping the growth of output).
• The wealthy have been largely insulated from the 2007/8 financial crash
• Real annual wages fell for the typical worker by 8% between 2008-13; the figure for young people up to age 29 is 13%
• Almost a million people resorted to food banks in 2014
The Stresses of Poverty
Studies (including an emerging body of brain science) show that the stresses of poverty often overwhelm the critical thinking skills that people need to develop and follow a pathway out of their living conditions, to break the poverty cycle. Low wage employment and zero hour contracts have an impact and reinforce a poverty life-cycle.
A Future Issue Potentially Disruptive
The increasing use of robots, biotechnology advances, digital technology and 4D may be disruptive in positive ways; however there may be a downside with fewer jobs for all classes potentially widening the income gap more.
‘Not so long ago those who worried about inequality were accused of partaking in the politics of envy. In the past year this concern officially became mainstream as voices from the Pope to Christine Lagarde to President Obama cautioned of its impacts. The mounting consensus: left unchecked, economic inequality will set back the fight against poverty and threaten global stability’ World Economic Forum setting out the problem ahead of its meeting in Davos (The Disintegration of the World, The Atlantic, May 2015)
Scott Barber is a Partner of Buzzacott within the Expatriate Tax Services team and a member of the Philanthropy Impact Board. He is an American Certified Public Accountant with over 20 years’ experience dealing with expatriate tax issues for private clients having worked for the Big 4 in Atlanta, Frankfurt and London since 1998. Scott works with a number of dual qualified charities, assisting with US tax compliance and advice. Scott joined Buzzacott Expatriate Services in December 2004.
Edward Finch is a Partner in Buzzacott’s Charity & Not-for-Profit team. He oversees the audit and advisory services that Buzzacott delivers to a wide range of charities, social enterprises and grant-making foundations operating locally, nationally and internationally. As well as advice relating to financial statements and reporting, advisory work for Edward’s clients encompasses structures and governance, reviews of systems and processes and training for trustees and staff. He undertakes a variety of writing and speaking, including regular articles for Social Enterprise magazine and other publications.
Buzzacott is the largest single office accountancy firm in the UK with over 300 staff working in specialist teams which combine niche expertise in international and regulation intensive sectors – expatriates, charities, FCA regulated businesses – with excellence in mainstream tax and financial management services.