Thirty-two of the world’s largest companies stand to see their profits jump by $109 billion more in 2020 as the Covid-19 pandemic lays bare an economic model that delivers profits for the wealthiest on the back of the poorest, according to a new Oxfam report released this week.
Power, Profits and the Pandemic, published ahead of the six-month anniversary of the declaration of the pandemic, also outlines how Covid-19 has made things even worse by encouraging corporations around the globe to put profits before workers’ safety, push costs and risks down the supply chain and use their political influence to shape policy responses.
Globally, half a billion people are expected to be pushed into poverty by the economic fallout from the pandemic. 400 million jobs have already been lost and the International Labour Organisation estimates that more than 430 million small enterprises are at risk.
The 25 richest billionaires have increased their wealth by staggering amounts.
Meanwhile, the protection given to shareholders has fuelled a share price boom. The top 100 stock market winners have added more than $3 trillion to their market value since the pandemic. As a result, the 25 richest billionaires have increased their wealth by staggering amounts.
For instance, Jeff Bezos’, the richest man on earth worth around $200 billion, wealth has increased with $92 billion in only five months, between 18 March and 20 August 2020. Bezos could have paid each of Amazon’s 876,000 employees a $105,000 bonus and would still be as wealthy as he was at the beginning of the pandemic. Invested over 25 years at a 6% interest rate this bonus would increase to $450,000 in retirement savings for each employee.
“Covid-19 has been tragic for the many but good for a privileged few,” says Chema Vera, Oxfam Executive Director. “The economic crisis we are suffering because of the pandemic has been fuelled by a rigged economic model. The world’s largest corporations are making billions at the expense of low wage workers and funnelling profits to shareholders and billionaires – a small group of largely white men in rich nations.”
“It is sickening that, in the middle of a pandemic, some corporations are paying-out massive dividends to wealthy shareholders having received government bailouts meant to protect jobs,” she adds. “Scarce resources are being handed to the already super wealthy at a time when hundreds of millions of people are suffering the consequences of this pandemic. Women, racial and ethnic minorities or migrants are being significantly impacted.”
The Oxfam report outlines how corporations have exacerbated the economic impacts of the pandemic by funnelling profits to shareholders instead of investing in better jobs and climate-friendly technology, paying their fair share of taxes, and prioritizing profits over people. The report sets out examples including:
- In the US, an estimated 27,000 meatpacking workers have tested positive ―one in nine employees― and more than 90 have died from COVID-19. The country’s largest meat processing company, Tyson Foods, published a letter advocating against closing its factories, despite 8,500 of its employees testing positive for the virus.
- Ten of the world’s largest apparel brands paid 74% of their profits (a total of $21 billion) to their shareholders in dividends and stock buybacks in 2019. This year 2.2 million workers in Bangladesh alone were affected when textile orders were cancelled. Factory shutdowns have lowered revenues in the country by an estimated $3 billion.
- In India, hundreds of tea plantation workers, many of them women, have gone unpaid as a result of the Covid-19 lockdown. At the same time, some of the largest Indian tea companies have boosted their profits or have been able to maintain profit margins by cutting costs.
- Mining operations in Peru have been kept open despite high risks of infection among their employees.
- Chevron announced cuts of 10-15% of its 45,000 global work force despite spending more cash on dividends and share buybacks during the first quarter of the year than they generated from core business.
- Nigeria’s largest cement company, Dangote Cement, allegedly fired more than 3,000 staff without prior notice or due process while the company is still expected to pay 136% of its profits to shareholders in 2020.
Oxfam finds that many companies’ ability to cope with the economic damage wreaked by the pandemic and take care of their employees has been severely undermined by years of increased payments to shareholders; some companies having handed over amounts significantly greater than their profits.
From 2016 to 2019, 59 of the world’s most profitable companies in the US, Europe, South Korea, Australia, India, Brazil, Nigeria, and South Africa distributed almost $2 trillion to their shareholders, with pay-outs averaging 83% of earnings. The three largest healthcare companies in South Africa ―Netcare, Mediclinic and Life Healthcare Group― paid out a staggering 163% of their profits to shareholders through dividends and share buy-backs.
Oxfam is calling for a response to the immediate crisis that prioritizes support for workers and small businesses. It includes establishing a Covid-19 Pandemic Profits Tax to ensure shared sacrifice, and the redeployment of resources away from those cashing in on the pandemic and toward those bearing the burden.
“We are at a critical juncture. We have a choice between returning to ‘business as usual’ or learning from this moment to design a fairer and more sustainable economy,” says Vera.
“Some of the captains of capitalism have jumped on the bandwagon and promised to move away from a shareholder first model. This talk is cheap. The pandemic must be the catalyst for reining in corporate power, restructuring business models with purpose, and rewarding all those that work with profits, creating an economy for all,” he continues.
“Unless we change course, economic inequality will increase. Now is the time to shore up small businesses, workers and democratic institutions ―not an even smaller number of large corporations that are exerting greater economic and political power.”