Analysis conducted by Oxfam and ActionAid on Forbes’ “Global 2000” ranking reveals that the world’s largest corporations have reaped astronomical windfall profits, surpassing $1 trillion each year for the past two years, as prices and interest rates continue to surge.
This windfall, totalling $1.09 trillion in 2021 and $1.1 trillion in 2022, marks an alarming 89 percent surge in total profits compared to the average total profits of 2017-2020.
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Windfall profits, for the purpose of this analysis, are profits that exceed the average profits of 2017-2020 by more than ten percent.
In 2021 and 2022, a staggering 45 energy corporations, on average, amassed windfall profits of $237 billion per year. Had governments imposed a 90 percent tax on the substantial windfall profits generated by oil and gas producers in the previous year, global investments in renewable energy could have risen by a substantial 31 percent.
As a result of these massive windfall profits, the number of energy billionaires has grown to 96, amassing a combined wealth of nearly $432 billion, surpassing last year’s figures by $50 billion.
Notably, food and beverage corporations, banks, pharmaceutical giants, and major retailers have also capitalized on the cost-of-living crisis, which has left more than a quarter of a billion people in 58 countries grappling with severe food insecurity in 2022.
This alarming trend marks the first simultaneous increase in extreme wealth and extreme poverty in a quarter-century.
Eighteen food and beverage corporations, on average, pocketed around $14 billion annually in windfall profits in 2021 and 2022, an amount more than double the $6.4 billion funding gap required to provide life-saving food assistance in East Africa.
Alarmingly, Oxfam estimates that, across Ethiopia, Kenya, Somalia, and South Sudan, one person is at risk of dying from hunger every 28 seconds. Meanwhile, global food prices escalated by over 14 percent in 2022.
In the same period, 28 drug corporations averaged $47 billion in annual windfall profits, while 42 major retailers and supermarkets generated approximately $28 billion in windfall profits each year.
Even as a devastating 9,000 people die daily from hunger, often due to conflict and war, nine aerospace and defense corporations managed to amass an average of $8 billion annually in windfall profits.
“People are deeply frustrated with corporate avarice. It is disheartening to witness corporations accumulating billions of dollars in extraordinary windfall profits while individuals worldwide struggle to afford basic necessities such as food, medicine, and heating,” remarked Anthea Spinks, Director of Programs at Oxfam Australia.
“Large corporations are manipulating prices to bolster their profits, exploiting people in the midst of multifaceted crises,” Spinks added.
“An increasingly dominant few corporations are monopolizing markets and inflating prices to enrich their wealthy shareholders. Large pharmaceutical companies, energy conglomerates, and major supermarket chains have unabashedly bolstered their profit margins throughout both the pandemic and the cost-of-living crisis. Most alarmingly, without appropriate regulation, including progressive taxation, governments are complicit in this behavior,” Spinks emphasized.
There is a growing body of evidence indicating that corporate profiteering plays a substantial role in fueling inflation, raising concerns that corporations are exploiting the cost-of-living crisis to boost profit margins, a phenomenon termed “greedflation” and “excuseflation.”
Christine Lagarde, President of the European Central Bank, suggested in May that corporations are contributing to “greedflation,” and the IMF recently published a study revealing that corporate profits have driven nearly half of Europe’s inflation increase over the past two years.
This surge in corporate profits has coincided with deteriorating pay and working conditions for employees. Oxfam estimates that the highest-paid CEOs in four countries enjoyed a real-term pay increase of 9 percent in 2022, while workers’ wages decreased by 3 percent.
One billion workers in 50 countries experienced an average pay cut of $685 in 2022, resulting in a collective loss of $746 billion in real wages when compared to inflation-adjusted wages.
Oxfam and ActionAid are urging governments to reclaim gains derived from profiteering. Imposing a tax of 50 to 90 percent on the windfall profits of the 722 mega-corporations could yield between $523 billion and $941 billion for each of the years 2021 and 2022.
This funding could significantly aid individuals grappling with hunger, escalating energy costs, and poverty in affluent nations, and provide hundreds of billions of dollars to assist countries in the Global South. For example:
1. Allocating $400 billion to the fund for loss and damage agreed upon at COP27 in the previous year. The urgency of loss and damage finance is emphasized by estimates suggesting that low- and middle-income countries may face costs of up to $580 billion annually by 2030. UN Secretary-General António Guterres has called for wealthy countries to impose windfall taxes on fossil fuel companies and redirect the funds to vulnerable countries facing worsening climate-related losses.
2. Closing the financing gap of $440 billion to provide universal social protection coverage and healthcare to more than 3.5 billion individuals residing in low- and lower-middle-income countries, in addition to addressing the $148 billion financing gap to offer universal access to pre-primary, primary, and secondary education in these nations. This move could result in the hiring of millions of new teachers, nurses, and healthcare workers across the Global South.
“Enough is enough. Government policies must not permit mega-corporations and billionaires to profit from the suffering of people. Governments should tax the windfall profits of corporations across all sectors and reinvest that money in assisting people while discouraging future profiteering. They must prioritize the well-being of the vast majority over the avarice of a privileged few,” stated Arthur Larok, Secretary-General of ActionAid.
“Taxing windfall profits is sound economic policy; it represents a clear and direct source of funds for development and combating climate change. Increasing the debt burden on poorer countries makes no sense when it exacerbates the climate crisis.”
Oxfam and ActionAid’s analysis is based on data from Forbes’ “Global 2000” ranking.
For more information, please refer to the methodology note. All figures are in USD.
According to the IEA, governments worldwide have earmarked $710 billion for “long-term clean energy and sustainable recovery measures.” Imposing a 90 percent tax on the windfall profits of 45 energy corporations ($237 billion in 2022) could generate $219 billion in revenue, marking a 30.9 percent increase when added to the existing $710 billion in investments.
As per the World Food Program’s Global Report on Food Crisis (GRFC), in 2022, 258 million people in 58 countries and territories faced acute food insecurity at crisis or worse levels (IPC/CH Phase 3-5), an increase from 193 million people in 53 countries and territories in 2021.
In East Africa alone, a record 36 million people are grappling with extreme hunger, nearly equivalent to the population of Canada.
The estimates for daily deaths attributable to IPC 3 level hunger driven by conflict are based on IPC reports on acute food insecurity, factoring in the crude death rates associated with IPC Phase 3 in the IPC Technical Manual Version 3.1. A deduction of 0.22 deaths per 10,000 affected population per day is made to account for the “normal death rate,” based on World Bank data.
Data for the East Africa funding gap was extracted from OCHA Financial Tracking Service (FTS) on 12 June 2023.
In 2022, global food prices were on average 14.3 percent higher than the previous year. Oxfam’s calculations of daily deaths attributable to IPC 3 level acute food insecurity driven by conflict are based on the IPC Technical Manual Version 3.1.
In the U.S., the U.K., and Australia, studies have found that 54 percent, 59 percent, and 60 percent of inflation, respectively, were driven by increased corporate profits.
An article published by European Central Bank economists Oscar Arce, Elke Hahn, and Gerrit Koester (2023) demonstrates that larger corporate profit margins contribute more significantly to domestic price pressures than wages.
The President of the European Central Bank, Christine Lagarde, suggested last May that corporations were contributing to “greedflation.” According to the IMF, rising corporate profits account for almost half the increase in Europe’s inflation over the past two years, outpacing the rising costs of imported energy.
Economists at the Federal Reserve Bank of Kansas City found that “markup growth” likely contributed more than 50 percent to inflation in the U.S. in 2021.
The EU has introduced a windfall tax, though it currently applies exclusively to energy corporations.
In 2020, the financing gap for achieving universal social protection coverage and healthcare in low- and lower-middle-income countries was $440.8 billion. The financing gap for universal access to pre-primary, primary, and secondary education in low- and lower-middle-income countries was estimated at $148 billion per year between 2020 and 2030.
Money © Mark Anning photo 2022
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