Corporations should be at the forefront of fighting inequality

Vaccines might ultimately save us from the coronavirus, but the damage that it left behind will last for generations. Worldwide, poverty has increased for the first time since 1998. The World Bank predicts that the pandemic will increase the number of extreme poor—living on less than USD 1.90 a day—by up to 150 million. The number of people experiencing crisis level hunger would rise to 270 million by the end of 2021, an increase of 82 percent in a year, according to the UN World Food Program.

Although it is too soon to see the full picture, most initial studies indicate that the pandemic has worsened one of today's great scourges: inequality. According to a newly published Oxfam report, the pandemic has hurt people living in poverty far more than the rich Globally, billionaires' wealth increased by a staggering USD 3.9 trillion between March 18 and December 31, 2020. Yet, millions of low-paid employees like domestic workers, street vendors, taxi drivers, retail and construction workers have lost their jobs.

Moreover, with unprecedented support from governments, stock markets have been booming, driving up billionaires' wealth, while the real economy faces one of the deepest recessions in a century. Even in the UK, thousands of small businesses are either struggling to survive or have been closed permanently.

This exposes a collective frailty and the inability of our deeply unequal economy to work for all. When the pandemic hit, billions of people did not have any resources or support to weather the economic and social storm that it created. Over three billion people did not have access to healthcare, three-quarters of workers had no access to social protection like unemployment benefits, and in low-and lower-middle income countries over half of workers were in working poverty.

The best efforts of governments, multilateral institutions, and non-governmental organisations are undoubtedly helpful for fighting inequality. However, corporations need to be in the lead. There are many pressing societal issues where important decisions can't be made by presidents and prime ministers, but by corporate chief executives.

Therefore, some scholars emphasise that multinational corporations (MNCs) are among the most powerful transnational actors to address this problem. 79,000 MNCs and its 790,000 affiliates control our economic system. Given the amount of their resources and operational efficiencies, they have the power to significantly improve the lot of the poor by stimulating economic development in the world's poorest countries.

In their book, "The role of business in fostering peaceful societies", Fort and Schipani argue that MNCs that promote economic development and build a sense of community both within the company and in their local areas make a great contribution to building a more harmonious culture. Likewise, my dissertation, explores a Switzerland based MNC's significant contribution in reducing inequality in Moga (Punjab-India) by providing jobs and buying milk from hundreds of thousands of farmers in the region. 

It is true that Transnational Corporations (TNCs) cannot provide a complete solution for inequality. But if they behave responsibly towards the society from which they generate profit, they can make meaningful contributions in a number of ways.

First, many empirical studies provide evidence that TNCs pay higher wages than locally owned companies which is an important criteria for reducing the wage gap.

Second, by paying higher taxes, corporations are at the forefront of governments' initiatives that alleviate the gap between the rich and the poor. Although George Osborne, former British finance minister, was unable to force Facebook, Google, and Starbucks to pay fair taxes, Unilever is one of the highest tax payers in Bangladesh, employing 10,000 people including those working in the supply chains.

Third, when a country opens-up to international trade, competition between TNCs increase significantly which helps reduce prices. This in turn increases the buying power of those in the lower income segment. 

Fourth, informal economic activity still commands large parts of developing countries' economies which in fact cost those who are poor the most. This is due to rent seeking and unnecessary involvement of middleman in the process of buying products and services. Corporations are increasingly discovering ways to eliminate this leakage, thus improving the purchasing power of the poor.

Fifth, the poor suffer not only from low incomes but a disparity in purchasing power compared to the rich. They pay more for comparable products, even for essentials such as water. My article, "The inextricable links between water scarcity and poverty", published in this newspaper explained how the poor living in Dharavi (Mumbai), the world's largest slum, pay a higher price for meeting their everyday water necessity compared to the rich living nearby Warden Road. MNCs penetration in the area empowers the poor by providing choices of buying water from various sources.

To create a more equal and sustainable economy that benefits all, not just the privileged few, businesses should be redesigned to prioritise society, rather than ever greater pay-outs to rich shareholders. Corporations have a duty not only to address any adverse impacts of their activities, but also to move towards business models that are sustainable and inclusive.

Antonio Guterres, secretary-general of the United Nations, writing for The Economist, urged governments to ensure that the private sector takes its responsibility towards putting people and the planet at the centre of their business models and encourage green economy that generates three times more jobs than investments in fossil fuels. A recent review of global polling data collected by the New York University also reveals that the pandemic has changed people's priorities.

A society can't exist peacefully if there is high inequality. It is in the self-interest of the governments' elite to create a more equal and sustainable world by putting pressure on MNCs to invest in healthcare, education, and other public services. As the Oxfam report insists, extreme inequality and poverty are not inevitable when governments choose to make taxes fairer, invest in public services and ensure fair wages for everyone.

Ismail Ali is a London based freelance journalist.