The influential report is supported by Bank of England chief economist Andrew Haldane and Nobel Prize-winning economist Joseph Stiglitz.
It notes that since 2009 one million women have died in childcare due to lack of basic health care, and that 57 million children are currently missing out on any form of education.
The charity, which published the report as part of its new Even It Up campaign, also found that the richest 85 people in the world have the same wealth as the poorest half of the world's population.
Extreme inequality
This group saw its wealth increase by a staggering £412m every day in the last year, while Oxfam now estimates that there are 16 billionaires in Sub-Saharan Africa, where 358 million people live in extreme poverty.
Mark Goldring, Oxfam's chief executive, said: "Inequality is one of the defining problems of our age. In a world where hundreds of millions of people are living without access to clean drinking water and without enough food to feed their families, a small elite have more money than they could spend in several lifetimes.
"The consequences of extreme inequality are harmful to everyone - it robs millions of people of better life chances and fuels crime, corruption and even violent conflict. Put simply, it is holding back efforts to end poverty."
Earlier this month the OECD said global inequality was at its worst levels since 1820. It said that the "great divergence" between the global rich and poor was one of the most "worrying" developments in the last 200 years.
'Fair deal'
This new Oxfam report echoes the grim picture painted by the controversial bestselling author Thomas Piketty in his book
Capital in the Twenty-First Century
. In response to growing inequality, the charity is now calling on governments to tackle tax evasion and to invest in public services, as well as introducing equal pay legislation to give women a "fair deal" and to introduce a living wage for all workers.
By calling for a shift of taxation from labour towards wealth and capital, the charity risks being attacked by those on the economic right, who accuse it of politicising the international debate surrounding poverty.
However while the report notes that it's "necessary to offer fair reward for talent and hard work" it argues a growing consensus is emerging that extreme levels of inequality are economically as well as socially damaging.
Moral obligation
This comes after the governor of the Bank of England warned in May that capitalism risked destroying itself if bankers failed to realise they have a moral obligation to create a fairer society.
He said: "Just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself."
Mr Haldane agreed, saying: "In highlighting the problem of inequality Oxfam not only speaks to the interests of the poorest people but also the wider collective interest: there is rising evidence that extreme inequality harms, durably and significantly, the stability of the financial system and growth in the economy. It slows development of the human, social and physical capital necessary for raising living standards and improving well-being."
- Independent
