18 December 2017

Growing inequalities are a threat to world social and political stability

Over the last decades, income and wealth inequality has increased in almost all countries. This is a consequence of the fact that the richer population categories have grabbed most of the benefits of growth: for example, the top 1% richest people captured twice as much benefits of growth as the 50% poorest. This explains why the top 1% richest people control now more than 20% of global income, while the 50% poorest ones get less than 10% of the income generated every year.

It is in the Middle-East that income inequality is the highest (the 10% richest capture 61% of income), while Europe is the region where they are the lowest, relatively (the 10% richest capture 37% of income).

Since 1980, the middle classes of the richest countries (the US and Europe, in particular) have seen their income per person grow slowest (less than 50% in 35 years). The 30% poorest have seen their income per person grow between 75 and 150%, while over the same period, for the extremely rich, income per person has more than tripled! These figures strongly illustrate the emergence of middle classes in the South, in China and India in particular, who are the main beneficiaries of relocation of economic activities that occurred in the wake of global market liberalisation. They also illustrate financialisation of the global economy and a stronger control of economic and financial activities by a minority of multinationals and their leaders (industry, trade, retail, digital and finance).

Global inequality and growth curve (1980–2016)

Download diagram: Elephant.png

These results are published in a report by the World Inequality Lab that groups more than a hundred economists from the five continents. The report relies on a method that combines systematically data coming from a variety of sources: national income and wealth accounts; household income and wealth surveys; fiscal data coming from taxes on income; inheritance and wealth data; and wealth rankings.

Weaker States

The World Inequality Lab report also shows that, over the period considered, capital accumulation has been in favour of the private sector, while public capital stagnated or regressed, reducing considerably the weight of States in the world economy. In France, for example, public capital dropped from almost 20% to less than 5% of national wealth.

Some suggestions to combat inequality

Projections presented in the report suggest a continuation of the increase of inequality in the future, unless the States adopt more aggressive fiscal and education policies. From the fiscal point of view, the authors suggest, among other things, more tax progressivity, combatting tax evasion and money laundering by creating a global financial register recording the ownership of financial assets. Regarding education, the report suggests to improve more equal access to education, in particular to elite colleges, and to give professionals greater training opportunities in order to enhance their access to more qualified and well-paying jobs. Finally, the authors also stress the essential role of the public sector in making investments in domains such as education, health and the environment. Insufficient as they may seem considering the magnitude of the issue and its impact, these suggestions however go in the right direction.

Important and alarming political consequences

One cannot but relate these figures, and particularly those pertaining to middle classes in rich countries, « losers » of economic growth during the last three decades, with some electoral results observed in recent years (Brexit, election of Donald Trump in the US and the rise of the extreme right in Europe).

With this report, we have now a better knowledge of how inequality has been evolving in the world and of some solutions that could avoid that the trend observed during the last thirty years continues and results finally in greater social tension and in the establishment of hard line nationalist and populist governments that could threaten world peace.

The question is now about which political forces could take up these elements in order to create a balance of power that could allow to combat effectively inequality. Here, we have to confess, perspectives are not that encouraging for the moment. But the situation could change rapidly under the pressure of events that may result from the on-going economic and social transformation of which the figures presented in the report are the symptoms.

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To know more

1. •F. Alvaredo et al., World Inequality Report 2018 - Executive Summary , World Inequality Lab, 2017
   

2. •F. Alvaredo et al., World Inequality Report 2018, World Inequality Lab, 2017
   

Earlier articles on hungerexplained.org related to the topic:

1. •Opinions : How to stop the global inequality machine (Jason Hickel), 2017
   

2. •Opinions : Growing Inequality under Global Capitalism (Jomo Kwame Sundaram et Anis Chowdhury), 2017
   

3. •Is “free-tradism” agonising? Why is it increasingly difficult to enter into free trade agreements? 2016
   

4. •Intergenerational equity: the European social model - The story of a political mistake, 2015
   

5. •Intergenerational equity is possible, provided there is a fundamental change in the principles that govern the world, 2015
   

6. •Imposing the liberal economic model, 2013
   

7. •Deux «revenants» menacent la France: la pauvreté et la faim, 2012 (in French)
   

8. •Intergenerational equity and sustainability: Our inegalitarian societies are preparing to pass on a crippling legacy to future generations, (2012)
   

9. •Exclusion 2012
   

Last update:    December 2017

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