In major cities, it is a common sight to witness homeless individuals residing in picturesque historical squares, immigrants selling clothing or books on makeshift stalls adjacent to towering modern edifices, and needy individuals engaging in acts of charity in close proximity to luxurious million-dollar cars. Well, these unfortunate scenes are the drawbacks of a growing disparity between rich and poor: a privileged few amassing great wealth, while countless others are left with nothing. These mentioned are obviously extreme examples, but the problem of inequality seems to be catching the attention of the western world, and numerous scholars have tried to provide us with some precise and comprehensive studies to better understand the entity of this problem. We try here to provide a bird eye of the actual state of the issue in numbers, using as benchmark the great “Work Inequity report 2022”.
The World Inequality Report, conducted by the Word Inequality LAB at the Paris School of Economics, is one of these comprehensive analyses: it provides estimates of income and wealth based on a World Inequality Database (WID.world). The database collects all the data gathered by over a hundred researchers in five continents.
The authors of this report, namely the researchers Lucas Chancel, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, used two variables to measure inequity: wealth, measured as the total value of what a person own, and income, or salary earned over the period of one year.
What they discovered is that an average individual adult earns USD23,380 per year and owns USD102,600. At a first glance these numbers might seem quite good, however, they hide the disparities between and within countries. The richest 10% of global population owns 52% of global income, whereas the poorest 50% captures only 8.5%. Furthermore, while an individual from the top 10% earns over a hundred thousand USD per year, a person from the poorest half makes less than three thousand USD per year.
If we analyze inequity in terms of wealth, the gap gets even larger: the poorest half of the global population owns only 2% of wealth, while the richest 10% represents 76% of the entire value. In particular, on average, the poorest half of the population owns a total value of USD 4,100 per adult, while those above the 90thpercentile own USD 771,300, which is 188 times the average of the bottom half.
The richest 1% is the population group that secured the biggest share of the wealth growth since the mid 90s. They caught 38% of all the additional wealth created since that period, whereas the bottom 50% only captured 2%. The richest individual’s wealth has increased at a pace of about 6 to 9% each year, while average global wealth growth rate was around 3.2%. Nowadays, billionaires, 2,582 people in total, own 3% of global wealth. The covid pandemic boosted the growth of billionaires’ wealth, indeed 2020 marked the steepest increase in their share of wealth.
The huge effort put by these economists in gathering thousands and thousands of data to give us a final value that summarizes such important aspects of reality is remarkable. However, while reading reports and articles like these, we should never forget that those are not just numbers, they (partially) tell us about the daily live of millions and millions of people. Each unit of the final percentage is a person before being a number in a report, has a story before being part of a category. So please, while going through the article, try to keep this in mind, try to figure out how these data have impact on many lives.
Until now this point, we have looked at the disparity on a global scale, comparing the average richness of people from the bottom 50% and from the top 10%. However, now the analysis will go more in detail, looking at the concrete consequences of these differences within geographical areas, governments, genders, and carbon emissions.
For starters, in terms of differences in heterogeneous geographic regions, it’s known that nations where there are dictatorships, high levels of corruption, overpopulation, and low levels of instruction are the poorest areas of the world. Here, money and power are concentrated in the hands of a restricted elite. In particular, Middle Est and North Africa (MENA region) are the most unequal region: here the top 10% earn the astonishing amount of 58% of total income.
On the other hand, Europe appears to be the most equal area: there, the top 10% income share is “only” around one third of the total.
Probably, if you are reading this article, it means that you are literate, own a device or a computer, have free access to internet and dispose of some time to dedicate to this reading; these are four things that probably the average MENA citizen doesn’t have in full. Don’t forget that (as of today) 660 million people live in extreme poverty, 781 million adults are illiterate and 2.9 billion don’t have access to the internet. Unfortunately, the majority of citizens of the last-mentioned region are in at least one of these categories, if not all.
Even though statistical data about income and wealth are more precise when it comes to label a category of population, data about a particular aspect of daily life can let us better emphasize with certain conditions, so here are a few of them. Around 2 billion people on earth (25% of population) haven’t access to safely managed drinking ; 828 million people go to bed hungry every night and 345 millions of them are facing acute, or crisis-level food insecurity; 150 million people are homeless and 1.6 billion lack adequate housing; 230 million people are unemployed; 1 in 5 children is engaged in labor and half of the world lacks access to essential health services.
These only a few of many distressing data about the concrete impact of inequity, and poverty, on daily life.
While differences between regions are quite marked, the financial situations of governments infer similar results. Public wealth comprehends financial and non-financial assets held by governments: substantially the resources that are used by politicians and policy makers to administrate the country. Said resources are very limited, and in many cases they are even financed by large public debt. For instance, in Germany the value of public wealth went from being close to 100% of national income in 1970 to almost zero in 2020; during the same period of time, for Britain, the same datum went from 60% to -106%.
This indebtedness is due to the large borrowings made by governments from the private sector to face the frequent crisis periods of the last two decades.
Public debt also boosted the growth of private sector’s wealth, which topped values around 700% of national income on some occasions.The currently low wealth of governments is a risk for the ability to tackle future challenges, like climate change and the problem of inequality itself.
The two last consequences analyzed by authors in the report are the emissions of carbon per person and the gender labor income. On average, humans emit 6.6 tons of carbon dioxide (CO2) per capita per year, however data reveal a big gap between poor and wealthy people. The wealthiest, who have a better life tenure, tend to consume more, and consumption increases together with income. The report shows important inequalities at the world level: the top 10% of emitters are responsible for almost 50% of CO2, while the bottom 50% emits only 12%. Finally, concerning gender parity, it can be stated that some actions have been taken, but still not enough. In 1990, women earned about 30% of labor income; instead, nowadays, this percentage increased solely by 5%.
Finally, reasons for said growing disparity are rooted to political choices and beliefs. Concerning inequality between countries, regions like Europe and China experienced relatively smaller rises than US, Russia, and India; the reason for this can be found in the adoption, by the latter nations, of a series of important liberalization and deregulation programs, which increased inequality. Moreover, said policies are also a consequence of different historical backgrounds: indeed, Europe and China experienced stronger socialist movements, keener on lower class needs.
A strong link between politics and the economic system is visible, indeed inequity is a cause and consequence of the political system, and contributes to a worsening of the economic situation, which itself contributes to increasing inequity. We are paying a high price for inequity, and the consequence is a weakening economic and political system, and this self-reinforcing vicious cycle can be stopped only by adopting new policies.
Take for example the financial crisis of 2008, which had roots in the financial system. During the years preceding that catastrophe, there was a tacit agreement between those who governed the financial world and the society, which was something like this: we will give you jobs and prosperity, in exchange we will be free to benefit of huge bonuses and salaries. Today we can say pretty firmly that this promise hasn’t been maintained: top 10% is even richer and bottom 50% is in a worst situation.
Financial markets have been fundamental for the development of today’s world over the last two centuries: they increased enormously productivity and helped the improvement of life expectancy, however at some point they have been used to concentrate richness in the hand of few, abusing of the rest of society.
But how did this happen? Probably a good part of this can be attributed to a “loss of morality”, both on the markets governing side and on the politics side, which became extremely sensitive to the power of money. Obviously, we can’t attribute these critics to all of the people who work in these two fields, and we can’t either think that all of those who had power minded only their own interests, but we can say that the tendency of policies outcomes shows a certain moral attitude of these two sectors.
Americans and Europeans are proud of their democratic institutions; however, the recent events of the economic world have seriously challenged the conviction of a real democracy. For how it was built and created, each citizen has a vote, but recently looks like that each dollar has a vote.
Politics decisions have crafted an economic system that gives huge advantages to a restricted number of people, but exist different models of governance, that imply certain consequences on how wealth and income are distributed, efficiency and stability. But to do this we need a democracy that reflects the needs of the majority of population and not of a restricted group of individuals.
In conclusion, when considering concrete actions that could be taken to tackle these issues, some scholars propose a tax on global multimillionaires, which would allow for an increase in spending for education, health, and ecological transition. Indeed, in 20th century, welfare state and social democracy were possible thanks to huge government expenditures, financed with progressive taxation rates.
The final suggestion is to learn from policies adopted in the past to design fairer development pathways. Nonetheless, the condition sine qua none of this is the awareness of the majority of society of this problem. Indeed, without it, no real radical change is possible and foreseeable in the future.