Over the last five or six years, in the aftermath of what has become known as the Great Recession of 2008, there has been increasing interest shown by economists, politicians and political pundits in the growing issue of economic inequality, both in individual countries and globally. There have also been some popular works on the subject, such as Joseph Stiglitz’s The Price of Inequality and Tavis Smiley and Cornel West’s The Rich and the Rest of Us. And, recently, former Prime Minister of Great Britain John Major gave a talk about the “shocking” levels of inequality in the UK today. What I would like to do in this article is look at how economically unequal the world is, how it may be getting worse and why some believe that such levels of inequality will have a negative effect on the world.
Before going further, however, it would be useful to set out the difference between a person’s income and a person’s wealth. Income is the amount of money which a person earns over a certain period of time; in 2012 the Office for National statistics (ONS) stated that in the UK the average yearly income of a full-time worker in the UK was £26,500. Wealth is the overall value of things (assets) which a person owns; in late 2009 the ONS stated that the average wealth of a UK household was £204,500.
So, what does the state of global economic inequality look like? Well, earlier this year Oxfam released a research paper which suggests that 80% of the world’s population (around 5.6 billion people) own only 5.5% of wealth in the world. Then, looking at the richest 1% of people in the world, the paper predicts that this group will own more than 50% of the world’s assets by 2016. Even starker, it reckons that the eighty wealthiest people in the world have the same amount of wealth as half of the world’s population (about 3.5 billion people).
Looking at income, in America a study by the United States Congressional Budget Office uncovered that since the late 1970s most of the income gains of the country have gone to the top 1% of households. Their incomes had risen by 275% (nearly four times what it was in the late 1970s) while the poorest fifth of the population’s incomes had grown by just 18%. In other words, in the space of thirty years, the income of the top 1% in America has risen 15 times faster than the poorest fifth. And in the UK, Professor Danny Dorling from Sheffield University has said that the share of all income taken by the 1% could soon return to what it was in 1918.
But, besides the obvious moral point that it is unfair to have an increasingly widening gap between rich and poor, why is income inequality such a bad thing for the world? Two highly important economic organisations, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have suggested that inequality can be a drag on the overall growth of a country’s economy, for one. Some experts, including economist Paul Krugman, point out that the concentration of economic power in too few hands could undermine democracy, because they could use that power to influence politicians for their own ends; by donating large amounts of money to a particular political party so as to shape that party’s policy, for example.
Another worry is that once inequality reaches a certain level, some of those at the bottom of society may become so enraged at such unfairness that they decide to rise up against those at the top – a by-product of inequality which even the super-rich have an interest in preventing.
Sources:
- http://news.bbc.co.uk/1/hi/business/8405901.stm
- http://www.bbc.co.uk/newsbeat/article/30881841/how-much-are-you-worth-the-worlds-wealth-in-pictures
Image: By Jonathan McIntosh (Own work) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
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