Inequality is not inevitable, it is a political choice
by World Inequality Report 2022, agencies
11:48am 8th Dec, 2021
The richest 10% of the global population currently takes 52% of global income, whereas the poorest half of the population earns 8% of it. Global wealth inequalities are even more pronounced than income inequalities. The poorest half of the global population barely owns any wealth at all, possessing just 2% of the total. In contrast, the richest 10% of the global population own 76% of all wealth.
In 2021, after three decades of trade and financial globalization, global inequalities remain extremely pronounced: they are as great today as they were at the peak of Western imperialism in the early 20th century.
In addition, the Covid pandemic has exacerbated even more global inequalities. Our data shows that the top 1% took 38% of all additional wealth accumulated since the mid-1990s, with an acceleration since 2020. More generally speaking, wealth inequality remains at extreme levels in all regions.
“The COVID crisis has exacerbated inequalities between the wealthy and the rest of the population. Yet, in rich countries, government intervention so far prevented a massive rise in poverty, this was not the case in poor countries. This shows the importance of social policies in the fight against poverty.”, explains Lucas Chancel, lead author of the report.
Economist Gabriel Zucman states: “The World Inequality Reports addresses a critical democratic need: rigorously documenting what is happening to inequality in all its dimensions. It is an invaluable resource for journalists, policymakers, and civil society all over the world.”
Lucas Chancel adds, “If there is one lesson to be learnt from the global investigation carried out in this report, it is that inequality is always political choice.”
Inequality is a political choice, not an inevitability
Income and wealth inequalities have been on the rise nearly everywhere since the 1980s, following a series of deregulation and liberalization programs which took different forms in different countries. The rise has not been uniform: certain countries have experienced spectacular increases in inequality (including the US, Russia and India) while others (European countries and China) have experienced relatively smaller rises. These differences, confirm that inequality is not inevitable, it is a political choice.
Average national incomes tell us little about inequality
The world map of inequalities reveals that national average income levels are poor predictors of inequality: among high-income countries, some are very unequal (such as the US), while other are relatively equal (e.g. Sweden). The same is true among low- and middle-income countries, with some exhibiting extreme inequality (e.g. Brazil and India), somewhat high levels (e.g. China) and moderate to relatively low levels (e.g. Malaysia, Uruguay).
While inequality has increased within most countries, over the past two decades, global inequalities between countries have declined. The gap between the average incomes of the richest 10% of countries and the average incomes of the poorest 50% of countries dropped from around 50x to a little less than 40x. At the same time, inequalities increased significantly within countries. The gap between the average incomes of the top 10% and the bottom 50% of individuals within countries has almost doubled, from 8.5x to 15x.
This sharp rise in within country inequalities has meant that despite economic catch-up and strong growth in the emerging countries, the world remains particularly unequal today. It also means that inequalities within countries are now even greater than the significant inequalities observed between countries.
Global inequalities seem to be about as great today as they were at the peak of Western imperialism in the early 20th century. Indeed, the share of income presently captured by the poorest half of the world’s people is about half what it was in 1820, before the great divergence between Western countries and their colonies.
Nations have become richer, but governments have become poor
One way to understand these inequalities is to focus on the gap between the net wealth of governments and net wealth of the private sector. Over the past 40 years, countries have become significantly richer, but their governments have become significantly poorer. The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands.
This trend has been magnified by the Covid crisis, during which governments borrowed the equivalent of 10-20% of GDP, essentially from the private sector. The currently low wealth of governments has important implications for state capacities to tackle inequality in the future, as well as the key challenges of the 21st century such as climate change.
Wealth inequalities have increased at the very top of the distribution
The rise in private wealth has also been unequal within countries and at the world level. Global multimillionaires have captured a disproportionate share of global wealth growth over the past several decades: the top 1% took 38% of all additional wealth accumulated since the mid-1990s, whereas the bottom 50% captured just 2% of it. This inequality stems from serious inequality in growth rates between the top and the bottom segments of the wealth distribution. The wealth of richest individuals on earth has grown at 6 to 9% per year since 1995, whereas average wealth has grown at 3.2% per year. 2020 marked the steepest increase in global billionaires’ share of wealth on record.
Gender inequalities remain considerable at the global level, and progress within countries is too slow
The World Inequality Report 2022 provides the first estimates of the gender inequality in global earnings. Overall, women’s share of total incomes from work (labor income) neared 30% in 1990 and stands at less than 35% today. Current gender earnings inequality remains very high: in a gender equal world, women would earn 50% of all labor income. In 30 years, progress has been very slow at the global level, and dynamics have been different across countries, with some recording progress but others seeing reductions in women’s share of earnings.
Addressing large inequalities in carbon emissions is essential for tackling climate change
Global income and wealth inequalities are tightly connected to ecological inequalities and to inequalities in contributions to climate change. On average, humans emit 6.6 tonnes of carbon dioxide equivalent (CO2) per capita, per year. Our data set on carbon emissions inequalities reveals important inequalities in CO2 emissions at the world level: the top 10% of emitters are responsible for close to 50% of all emissions, while the bottom 50% produce 12% of the total.
These inequalities are not just a rich vs. poor country issue. There are high emitters in low- and middle-income countries and low emitters in rich countries. In Europe, the bottom 50% of the population emits around five tonnes per year per person; the bottom 50% in East Asia emits around three tonnes and the bottom 50% in North America around 10 tonnes. This contrasts sharply with the emissions of the top 10% in these regions (29 tonnes in Europe, 39 in East Asia, and 73 in North America).
This report also reveals that the poorest half of the population in rich countries is already at (or near) the 2030 climate targets set by rich countries, when these targets are expressed on a per capita basis. This is not the case for the top half of the population. Large inequalities in emissions suggest that climate policies should target wealthy polluters more.
Redistributing wealth to invest in the future
The World Inequality Report 2022 reviews several policy options for redistributing wealth and investing in the future in order to meet the challenges of the 21st century. We present revenue gains that would come from a modest progressive wealth tax on global multimillionaires. Given the large volume of wealth concentration, modest progressive taxes can generate significant revenues for governments. In our scenario, we find that 1.6% of global incomes could be generated and reinvested in education, health and the ecological transition.
We stress at the outset that addressing the challenges of the 21st century is not feasible without significant redistribution of income and wealth inequalities. The rise of modern welfare states in the 20th century, which was associated with tremendous progress in health, education, and opportunities for all, was linked to the rise of steep progressive taxation rates. This played a critical role in order to ensure the social and political acceptability of increased taxation and socialization of wealth. A similar evolution will be necessary in order to address the challenges of the 21st century.
Recent developments in international taxation show that progress towards fairer economic policies is indeed possible at the global level as well as within countries. The report discusses various options to tackle inequality, learning from examples all over the world and throughout modern history.
Inequality is always political choice and learning from policies implemented in other countries or at other points of time is critical to design fairer development pathways.
This report presents the most up-to-date synthesis of international research efforts to track global inequalities. The data and analysis presented here are based on the work of more than 100 researchers over four years, located on all continents, contributing to the World Inequality Database (WID.world), maintained by the World Inequality Lab. This network collaborates with statistical institutions, tax authorities, universities and international organizations, to harmonize, analyze and disseminate comparable international inequality data.
Ten richest men double their fortunes in pandemic while incomes of 99 percent of humanity fall
The world’s ten richest men more than doubled their fortunes from $700 billion to $1.5 trillion — at a rate of $15,000 per second or $1.3 billion a day — during the first two years of a pandemic that has seen the incomes of 99 percent of humanity fall and over 160 million more people forced into poverty.
“If these ten men were to lose 99.999 percent of their wealth tomorrow, they would still be richer than 99 percent of all the people on this planet,” said Oxfam International’s Executive Director Gabriela Bucher. “They now have six times more wealth than the poorest 3.1 billion people.”
In a new briefing “Inequality Kills,” published today ahead of the World Economic Forum’s Davos Agenda, Oxfam says that inequality is contributing to the death of at least 21,000 people each day, or one person every four seconds. This is a conservative finding based on deaths globally from lack of access to healthcare, gender-based violence, hunger, and climate breakdown.
“It has never been so important to start righting the violent wrongs of this obscene inequality by clawing back elites’ power and extreme wealth including through taxation —getting that money back into the real economy and to save lives," she said.
Billionaires’ wealth has risen more since COVID-19 began than it has in the last 14 years. At $5 trillion dollars, this is the biggest surge in billionaire wealth since records began. A one-off 99 percent tax on the ten richest men’s pandemic windfalls, for example, could pay: to make enough vaccines for the world; to provide universal healthcare and social protection, fund climate adaptation and reduce gender-based violence in over 80 countries; All this, while still leaving these men $8 billion better off than they were before the pandemic.
“Billionaires have had a terrific pandemic. Central banks pumped trillions of dollars into financial markets to save the economy, yet much of that has ended up lining the pockets of billionaires riding a stock market boom. Vaccines were meant to end this pandemic, yet rich governments allowed pharma billionaires and monopolies to cut off the supply to billions of people. The result is that every kind of inequality imaginable risks rising. The predictability of it is sickening. The consequences of it kill,” said Bucher.
Extreme inequality is a form of economic violence, where policies and political decisions that perpetuate the wealth and power of a privileged few result in direct harm to the vast majority of ordinary people across the world and the planet itself.
“The world’s response to the pandemic has unleashed this economic violence particularly acutely across racialized, marginalized and gendered lines. As COVID-19 spikes this turns to surges of gender-based violence, even as yet more unpaid care is heaped upon women and girls,” Bucher said.
The pandemic has set gender parity back from 99 years to now 135 years. Women collectively lost $800 billion in earnings in 2020, with 13 million fewer women in work now than there were in 2019. 252 men have more wealth than all 1 billion women and girls in Africa and Latin America and the Caribbean combined.
The pandemic has hit racialized groups hardest. During the second wave of the pandemic in England, people of Bangladeshi origin were five times more likely to die of COVID-19 than the White British population. Black people in Brazil are 1.5 times more likely to die from COVID-19 than White people. In the US, 3.4 million Black Americans would be alive today if their life expectancy was the same as White people — this is directly linked to historical racism and colonialism.
Inequality between countries is expected to rise for the first time in a generation. Developing countries, denied access to sufficient vaccines because of rich governments’ protection of pharmaceutical corporations’ monopolies, have been forced to slash social spending as their debt levels spiral and now face the prospect of austerity measures. The proportion of people with COVID-19 who die from the virus in developing countries is roughly double that in rich countries.
“The COVID-19 pandemic has revealed openly both the motive of greed, and the opportunity by political and economic means, by which extreme inequality has become an instrument of economic violence,” said Bucher. “After years now of researching and campaigning on the issue, this is the shocking but inevitable conclusion that Oxfam has had to reach today.”
Despite the huge cost of fighting the pandemic, in the past two years rich country governments have failed to increase taxes on the wealth of the richest and continued to privatize public goods such as vaccine science. They have encouraged corporate monopolies to such a degree that in the pandemic period alone, the increase in market concentration threatens to be more in one year than in the past 15 years from 2000 to 2015.
Inequality goes to the heart of the climate crisis, as the richest 1 percent emit more than twice as much CO2 as the bottom 50 percent of the world, driving climate change throughout 2020 and 2021 that has contributed to wildfires, floods, tornadoes, crop failures and hunger.
“Inequality at such pace and scale is happening by choice, not chance,” Bucher said. “Not only have our economic structures made all of us less safe against this pandemic, they are actively enabling those who are already extremely rich and powerful to exploit this crisis for their own profit.”
The report notes the significance of the world’s two largest economies — the US and China—starting to consider policies that reduce inequality, including by passing higher tax rates on the rich and taking action against monopolies. “This provides us some measured hope for a new economic consensus to emerge,” said Bucher.
Oxfam recommends that governments urgently:
Claw back the gains made by billionaires by taxing this huge new wealth made since the start of the pandemic through permanent wealth and capital taxes.
Invest the trillions that could be raised by these taxes toward progressive spending on universal healthcare and social protection, climate change adaptation, and gender-based violence prevention and programming.
Tackle sexist and racist laws that discriminate against women and racialized people and create new gender-equal laws to uproot violence and discrimination. All sectors of society must urgently define policies that will ensure women, racialized and other oppressed groups are represented in all decision-making spaces.
End laws that undermine the rights of workers to unionize and strike, and set up stronger legal standards to protect them.
Rich governments must immediately waive intellectual property rules over COVID-19 vaccine technologies to allow more countries to produce safe and effective vaccines to usher in the end of the pandemic.
Bucher said: "There is no shortage of money. That lie died when governments released $16 trillion to respond to the pandemic. There is only a shortage of courage and imagination needed to break free from the failed, deadly straitjacket of extreme neoliberalism. Governments would be wise to listen to the movements —the young climate strikers, Black Lives Matter activists, #NiUnaMenos feminists, Indian farmers and others – who are demanding justice and equality”.
http://www.oxfam.org/en/press-releases/ten-richest-men-double-their-fortunes-pandemic-while-incomes-99-percent-humanity http://policy-practice.oxfam.org/resources/inequality-kills-the-unparalleled-action-needed-to-combat-unprecedented-inequal-621341/ http://policy-practice.oxfam.org/resources/rising-to-the-challenge-the-case-for-permanent-progressive-policies-to-tackle-a-621343/
Responding with Equality: The case for combating extreme inequality to tackle crises, strengthen democracy and foster a fairer future in the wake of the coronavirus pandemic
For decades, our flawed economic and governance systems have allowed inequality and social exclusion to grow to extreme and dangerous levels, and now coronavirus has driven an even greater wedge between the haves and have nots.
Without immediate action, the pandemic could cause the biggest spike in inequality ever seen, and further destabilize the democratic systems we need to ensure a recovery for all. Governments must take action to tackle the inequality and climate crises, rein in extreme wealth and monopoly power, and deliver universal public services and social protection.
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