Global inequality

I’ve written a number of times about income inequality in the UK. As I’ve mentioned before, since 1980 the top 1% have increased their share of the income from 8% to 15%, while the top 10% have increased their share from 25% to 31%. There has clearly been a significant increase in income inequality in the last 30 years or so and I find it amazing that, given the current financial crisis, noone seriously suggests that we should be trying to drive income levels back to what they were in the 1980s. I appreciate that this is not easy, but it would allow most to earn a living wage, probably increase employment, and reduce the benefits bill (since fewer would require benefits). Instead, we’re trying to solve the UK’s current financial problems by cutting benefits for those on low incomes.

Anyway, the reason I decided to write about this was that I noticed today an interesting report by Oxfam claiming that the Annual income of richest 100 people enough to end global poverty four times over. The report claims that in the last 20 years, globally, the top 1% have increased their income by 60%. The top 0.01% by an ever larger amount. In 2012, alone, the richest 100 people in the world increased their wealth by £240 billion. This increase is, according to the CIA world factbook, about the same as the GDP of Portugal. I find this staggering. At a time of financial crisis, the wealthiest 100 people can increase their wealth – in a single year – by the GDP of a Western European country with a population of 11 million.

One problem, I find, with this type of issue is that it is often perceived as some kind of debate about capitalism versus socialism. It is not. It is really a debate about how best to distribute income in a modern society. I have no issue with those who are creative, hard-working, and who contribute most to economic growth being rewarded more than others. I do think, however, that there needs to be some balance. I understand that global wealth can increase, but it doesn’t appear to be doing so fast enough to accommodate the rise in income of the top 1% – at least not without a corresponding loss of income for those on the bottom. Is it morally defensible for the top few percent to take an ever increasing faction of the global income while millions are living in poverty. Noone’s asking the top few percent to become poor. All that is needed is a recognition that increasing their wealth by an amount comparable to the GDP of a major nation might be questionable during these difficult financial times.

I don’t know how to do anything about this. I think the problem is our governments. The wealthy clearly have an influence on government policy. In some sense this is natural. As their wealth increases, it seem clear that this influence will increase and they will do their utmost to dissuade governments from doing anything that might inhibit their ability to further increase their wealth. This seems like a horrible feedback loop that could be extremely dangerous and damaging to world stability (as suggested by Oxfam). To me, governments should be aiming to have a damping influence on this feedback loop, and they seem very reluctant to do this. It seems amazing to me that, in what are regarded as democracies, we have governments that seem to be following a path that will increase the wealth of a tiny fraction of the world’s population at the expense of the wealth of the majority that they are meant to be representing. I don’t really know what else to say, but I do think that this could become a very big issue in the not too distant future if we don’t start acting to redistribute wealth in a more equitable way.

Advertisements

2 thoughts on “Global inequality

  1. I was thinking a little bit about whether or not it made sense that the richest 100 people could have increased their wealth in 2012 by $240 billion. It seems remarkable. I can’t find any raw data, but from wikipedia, the Forbes list of billionaires suggests that the 10 richest people had a total worth (in 2012) of $395 billion. There were 1226 billionaires with a total worth of $4.6 trillion. So 1226 people have are worth about 7% of the entire world economy. I don’t quite know the worth of the top 100, but it has to be between $395 billion and $4.6 trillion. Increasing their wealth by $240billion in 2012 is not therefore that unlikely. It might be something like a 10% growth of their wealth in a single year.

  2. Amazing article in the Guardian today claiming that an IMF report has suggested that the deterioration of the UK’s current account deficit between 1997 and 2007 can be explained by the rise in British inequality. I think this makes perfect sense. We’re a consumer society. As inequality grows, those on lower incomes have less disposable income. The only way that they can spend is to borrow and hence our debt level rises until it becomes unsustainable. As far as I can tell, this process results in the wealthy – in a sense – winning multiple times. They effectively lend their wealth to the poor to buy their products. They then earn interest on these loans and when a financial crisis hits, they get bailed out by the taxpayer. Remarkable economic model.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s