In 2013 in the World Economic Forum (WEF) in Davos various leaders from all over the world identified inequality as one of the most persistent dangers the world faces today. It might be ironic that it was the plutocrats that identified this as a key issue in the global agenda but the bitter truth is that they were right. According to the report published in the WEF the widening income gap, chronic fiscal imbalances and greenhouse gas emissions were presented as the three most likely threats to emerge over the coming decade. Even more importantly the prevailing mood was that there is no progress and that state leadership does not seem to be in a position to tackle the dangers that derive from inequality.
Disparities in wealth are less visible in the western world today than they were a century ago and nowadays even poor people can afford to have a car, a tv-set and an iPhone. Yet, images can be deceiving as both technological progress and democratisation have hidden the rising concentration of incomes. According to a special report published by the Economist, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, the share going to the top 0.01% has quadrupled, from just over 1% to almost 5% (Economist, 2013).
This is an extraordinary phenomenon and it is not limited to the US. Many countries have seen a rise in the share of national income taken by the top 1% but it should be also noted that the level of inequality differs widely around the world. Emerging economies are more unequal than rich ones whereas Scandinavian countries have the smallest income disparities.
Overall, the majority of the people on the planet live in countries where inequalities are bigger than they were a generation ago. This does not mean, however, that the world as a whole has become more unequal. Global inequality has been reduced as poorer countries catch up with richer ones. In this regard, the planet as a whole seems to becoming a fairer place to live.
Furthermore, what is promising is that although inequality has been on the rise for three decades, its political relevance has increased. Before the financial crisis, growing disparities were hardly at the top of the politicians’ agenda but in today’s economic environment, more inequality often means that people at the bottom and even in the middle of the income distribution are falling behind not just in relative but also in absolute terms.
Some societies are more concerned about equality of opportunity, others more about equality of outcome. Europeans tend to be more egalitarian, arguing that in a healthy society there should be no disparities that can affect a society’s cohesion. On the other hand, Americans and Chinese put more emphasis on equality of opportunity suggesting that a society with wide income gaps can still be fair. Furthermore, in terms of labour the world seems to be divided and one can discern certain hierarchical structures that demonstrate this inequality in terms of wages and income (Strauss, 2012: 141).
To conclude, when discussing inequality it is important to remember and refer to the following points. First, a key factor of today’s income distributions is government policy. Second, a significant part of the existing inequality is inefficient, especially in the most unequal countries. This mirrors market and government failures that have a negative impact on growth. Third, there is a reform agenda to reduce income disparities that makes sense whatever your attitude towards fairness. Inequality is shaped by complex forces often working in different directions. As Milanovic points out, “Inequality has increased between nations over the last half century (richer countries have generally grown faster than poorer countries). And yet the two most populous nations, China and India, have also grown fast. But over the past two decades inequality within countries has increased. As complex as reconciling these three data trends may be, it is clear: the inequality between the world’s individuals is staggering” (2011:3-4). It goes out without saying that the world will be a batter place when there is both an equality of opportunities and an equality of outcomes. It is easier said than done but at least it is worth trying.
BBC, The world’s inequality explained in 50 seconds, 5 February 2015.
Ghosh, J. “Inequality is the biggest threat to the world and needs to be tackled now” The Guardian, 20 February 2013.
Milanovic, M. Worlds Apart: Measuring International and Global Inequality. Princeton: Princeton University Press, 2011. Project MUSE. Web. 2 Nov. 2015.
O’Brien, R. and Marc Williams (2013) ‘Global Division of Labour’ in Global Political Economy: Evolution and Dynamics (Palgrave Macmillan 4th edition), pp. 182 – 199.
Strauss, K. (2012), ‘Coerced, forced and unfree labour: geographies of exploitation in contemporary labour markets’, Geography Compass 6(3): 137-148.
The Economist, Special Report on Inequality, October 2012.