Wednesday, May 23, 2018

Global Inequality

The first ever World Inequality Report was published recently by the leading economists who created the World Wealth and Income Database.

The report finds that the top 10% of a nation’s earners took home:

37% in Europe;
41% in China;
46% in Russia; 
47% in US-Canada and
55% in sub-Saharan Africa, Brazil, and India. 
In the Middle East, the world’s most unequal region according to estimates, the top 10% capture 61% of the national income.

 Furthermore, from 1980 to 2016, the richest 1% acquired 27% of the world’s income whilst, by contrast, the bottom 50% accounted for only 12% of the world’s income. The report proves that there has been rising inequality since the 1980s (measured by the top 10% share of income distribution).

The poorest sector of the global population has experienced an increase in prosperity due to high growth in Asia (particularly in China and India). However, despite the increased prosperity, the top 1% richest individuals in the world continued to capture twice as much growth as the bottom 50% of individuals since the 1980s. Income growth for the middle 'class' has been slow which leads the segment being squeezed in the US and Western Europe.

Economic inequality is largely driven by the unequal ownership of capital, which can be either privately or publicly owned. The report shows that since 1980 the world has experienced a transfer from public to private wealth in nearly all countries (i.e. individuals, and not the government, are in control of the nation’s wealth). As a result, the government is limited in its ability to tackle the issue of wealth inequality as the balance between private and public wealth is a crucial determinant of the level of inequality experienced by a nation.

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