By Abdul Rahman – Peoples Dispatch
Rising inequality is reinforced by the global financial system, which privileges the wealthier countries and compels the poorer nations to transfer a substantial part of their national income to them.
Neoliberal free-market economic policies are creating an unprecedented concentration of wealth and power in the hands of a few, leaving the majority of the world population with little or no means to make a decent life and almost no power over their destiny, claims the 2026 World Inequality Report published earlier this month.
The report claims, “inequality today is not confined to income or wealth; it affects every domain of economic and social life” resulting in the world facing unequal access to basic material resources, gender disparities, territorial divides and climate change, among others.
The report is published every four years from 2018 by the Paris-based World Inequality Lab, in collaboration with the United Nations Development Program (UNDP). This years’ report was edited by economists Lucas Chancel, Ricardo Gómez-Carrera, Rowaida Moshrif, and Thomas Piketty.
The report is prefaced by Jayati Ghosh and Nobel-Prize winner Joseph Stiglitz.
According to this year’s report, wealth and income inequality are both rising across the world, with the richest 10% of the world’s population owning three-quarters of all personal wealth and more than half (53%) of all the income.
The disparities are relatively similar irrespective of the region and development status of the nation.
In almost all regions of the world, the top 1% of the population is richer than the combined 90%. Wealth inequality increases further with each passing day, mostly due to the lack of political will to stop it.
The report notes that today the bottom 50% of the world’s population holds just 2% of all wealth and less than 10% of all income. A large number of the bottom half, in fact, owns nothing but debt and struggles to make enough each day to survive.
The wealth of a small number of billionaires and millionaires is growing at a rate more than double that of the wealth (or lack of wealth) of billions in the world who are facing a persistent economic crisis.
The report says, 60,000 people (around 0.001% of the world’s population) control three times more wealth, around 6% of global wealth, than the entire wealth owned by half of the world’s population.
Inequality across the regions
The inequality is distributed almost equally across regions, with North America and Oceania remaining the richest in both wealth and income share and having 338 times more wealth than the global average and 290 times more income than the average global income.
Sub-Saharan Africa, South Asia and Latin America remain the world’s poorest regions with their share in both income and wealth below the global average.
Within those regions the inequality, however, is similar to global figures, with Europe being relatively better in terms of income and wealth inequality than the rest.
However, the domination of the top 10% in terms of share in income and wealth remains an issue across the regions.
Among the individual countries, the trend of income and wealth inequality remains similar to regional patterns, with some countries showing worse conditions than others. For example, South Africa remains the world’s most unequal country in terms of both income and wealth distribution: the top 10% having a share of more than 66% in total income and over 85% of total wealth.
The bottom 50% in South Africa receive just 6% of total income and have a negative share in total wealth, referring to them having more debt than the wealth.
The report records a similar pattern in some European countries as well, such as Sweden and Poland, where the bottom 50% have a negative share in wealth distribution.
Most of the major Latin American economies, Brazil, Mexico, Chile, and Colombia, have similar trends in income and wealth inequality as South Africa.
More than 70% of all wealth is owned by the top 10% of the population in countries such as Russia, Mexico, Brazil, and Colombia, with the bottom 50% owning less than 3% of the total wealth.
Even among the wealthiest countries, such as the US, Australia, Japan, and the UK, the top 10% earn more than half of the country’s total income while the bottom half is left with less than 5%.
Among developing countries, such as India, the trend of unequal distribution of income and wealth remains the same, with the top 10% earning more than 58% of total income while the bottom 50% earns around 15%.
Geography of opportunity
The report highlights how inequalities in wealth and income are also related to inequalities in opportunities and the perpetuation of the problem.
Just to give one such example, the report cites the gaps in social spending between states in Europe and North America compared to Sub-Saharan Africa. The former spends more than 40 times more on education than a country in Sub-Saharan Africa. This gap is roughly three times larger than the difference in their per capita GDP, the report claims.
The gap in social spending is partially explained in terms of the sovereign debt crisis most of the African and poorer countries are facing. The crisis is largely due to unequal access to global financial institutions, which grant privileges to the wealthy countries and make them a net receiver of incomes generated in poorer nations.
The report notes that poorer countries pay an amount equal to 1% of the global GDP in debt servicing to rich countries annually. This is three times the global development assistance they receive and hugely affects their capabilities to spend on health and education.
The report indicates how the bottom 50% of the world’s population, mostly living in Asia and Africa, contributes just 3% of carbon emissions, yet faces disproportionate effects from the climate crisis created mostly by the top 10%, who contribute over 77% of all emissions.
“Wealthy individuals fuel the climate crisis through their investments even more than their consumption and lifestyle,” the report highlights, noting how they mostly escape the repercussions of their acts while the poor are forced to face the effects of pollution, frequent floods and droughts every year.
Tax the rich
The report proposes similar remedies as previous reports on the matter of inequality, such as the Oxfam inequality report. Global inequalities can be reduced with sustained investments in education and health and better taxation of the rich, the report prescribes.
The report notes that at present the rich pay a disproportionally smaller part of their income in taxes than the poorer households. “Effective income tax rates climb steadily for most of the population, but then fall sharply for billionaires and centimillionaires.”
The report calls for urgent action, including higher taxes, arguing that even a small 3% additional tax on the richest 100,000 people, for example, would yield enough money to cover all education expenses in the low and middle income countries.
However, it notes the absence of political will to take such basic measures due to “fragmented electorates, the under-representation of workers, and the outsized influence of wealth” in policy-making – the biggest hurdles in achieving tax justice.
…………………………………………………….