World Inequality Report 2022

In a nutshell, three decades of trade and financial globalisation, has pronounced further global inequalities. The Covid-19 pandemic has exacerbated them (That’s according to the World Inequality Report by World Inequality Lab (“Report”)). The Report suggests the top 1% took 38% of all additional wealth accumulated since the mid-1990s. The bottom 50% captured just 2% of it.

The key points also include:

• MENA (Middle-East and North Africa) is the most unequal region in the world. Europe has the lowest inequality levels.
• Nations have become richer but governments have become poorer – because they have relied on borrowings to meet expenditures (for stimulus packages)
• Gender inequalities remain considerable
• Ecological inequality remains an issue especially between high and low emitters

Global income and wealth inequality, 2021

The Report led by Thomas Piketty (a French economist) also highlighted that 10% of the world population take home 52% of global income, while the bottom 50% earned only 8.5%. These inequities could not be reduced by taxation alone.

Progressive tax rates, introduced in the first half of 20th century were dismantled by the 1980s with Reagonomics – free market and small governments. Then again, Europe and America got rich on Industrial Revolution and colonalisation. The latter dismantled progressive sectors of India and China to ensure markets for their goods.

In 1920, inter-country inequality was only 11% of global inequality. (Intra-country inequality could be higher). By 1980 inter-country inequality peaked at 57% of global inequality. With Covid, domestic inequality accounted for 68% of global inequality.

The rich have more but want more! Private wealth grew at the expense of public wealth. Governments of Europe, North America and Japan need debt to tackle slow growth since the 1980s. Then privatisation policies transferred public wealth to the private sector.

In addition, inequalities and climate change are highly co-related. Between 1850 and 2020, about 49% of historical carbon emission was accounted by North America (27%) and Europe (22%). An IMF report mentioned “the richest countries represent only 16% of the world population but almost 40% of CO2 emissions and the poorest countries with 60% of world population account for 15% of emissions (World Bank). On this, COP26 was a failure – to acknowledge the rich countries contribution to emissions and their pledge to rectify it.

To overcome the challenges it has to have the following:

• An acknowledgement by governments in developed countries and polluters (fossil fuels) and others;
• A “green” tax in rich countries with sums transferred to the poor countries impacted by emissions;
• Grants for countries preserving permanent forests and doing re-forestation efforts

As Andrew Sheng  suggests (Starbiz 19/12/21), a global summit perhaps bi-annually to map-out how inequalities are to be addressed and a review of specific projects sanctioned to tackle global inequalities need to be convened.

References:

1. World Inequality Report 2022, 7 December 2021(https://wid.world/news-article/world-inequality-report-2022/)

2. We need a global summit on inequality, Andrew Sheng, Starbiz, 19 December 2021