It may not feel that way to you, but over the past quarter century, the world has become a much wealthier place. Global wealth is estimated to have more than doubled since 2000 to over €400 trillion last year.
Of course, your perception may have been affected by the fact that some have done considerably better than others. While the richest one per cent took 41 per cent of all the new wealth created in that time, half of humanity was left with just 1 per cent of it. That top 1 per cent increased their average wealth individually by 2,655 times as much as the bottom half. In that time, average global chief executive pay increased by half while average workers’ pay rose by less than 1 per cent.
The wealth of the world’s 3,000 billionaires, more of whom acquired their fortunes through inheritance than entrepreneurship according to Oxfam, now represents 16 per cent of global GDP. In the next 30 years, a third will transfer more than $5.2 trillion to their heirs, largely untaxed, cementing intergenerational inequality.
And yes, the world has got wealthier – but any reduction in poverty has slowed almost to a halt, and reversed in some regions. The number of people facing either moderate or severe food insecurity stands at 2.3 billion. Half of the world’s population is still not covered by essential health services and has no access to social protection – 3.8 billion people are entirely unprotected. A woman in Kenya is 37 times more likely to die in pregnancy or childbirth than a woman in Sweden.
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And yet, “if this [wealth] were more equitably distributed and alternatively deployed,” a stark report published at last weekend’s G20 summit argued, “this would be enough to end world hunger, educate every child, and ensure a rapid transition away from fossil fuels”.
The report, authored by a group of economists chaired by Nobel Prize-winner Joseph Stiglitz, was an attempt by the G20’s South African presidency to put the issue of inequality squarely on the agenda of the group, which represents 56 per cent of the world’s population. And this is not just as a moral imperative; there is growing consensus among organisations including the IMF, World Bank and OECD that inequality is an economic impediment to growth and sustainability – as well as being a social time bomb at the heart of the developed and developing world.
Some hoped that the US absence from the conference – the result of a fit of Trump pique – might make the world’s middle-ranking leaders more receptive to the idea that inequality ranks with climate change as a fundamental challenge. It was not to be.
The summit conclusions gave only the curtest nod to the word “inequality”, with some platitudes about debt relief. The conclusions passed over the report’s key and not very radical recommendation to establish an independent international panel of experts to collate data on global inequality. The widely admired and authoritative panel on climate change, which did so much to build a global scientific consensus on man-made causation of climate change, had been suggested as the model.
Poverty and hunger aside, there has also been a notable weakening of middle-income groups in many parts of the world, evidence of what the report calls “an evisceration of the middle, which can have significant consequences for economic and political stability”. It warns that his can be closely associated with the rise of the far right, authoritarian leaders and a weakening of democracy.
The issue of taxation of wealth, specifically of extreme, billionaire wealth, has increasingly become a hot potato in rich and middle-income countries. France is a particular case in point – its budget and parliament are deadlocked over the refusal of the centrist Lecornu government to consider tax on the ultra-rich to bridge the country’s desperate deficit/debt crisis.
The reality of accelerating inequality is striking. The wealthiest 0.1 per cent of French people earn on average 167 times more individually than the quarter of lowest-income households, a ratio that has soared from 95 in only 20 years. Between 2003 and 2022, their average income more than doubled in nominal terms, and rose 2.6 times faster than for other households.
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Inherited wealth today represents 60 per cent of national wealth in France, while in the early 1970s it was only 35 per cent – commentators talk of inequality “at levels comparable to the 19th century”. By 2040, €9 trillion in inheritance held by France’s oldest citizens will be passed down to their children.
Meanwhile, over the past 20 years, the tax rate for the very highest-income households has actually fallen, while it has remained fairly stable for other taxpayers. From 29.2 per cent in 2003, the average ultrarich tax rate dropped to 25.7 per cent in 2022.
“Extreme inequality is a choice. It is not inevitable and can be reversed with political will,” Stiglitz’s report states.
