InternationalVOLUME 15 ISSUE # 19

Rising inequality in the world

Income inequality is increasing in the world. Nearly half of the world’s population lives on less than $2.50 a day. Over 1.3 billion live in extreme poverty — less than $1.25 a day while the combined wealth of the world’s top ten billionaires is greater than the total GDP of the 85 poorest countries on Earth. The world’s three richest people have a combined net worth of $858billion.

On the other hand, over 1.6 billion of the world’s two billion informal economy workers are affected by Covid-19 lockdown and containment measures, a new briefing paper issued by the International Labour Organisation (ILO) said. Most are working in the hardest-hit sectors or in small units more vulnerable to shocks including workers in accommodation and food services, manufacturing, wholesale and retail, and the more than 500 million farmers producing for the urban market. Women are particularly affected in high-risk sectors. The Covid-19 lockdown and containment measures threaten to increase relative poverty levels among the world’s informal economy workers by as much as 56 percentage points in low-income countries. In high-income countries, relative poverty levels among informal workers is estimated to increase by 52 percentage points, while in upper middle-income countries the increase is estimated to be 21 percentage points.

Besides, with these workers needing to work to feed their families, Covid-19 containment measures in many countries cannot be implemented successfully. This is endangering governments’ efforts to protect the population and fight the pandemic. It may become a source of social tension in countries with large informal economies. More than 75pc of total informal employment takes place in businesses of fewer than ten workers, including 45pc of independent workers without employees. With most informal workers having no other means of support, they face an almost unsolvable dilemma: to die from hunger or from the virus, the briefing says. It has been exacerbated by disruptions in food supplies, which has particularly affected those in the informal economy. For the world’s 67 million domestic workers, 75pc of whom are informal workers, unemployment has become as threatening as the virus itself. Many have not been able to work, whether at the request of their employers or in compliance with lockdowns. Those who do continue to go to work face a high risk of contagion, caring for families in private households. For the 11 million migrant domestic workers the situation is even worse.

The countries with the largest informal economies, where full lockdowns have been adopted, are suffering the most from the consequences of the pandemic. Informal economy workers significantly impacted by lockdown vary from 89pc in Latin America and the Arab states to 83pc in Africa, 73pc in Asia and the Pacific, and 64pc in Europe and Central Asia.

Before the pandemic struck, global spending on defence rose by four per cent in 2019, the largest growth in 10 years. The increase alone in US spending from 2018 to 2019, $53.4 billion, was almost as big as Britain’s entire defence budget. The International Institute for Strategic Studies (IISS) said the rise was fuelled by growing rivalries between big powers, new military technologies and rumbling conflicts from Ukraine to Libya. Beijing’s military modernisation programme, which includes developing new hard-to-detect hypersonic missiles, is alarming Washington and helping drive US defence spending. Its annual “Military Balance” report said both the US and China had increased spending by 6.6pc, to $684.6 billion and $181.1 billion respectively. Europe — driven by ongoing concerns about Russia — stepped up by 4.2pc, but this only brought the continent’s defence spending back to 2008 levels, before the global financial crisis saw budgets slashed. Elsewhere, spending in Asia is booming — growing more than 50pc in a decade, rising from $275 billion in 2010 to $423b in 2019 in real terms as the continent’s economic success has allowed countries to invest more in their militaries.

On the other hand, more than 3 billion people live on less than $2.50 a day while over 1.3 billion live in extreme poverty. Over 80pc of the world population lives on less than $10 a day. One billion children worldwide live in poverty. According to UNICEF, 22,000 children die each day due to poverty. Over 805 million people worldwide do not have enough food to eat. More than 750 million people lack adequate access to clean drinking water. Diarrhea caused by inadequate drinking water, sanitation, and hand hygiene kills an estimated 842,000 people every year globally, or approximately 2,300 people per day. In 2011, 165 million children under the age 5 were stunted (reduced rate of growth and development) due to chronic malnutrition. Oxfam estimates that it would take $60 billion annually to end extreme global poverty–that’s less than 1/4 the income of the top 100 richest billionaires.

According to the Daily Mail, the combined wealth of the world’s top ten billionaires is greater than the total GDP of the 85 poorest countries on Earth. The world’s richest individuals including Jeff Bezos, Bill Gates and Mark Zuckerberg have a combined net worth of $858 billion. Meanwhile, the 85 smallest economies in the world have a combined GDP of just $814 billion, far behind a small handful of rich businessmen. Their cumulative wealth is even higher than the GDP of developed countries, such as Sweden and Belgium, and the oil-exporting powerhouse of Saudi Arabia. If converted to GDP, the top ten billionaires’ combined $858 billion wealth would make them the 18th richest country in the world. The elite club would be wealthier than large regional powers such as Saudi Arabia, Turkey and Iran and Western nations including Austria, Sweden and Belgium.

The World Social Report 2020, published by the UN Department of Economic and Social Affairs, shows that income inequality has increased in most developed countries, and some middle-income countries – including China, which has the world’s fastest growing economy. The study shows that the richest one per cent of the population are the big winners in the changing global economy, increasing their share of income between 1990 and 2015, while at the other end of the scale, the bottom 40pc earned less than a quarter of income in all countries surveyed.

One of the consequences of inequality within societies, notes the report, is slower economic growth. In unequal societies, with wide disparities in areas such as health care and education, people are more likely to remain trapped in poverty, across several generations. As the UN’s 2020 report on the global economy showed, the climate crisis is negatively impacting the quality of life, and vulnerable populations are bearing the brunt of environmental degradation and extreme weather events. Climate change, according to the World Social Report, is making the world’s poorest countries even poorer, and could reverse progress made in reducing inequality among countries.

Income disparities and a lack of opportunities are creating a vicious cycle of inequality, frustration and discontent among people across the globe. Governments and international organisations have a role to play in leveling the playing field and creating a fairer world for all. They will have to find a solution to sharpening inequalities, otherwise disgruntlement and conflict will rise and affect all of them.