Measured in terms of income and wealth, the world is becoming more and more unequal with each passing year. What’s more, disparities in global income were exacerbated by the COVID-19 pandemic, with some countries facing greater economic losses than others.
According to a new report by the Swiss financial giant Crédit Suisse, aggregate global wealth grew by 9.8% in 2021 to reach $463.6 trillion. The report says that the US and China added the most household wealth: the former contributed just over half of the total increase, while China contributed a quarter. Africa, Europe, India and Latin America all combined together accounted for just 11.1% of global wealth growth in 2021.
The richest 1% on the planet accumulated 45.6% of global wealth in 2021, a rise of 1.7% from 2019, the year before the Covid-19 pandemic. And the forecast is that this elite group will continue to grow: the number of millionaires will reach 87 million and the number of ultra-high-net-worth individuals (those with a net fortune of over $50 million) will reach 385,000 in the next five years. At the bottom of the pyramid were those with capital of less than $10,000 in 2021 and who represented 53% of the world’s population.
The US and China are the leading countries in wealth accumulation thanks largely due to their high annual growth rate in 2021. By contrast Europe grew only 1.5% last year, although it accumulated the second largest mass of wealth behind the US and ahead of China. However, it is estimated that in the next five years, middle-income countries will account for global wealth increases, producing 42% of global growth.
Income inequality between countries has improved, yet income inequality within countries has become worse. Today, 71 percent of the world’s population live in countries where inequality has grown. This is especially important because inequalities within countries are the inequalities people feel day to day, month to month, year to year. This is how people stack up and compare themselves with their neighbours, family members, and society. Since 1990, income inequality has increased in most developed countries and in some middle-income countries, including China and India.
There are sharp variations in the growth of inequality between regions and within countries. While inequality has gone up in a majority of countries over the past three decades, it has fallen in a few. In Latin America and the Caribbean, there has been a considerable decline, although levels remain high. In Africa and Asia, trends have been more varied, with greater similarities between emerging economies or landlocked developing countries, and between rural or urban areas, than within regions.
A rising phenomenon is the concentration of wealth at the top. According to an Oxfam report, in the 10 years since the financial crisis, the number of billionaires has nearly doubled, and the fortunes of the world’s super-rich have reached record levels. In 2018, the 26 richest people in the world held as much wealth as half of the global population (the 3.8 billion poorest people), down from 43 people the year before.
But the impacts of inequality go far beyond income and purchasing power. Inequalities of opportunity affect a person’s life expectancy and access to basic services such as healthcare, education, water, and sanitation. Needless to say, high levels of inequality of opportunity discourage skills accumulation, choke economic and social mobility, and human development and, consequently, depress economic growth. There is growing evidence that high levels of income and wealth inequality are propelling the rise of nativism and extreme forms of nationalism.
Given the above facts, government leaders and policymakers are increasingly concerned about finding ways to reduce inequality to create a more just and equal society for all. It has been found that national policies and institutions play a significant role in shaping inequality. Reducing global income and wealth inequality requires significant shifts in national and global policies. But this is not in evidence. Progressive taxation and stopping tax evasion are a good way to stop accumulation of wealth in a few hands. Ensuring equal access to education and well paid jobs, as well as public investments in healthcare can help minimize inequality levels worldwide.
Experts also underline the need for supporting low- and middle-income countries so that they can achieve growth and reduce poverty and disadvantage through public policy reform.In this connection, an urgent need is to helpindigenous peoples, migrants and refugees, and ethnic and other minorities who are poor because they continue to suffer from discrimination, marginalization and lack of legal rights. Similarly, social protection has been significantly extended globally, yet persons with disabilities are up to five times more likely than average to suffer from health related poverty. These groups need special attention from local governments as well as international agencies.