The Horrifying Truth About Income Inequality

Global inequality has approached an astounding level.

Eighty-five people at the top possess as much as the bottom 50 percent of the world’s inhabitants, according to a new study (PDF).

“It is staggering that in the twenty-first century, half of the world's population—that's three and a half billion people—own no more than a tiny elite whose numbers could all fit comfortably on a double-decker bus,” Winnie Byanyima, executive director of Oxfam, said in an advisory issued with the study.

The study has a chart that shows sharply rising inequality over the past three decades in a number of major countries, such as the United States, Japan, Australia, and Sweden.

It also delineates the impact of this rising concentration of wealth on the political process.

“When wealth captures government policymaking, the rules bend to favor the rich, often to the detriment of everyone else,” it states. “The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all.”

Oxfam was astute enough to release the study during the annual gathering of the rich and famous at Davos, Switzerland. But the rich-poor disparity has reached such a stage that even the organization that puts together this yearly shindig is expressing concern.

“We cannot afford to allow the next era of globalization to create as many risks and inequities as it does opportunities,” Klaus Schwab, founder of the World Economic Forum, wrote in a blog post recently.

And the organization actually commissioned a report on the phenomenon that warns of the social consequences of the gap.

“It’s essential that we devise innovative solutions to the causes and consequences of a world becoming ever more unequal,” its authors write.

There are a number of trends that are causing this widening chasm, says Nobel laureate Joseph Stiglitz. First is the brand of austerity economics especially practiced in Europe that balances budgets on the backs of the poor.

“Excessive financialization also helps explain the soaring inequality,” he adds. “In many countries, weak corporate governance and eroding social cohesion have led to increasing gaps between the pay of chief executives and that of ordinary workers. American innovations in rent-seeking—enriching oneself not by making the size of the economic pie bigger but by manipulating the system to seize a larger slice—have gone global.”

Rounding out Stiglitz’s list is the global corporate assault on wages and benefits.

What might be done to reverse this trend?

Oxfam has a number of suggestions. These include a progressive tax system, strengthened social safety nets, stronger workers’ rights, and a crackdown on tax avoidance.

These are eminently sensible proposals, but the question is if governments have enough political will to implement them.
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Photo: "Handsome man with money," via Shutterstock.