We need to talk about wealth inequality – not just now, but always
Distribution of wealth should a headline talking point of economic discourse, alongside GDP, employment levels and inflation.
The richest one percent of people in the UK hold more wealth than the poorest 70%.
The wealthiest two people in the Republic of Ireland possess more wealth than the bottom half of the population.
These are findings from a recent study by Oxfam. Survival of the Richest examines wealth inequality around the world.
As the pandemic ended, the biggest political issue in both the UK and Ireland (and further afield) was the skyrocketing cost of living. But not everyone is feeling the pinch.
- The number of Irish people with individual wealth of over €46.6 million (US$50 million) has more than doubled between 2012 and 2022, rising from 655 to 1,435 people.
- The four richest Britons hold £42.2 billion in total wealth, compared with the £38 billion total possessed by 20 million Britons in the least-well-off households.
Covid-19 did few favours for economies anywhere. Russia’s invasion of Ukraine was a big factor in energy-price spikes. However, the cost of living in the UK has been an issue since the 2008 financial crisis – in real terms, wages have been basically flat since then, ending a long period where pay was rising and rising.
Now, with inflation far above any growth in wages, most people are feeling poorer and poorer. Which brings us to wealth inequality.
Anyone who finds themselves or their household in creeping financial trouble is, quite naturally, going to look around and see how everyone else is doing.
It’s also quite natural to look up where, according to Oxfam, not everyone is struggling:
- Since 2020, the richest 1% have captured almost two-thirds of all new wealth – nearly twice as much money as the bottom 99% of the world’s population.
- Billionaire fortunes are increasing by $2.7bn a day, even as inflation outpaces the wages of at least 1.7 billion workers, more than the population of India.
- Food and energy companies more than doubled their profits in 2022, paying out $257bn to wealthy shareholders, while over 800 million people went to bed hungry.
- A tax of up to 5% on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year, enough to lift 2 billion people out of poverty, and fund a global plan to end hunger.
All this echoes the findings of a major piece of international research from last year. The World Inequality Report 2022 was based on 20-years of economic data, and found that inequality is “a political choice, not an inevitability.”
That report also found that not enough information is gathered and analysed as a matter of course, when it comes to inequality.
“We live in a data-abundant world and yet we lack basic information about inequality. Economic growth numbers are published every year by governments across the globe, but they do not tell us about how growth is distributed across the population – about who gains and who loses from economic policies.”
Should we not be doing this? We are all familiar with GDP, with inflation, and with employment figures. These are the sorts of economic statistics that feature regularly in the news. They are tracked as part of our normal social discourse.
Why is this not also true for wealth inequality? Should it not be something under examination, by default?
The World Inequality Report (WIR) research “reveals that national average income levels are poor predictors of inequality: among high-income countries, some are very unequal (such as the US), while other are relatively equal (e.g. Sweden). The same is true among low- and middle-income countries, with some exhibiting extreme inequality (e.g. Brazil and India), somewhat high levels (e.g. China) and moderate to relatively low levels (e.g. Malaysia, Uruguay).”
There are wealthy countries with high inequality and wealth countries with low inequality. There are poor countries with high inequality and poor countries with low inequality. WIR argues that this proves inequality can be tackled without destroying growth.
The report also found that Europe has, broadly speaking, the lowest levels of inequality in the world. For those of us who live here, that might feel surprising. Look again at the first few paragraphs in this article. The disparities in wealth are staggering. And yet this is worse elsewhere.
So, how should it be tackled? Plenty of ideas exist for how we can reduce wealth inequality. WIR outlines a few – but is very clear that it is advocating changes that could improve the picture over time, not nailed-on quick fixes.
“The World Inequality Report 2022 reviews several policy options for redistributing wealth and investing in the future in order to meet the challenges of the 21st century [including] revenue gains that would come from a modest progressive wealth tax on global multimillionaires. Given the large volume of wealth concentration, modest progressive taxes can generate significant revenues for governments… we find that 1.6% of global incomes could be generated and reinvested in education, health and the ecological transition.
“We stress at the outset that addressing the challenges of the 21st century is not feasible without significant redistribution of income and wealth inequalities. The rise of modern welfare states in the 20th century, which was associated with tremendous progress in health, education, and opportunities for all, was linked to the rise of steep progressive taxation rates.
“This played a critical role in order to ensure the social and political acceptability of increased taxation and socialization of wealth. A similar evolution will be necessary in order to address the challenges of the 21st century. Recent developments in international taxation show that progress towards fairer economic policies is indeed possible at the global level as well as within countries.”
Wealth inequality isn’t going to go away tomorrow, or next year, or – realistically – ever. But that itself is part of the point. This is a core issue. It requires management – which means it requires ongoing scrutiny, like GDP and employment levels and inflation.
This isn’t something we need to talk about now, it’s something we should discuss always.
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