Publish : 10 Dec 2021, 11:55 AMUpdate : 10 Dec 2021, 11:55 AM
An astounding fact lurks within the tsunami of bleak economic data the world has generated throughout the past 22 months since the first Covid-19 lockdowns. Everywhere, almost everyone has done very badly, with the notable exception of the super-rich.
Global billionaires added a whopping 25% to their collective wealth last year alone, and that gap has only widened dramatically further ever since. We are now at an inflection point of inequality, that rivals the worst days of colonialism and slavery.
All that and more is in the World Inequality Report 2022, which was released earlier this week from Thomas Piketty’s pioneering World Inequality Lab at the Paris School of Economics.
As the Nobel Prize winners Abhijit Banerjee and Esther Duflo put it in their foreword to the report, “It is the product of a relentless data amassment which makes it possible to provide better answers to almost every question we want to ask about what is happening to inequality world-wide.”
Bottom line? “The answer is not pretty.”
Here, the eminent economists are putting it politely, because the facts are actually pitiless and devastating. Today, the entire poorer half of the global population controls just 2% of wealth, while the top 10% has amassed 76%.
We now know that almost 40% of all gains since the 1990s have gone to just 1% of us. But it’s still deeply shocking to learn the catastrophic pandemic year of 2020 “marked the steepest increase in global billionaires’ share of wealth on record.”
It didn’t have to be this way, and there’s nothing normal or inevitable about this predicament. Banerjee and Duflo take pains to point out that “there is no case for giving up or opting to sit it out till the revolution.”
They write, “The period from 1945 or 1950 till 1980, was a period of shrinking inequality in many parts of the world (US, UK, France, but also India and China) [in] 30 odd years of fast productivity growth and increasing prosperity.” Those boom years -- never repeated again -- demonstrate that there is no prima facie evidence for the idea that fast growth demands or necessarily goes hand in hand with growing inequality.”
The big difference between then and now, of course, is cultural.
In those days, say Banerjee and Duflo, “tax rates were high, and there was an ideology that inequality needed to [be] kept in check, that was shared between the corporate sector, civil society, and the government.”
But when the US and UK economies slowed, “that led to the conviction that a big part of the problem was that the institutions that kept inequality low (minimum wage, union, taxes, regulation, etc) were to blame, and what we needed was to unleash an entrepreneurial culture that celebrates the unabashed accumulation of private wealth. We now know that as the Reagan-Thatcher revolution, and it was the starting point of a dizzying rise in inequality within countries that continues to this day.”
No society has remained immune from the phenomenon, but it has played out in particularly damaging ways in our part of the world.
Banerjee and Duflo write, “When state control was (successfully) loosened in countries like China and India to allow private sector-led growth, the same ideology [of liberalization potentially unleashing entrepreneurial dynamism] got trotted out to justify not worrying about inequality, with the consequence that India is now among the most unequal countries in the world (based on this report) and China risks getting there soon.
That abysmal track record makes the World Inequality Report’s fact sheet for India depressing reading. Summarizing the historical picture, it says “Indian income inequality was very high under British colonial rule (1858-1947), with a top 10% income share around 50%. After independence, socialist-inspired five-year plans contributed to reducing this share to 35-40%. Since the mid-1980s, deregulation and liberalization policies have led to one of the most extreme increases in income and wealth inequality observed in the world.”
Is there a way out from this ever-deepening hole? Banerjee and Duflo exhort us to remember that “Policy kept inequality in check, and policy changes let it run amok. This report once again makes it clear that profound policy changes are needed for things to fall back in place. The policy solutions often exist, and when they don’t, we often know how to find them.”
What we have to do now is already evident: “As the world comes out of the pandemic and there is renewed attention to economic policy, a report like this is extraordinarily timely. It has the potential to light a fire under us to do something now, before the cumulative concentration of economic (and other) power in the hands of a smaller and smaller minority makes it impossible to fight back. Read it, shout out its messages, find ways to act upon it.”
Shout it out: Inequality is a political choice
An astounding fact lurks within the tsunami of bleak economic data the world has generated throughout the past 22 months since the first Covid-19 lockdowns. Everywhere, almost everyone has done very badly, with the notable exception of the super-rich.
Global billionaires added a whopping 25% to their collective wealth last year alone, and that gap has only widened dramatically further ever since. We are now at an inflection point of inequality, that rivals the worst days of colonialism and slavery.
All that and more is in the World Inequality Report 2022, which was released earlier this week from Thomas Piketty’s pioneering World Inequality Lab at the Paris School of Economics.
As the Nobel Prize winners Abhijit Banerjee and Esther Duflo put it in their foreword to the report, “It is the product of a relentless data amassment which makes it possible to provide better answers to almost every question we want to ask about what is happening to inequality world-wide.”
Bottom line? “The answer is not pretty.”
Here, the eminent economists are putting it politely, because the facts are actually pitiless and devastating. Today, the entire poorer half of the global population controls just 2% of wealth, while the top 10% has amassed 76%.
We now know that almost 40% of all gains since the 1990s have gone to just 1% of us. But it’s still deeply shocking to learn the catastrophic pandemic year of 2020 “marked the steepest increase in global billionaires’ share of wealth on record.”
It didn’t have to be this way, and there’s nothing normal or inevitable about this predicament. Banerjee and Duflo take pains to point out that “there is no case for giving up or opting to sit it out till the revolution.”
They write, “The period from 1945 or 1950 till 1980, was a period of shrinking inequality in many parts of the world (US, UK, France, but also India and China) [in] 30 odd years of fast productivity growth and increasing prosperity.” Those boom years -- never repeated again -- demonstrate that there is no prima facie evidence for the idea that fast growth demands or necessarily goes hand in hand with growing inequality.”
The big difference between then and now, of course, is cultural.
In those days, say Banerjee and Duflo, “tax rates were high, and there was an ideology that inequality needed to [be] kept in check, that was shared between the corporate sector, civil society, and the government.”
But when the US and UK economies slowed, “that led to the conviction that a big part of the problem was that the institutions that kept inequality low (minimum wage, union, taxes, regulation, etc) were to blame, and what we needed was to unleash an entrepreneurial culture that celebrates the unabashed accumulation of private wealth. We now know that as the Reagan-Thatcher revolution, and it was the starting point of a dizzying rise in inequality within countries that continues to this day.”
No society has remained immune from the phenomenon, but it has played out in particularly damaging ways in our part of the world.
Banerjee and Duflo write, “When state control was (successfully) loosened in countries like China and India to allow private sector-led growth, the same ideology [of liberalization potentially unleashing entrepreneurial dynamism] got trotted out to justify not worrying about inequality, with the consequence that India is now among the most unequal countries in the world (based on this report) and China risks getting there soon.
That abysmal track record makes the World Inequality Report’s fact sheet for India depressing reading. Summarizing the historical picture, it says “Indian income inequality was very high under British colonial rule (1858-1947), with a top 10% income share around 50%. After independence, socialist-inspired five-year plans contributed to reducing this share to 35-40%. Since the mid-1980s, deregulation and liberalization policies have led to one of the most extreme increases in income and wealth inequality observed in the world.”
Is there a way out from this ever-deepening hole? Banerjee and Duflo exhort us to remember that “Policy kept inequality in check, and policy changes let it run amok. This report once again makes it clear that profound policy changes are needed for things to fall back in place. The policy solutions often exist, and when they don’t, we often know how to find them.”
What we have to do now is already evident: “As the world comes out of the pandemic and there is renewed attention to economic policy, a report like this is extraordinarily timely. It has the potential to light a fire under us to do something now, before the cumulative concentration of economic (and other) power in the hands of a smaller and smaller minority makes it impossible to fight back. Read it, shout out its messages, find ways to act upon it.”
Vivek Menezes is a writer based in Goa, India.
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