Income and wealth inequality is unjust, and yet the world continues to tolerate rising injustices, the most recent being inequalities in vaccine distribution.
French political economist Thomas Piketty and his colleagues at the World Inequality Lab have just published the World Inequality Report 2022, a real goldmine in data and insights on global inequalities. I found at least three nuggets inside that are blindingly obvious.
First, inequality is primarily a political issue. We can all do something about it, but since politics has been captured by money, the few remain more equal than the many. Between 1995 and 2021, the top 1 percent wealthiest people in the world captured 38 percent of the growth in global wealth, whereas the bottom 50 percent had a pitiful 2 percent share. Similarly, the richest 10 percent of world population take home 52 percent of global income, whereas the bottom 50 percent earned only 8.5 percent.
The report showed why these inequities could not be reduced despite increases in average income and wealth per capita. The progressive tax rates where the rich paid more than the poor, introduced in the first half of the 20th century to deal with inequality, were dismantled in the 1980s. The neoliberal free market philosophy preached low taxes and small governments to encourage entrepreneurship, but effectively handed more income and wealth to the elite few.
Piketty’s second historical insight is that Europe and later America got rich on the back of both the Industrial Revolution and colonization. In 1820, between country (inter-country) inequality was only 11 percent of global inequality meaning that most inequality was domestic (intra-country). But inter-country inequality rose when the West advanced with industrialization and resource extraction from the colonies. That peaked in 1980 when it represented 57 percent of global inequality. Since then, the rise in income of China, India and other newly independent countries narrowed the gap with the West, but by 2020, domestic inequality again accounted for 68 percent of global inequality. This meant that the developing countries allowed their own inequalities to worsen, even as they were narrowing the gap with the West.
In short, the rich are the same everywhere. They have more and want more.
But there is a twist to this story. One reason why the Rest has caught up with the West is that “nations became richer, but governments have become poor.” In essence, because the Europe, North America and Japan governments used debt to tackle slow growth since the 1980s, private wealth grew at the expense of public wealth. Privatization policies transferred public wealth such as utilities to the private sector, whereas public sector debt continued to increase.
The third insight is that inequalities and climate change are highly co-related. Between 1850-2020, half (49 percent) of historical carbon emission was accounted by North America (27 percent) and Europe (22 percent), China accounted for 11 percent, but has become the largest emitter, although per capita emission remains lower. A recent IMF study pointed out that “the richest countries represent only 16 percent of the world population but almost 40 percent of CO2 emissions. The two categories of the poorest countries in the World Bank classification account for nearly 60 percent of the world’s population, but for less than 15 percent of emissions.” The COP26 debate was all about whether China, India and other emerging markets that are increasing their carbon emissions should do more on Net Zero pledges.
The entanglement between CO2 emission and income and wealth levels suggest that climate warming policies should focus more on making those responsible for carbon emissions pay more for remedial climate action. The bottom 50 percent of population in Europe emits around 5 tons of carbon per person per year, with their counterpart class emitting 3 tons in East Asia and 10 tons in North America.
But the top 10 percent in these regions account for 29 tons in Europe, 39 tons in Asia and 73 tons in North America. Indeed, the top 1 percent in the US account for 269 tons of carbon per person per year, compared with 139 tons for the top 1 percent in China. The rich everywhere are the biggest carbon emitters.
All these suggest that tackling climate change and social injustice are part of a total political package, cutting across nations. It’s one thing to promise to cut carbon to Net Zero, it’s another to design the projects and programs to deliver on their promises. Back home, each government will face huge resistance from vested interests that want to delay or just green-wash any action. In other words, talk more and do less.
The Report has made some excellent suggestions to tackle inequality, such as progressive tax measures and a global asset register, that are bound to be controversial. But to be effective, they need global cooperation. No single country can impose higher tax rates or tougher action without being undercut by another country.
The next Global Summit should be about how to tackle inequalities. Given such complex issues and facts raised by the Piketty and his colleagues, the least we can do is to have a democratic, transparent and constructive dialogue on how those who can afford and emit more carbon should pay more taxes to foster a more sustainable and inclusive world.Life is unfair, but what can we do about it?
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Andrew Sheng writes on global issues from an Asian perspective. The views are entirely his own. -- Ed.(Asia News Network)