A striking analysis by an institution of the highest order, The Guardian, has seen the light. The analysis in question projects the distribution of wealth in society, based on the trend experienced in the last decade.
And the projections are not good, neither for the (increasingly less) middle class, nor for the most benefited: the upper class. The projection is that in 2030, the richest 1% of the planet will own two thirds of the global wealth.
Although our most frequent readers know that this topic has never stopped being present in our analyses, this time, the debate has returned to occupy covers in the “mass media.” The blowing of the bellows has revived the embers of this particular bonfire.
The analysis has its origin in the Library of the House of Commons of the United Kingdom. This institution has analyzed the trends suffered in the distribution of wealth since the last major crisis in 2008, and, as I said, concludes that, if this continues, by 2030, the richest 1% of the globe will own 64% of wealth in the world.
Even in more favorable scenarios for equality, it only reduces the scandalous figure to which the richest 1% would end up owning more than 50 % of global wealth.
The growing inequality trend that is consolidated
The fact is that this projection is based on real and tangible data. Since 2008, the wealth of the richest 1% has been rising at a rate of 6% per year. Meanwhile, the wealth of the remaining 99% has been experiencing a growth rate 50% lower, staying at a distant 3%.
The result of the difference between these annual percentage variations, with the multiplying effect of an order of magnitude that would be after a decade of sustained trend accounts for the growing inequality.
Moreover, one could even say that the projection is conservative, since the factors that have led to this growth of inequality are factors that feed back on themselves, so it can not be ruled out that the uneven evolution of the wealth of the different social classes can even increase their pace.
Indeed, several analysts point as one of the reasons for the growing inequality to the fact that, in recent decades, socioeconomic systems have seen how the wage gap (or income) between rich and middle class widened appreciably. We have already analyzed this topic in the article “Tired of CEOs with stratospheric salaries?”
Inequality reinforces itself
This (increasingly) wide advantage in income has opened a gap that is also a gap in wealth, since the income has ended up translating into a significantly higher savings capacity. This in turn has led to these upper classes monopolizing assets.
Obviously, the accumulation of assets in the same hands (strong) has had as a consequence that the higher classes increase their proportion of direct possession of businesses, companies, stocks, startups, investment vehicles such that the assets of the socioeconomic system in general have ended up mostly in the hands of a few owners.
And those assets, after the end of the Great Recession, have accumulated juicy capital gains to their landowners, further increasing the differences between classes, and making a multiplier effect on distribution inequality of wealth.
There is an open debate, and there are some who even claim that inequality has dropped
As you may already know, today’s topic is the subject of heated debate- one that has even reached academic circles. The debate does not focus on the existence of inequality – that is undeniable, but on whether inequality benefits or harms the economy of a country. Running a veil over topics such as social justice, the truth is that some positions seem evidently substantiated, and others indefensible.
The German publication Deutsche Welle published an interesting article about the benefit or detriment of inequality. To begin, demonstrating whether inequality benefits or harms economic growth is a very difficult subject.Â Indeed, a degree of inequality fosters meritocracy and encourages social progress and entrepreneurship, but it is no less true that excessive inequality deteriorates the economy, due to a simple and widely proven fact: the marginal propensity to consume is much greater among the most vulnerable classes.
In other words, money in the hands of classes with more economic limitations tends to be much more easily to be spent, and therefore to revert to the system generating consumption and economic activity. In other words, I’m of the belief that a certain degree of inequality benefits the system as a whole, while excessive inequality ends up hurting economic growth.
Some argue against the thesis of the growing and dangerous excess of inequality by putting on the table data that show how inequality has actually fallen in global terms. However, this argument lacks depth of reasoning beyond the most obvious data.
Global inequality has effectively declined, mainly due to the rise of the middle classes of emerging countries, especially in China and India, and at the cost of the stagnation (or even decline) of the middle classes of developed countries according to the World Inequality Report. There is the gap that decreases, the international one.
But if we reduce the matter a bit more, we can see how in truth, when analyzing national realities, the inequality in each country or economic area has experienced an important increase. It is the paradox of being rich in global terms, but you are left with crumbs if you’re not a part of the 1% in your respective country.
What is even more important is the perception of inequality. This leads to social instability, and ultimately to the unsustainability of the socioeconomic system.
There are analysts who already doubt that there is hope and that governments no longer have the capacity to reverse the situation. They argue that they no longer have the necessary resources to do so. The World Inequality Report itself states that “countries have become rich but governments have become poor, which limits their options to attack inequality”, at least without breaking the rules of the game (with everything that could end up implying ).
The most sinister side of inequality
The data also show a much more sinister side of inequality than that of simply discouraging economic growth, and part of the instability that I have already mentioned before. In the graph that you can see below on the evolution over the last decades of the percent of the wealth monopolized by the richest 1%, you can see how there is currently an evident upward trend from the minimum of 8.9% at the beginning of the 1980s, reaching a maximum of around 22% in recent years.
It is my duty to call attention to the fact that the previous comparable peak of inequality was reached in 23.9% shortly before the beginning of the 30s of the last century. I do not need to remind you how socially and economically convulsed that decade turned out to be. Neither do I need to remind you of the outcome of this situation in different countries and around the world. And I will not even think of mentioning the millions of deaths that the devastating Second World War left on the table.
But no, some insist on ignoring the key factor that excessive inequality can lead to social instability, and I hope that at least they do not deny that social instability can lead to any extreme political situation. Paradoxically, in these unstable situations it is almost always of little use to have accumulated much or little money during the pre-eminent time: it matters little to the one who pulls the trigger.