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The modern world: the rise of inequality and political instability
Material posted : Administrator Publication date: 16-12-2017

The output of the report, which was the fruit of the work of hundreds of economists from different countries, sheds light on one of the main themes in the beginning of this century.

Aymi wall street", "We are the 99%"... Originated after the financial crisis in 2007, the social movement will once again find arguments to support their positions and the food for anger. Exit 14 December report, which was the fruit of the work of hundreds of economists from different countries (they joined in World Wealth and Income Database,, sheds light on one of the main themes in the beginning of this century.

The global success of the book Thomas Piketty (Thomas Piketty) "capital in the XXI century", which was released in 2013 and has sold 2.5 million copies, showed the scale of the existing issues around the world.

This phenomenon is well documented in developed countries, but it is not best explored in the developing world. Some of them undoubtedly learned a considerable benefit from two decades of open market, however, we know little about the variation in their population in terms of income and size of property.

The merit of the presented work lies in the fact that it is taken for the solution to this problem. Until recently, the only source of information was the household surveys that were conducted by major organizations such as the world Bank, the UN and the OECD. The work of specialists under the leadership of WID, Facundo Alvaredo (Facundo Alvaredo), Luc Chancel (Chancel Lucas), Thomas Piketty, Emmanuel Saez (Emmanuel Saez) and Gabriel Zucman (Gabriel Zucman) has supplemented this information with national accounting and tax data, which was not informed.

This is the most detailed study over a long period (1980-2016) in a large number of countries (almost 70 in terms of income). Despite certain gaps (Africa) and inaccuracies, it allows us to consider the trajectory of all categories of income and assets, not just the wealthiest.

Not counting the total growth, which is rooted in the wave of liberalization 1980-1990-ies with the subsequent jump of trade in globalization, comparing different areas of the world indicates the existence of extremely heterogeneous situations caused by completely different cultural and political reactions.

If we consider the rise of inequality as an inevitable cost of innovation, and brought with them economic prosperity, or wonder about the economic and political imbalance that it can cause in our societies, these invaluable and in-depth data lay the Foundation for the very important, but only to gain momentum discussion. That is why Le Monde publishes for three days of research, reports and articles on this topic. We offer you to familiarize yourself with the basic elements of operation WID.

Income inequality has grown everywhere

The rise in earnings inequality observed in recent decades almost all over the world. This trend can be graphically presented: the famous "elephant" (the curve looks like his head and trunk) which was popularized by the economist Branko Milanovic (Branko Milanovic), and is restated in this report.

From this it follows that since 1980-ies of the 1% richest people in the world pulled the 27% revenue growth against 12% in 50% of the poorest. Anyway, the income of this group also went up, particularly thanks to the rise of developing countries led by China. As for the spread between these two groups of people (for the most part, the Western middle class), in their case, there is a very slight increase or even stagnation from 1980 to 2016.

At the global level, the growth of inequality slowed down some after 2007. According to the authors of the report, this is due to the slow equation of the average income of different regions of the world.

As inequality in property

Inequality is measured not only by income. It concerns and the people have property, in particular real estate, financial assets and participation shares. Now in the world the level of this inequality is 20-30% lower than at the beginning of the twentieth century.

Whatever it was, it started to increase again from the 1980s in most countries, and in particular in the USA, where 1% of the richest were holding 39% of the assets of citizens in 2014, against 22% in 1980. The phenomenon was less developed in France and the UK, where income inequality is not so great, but the middle class had a wide access to the property during this period, which somewhat slowed down the widening gap.

The situation is heterogeneous depending on the countries

In different regions of the world might get a completely different picture. In 2016 the richest 10% owned 37% of national income in Europe, 41% in China, 47% in North America, 55% in India and Brazil...

In addition, the growth rates of inequality also vary depending on countries. According to the authors of the report, this means that "state agencies and policies play a role in their change." Thus, the United States and Europe was unequal way, despite comparable levels of economic openness. The level of inequality in both regions were close in the 1980-ies. But then it started to grow much more quickly and actively in the United States.

With regard to developing countries the way China and India also differed: since the 1980-ies among the Indian population was observed much more significant growth in inequality.

The mass movement of capital in the private sector

Since the 1980s, most countries have become richer... except that their governments are impoverished, which became one of the driving forces of rising inequality. As proof, the report considers the distribution of public and private capital, which amount represents all owned by the country. "Since the 1980s years, almost everywhere there had been a mass movement from the first to the second", — the authors of the report.

During the "thirty glorious years" of state assets (housing, land, shares of state-owned enterprises minus debt) in developed economies stood at more than 40% of national income. Things have changed since the 1970-ies in connection with the privatization and growth of Treasury bonds. As a result, the balance of state assets is now negative in the USA and the UK, and just barely comes to a positive level in France, Germany and Japan. In Russia and China this share declined from 60-70% in the 1980-ies up to 20-30% today.

In parallel, private capital sharply went up the hill, with 200-350% of the national income of rich economies in the 1970-ies, up to 400-700% today. "This limits the ability of the government in redistribution of wealth and the growth inhibition of inequality" — noted in the study. The only exception are the countries that have used oil revenues for the formation of the state Fund, like Norway.

Europe protects its social model

As noted in several chapters of the study, Europe is a region where the difference between 0,001% richest 50% poorest expressed the least. This situation is largely connected with the formed after the Second world war social model (generous allocation system and the progressive tax system), more beneficial for the common population policies of remuneration and the relative equality in the education system.

Anyway, since 1970-ies the inequality there, too, increased. In addition, the region has a strong contrast between who have achieved a lot in terms of equality the Nordic countries and States like Spain, which still can not recover after the bursting in 2008 of a bubble in the real estate market.

United States — the massive inequality among rich countries

In 2014, 1% of the richest Americans accounted for over 20% of national income as against 12.5% in 50% of the poorest. The income of the latter was frozen in place since 1980, despite a 60% increase in the average wage (before taxes).

While in the twentieth century, American society has long been more equal than in the European. The trend has changed with the weakening of state regulation and tax cuts under Ronald Reagan. Since progressive taxation has almost disappeared, the minimum wage was almost frozen, and inequality of access to education and health care reached a peak. The growth of unearned income (from capital) in 2000, only reinforces the inequality.

The middle East is the leader in inequality

In the middle East the richest 10% accounted for more than 60% of national income. The authors considered the region as a whole because of its relative cultural homogeneity and equal to Western Europe population.

Oil revenues increases the inequality between different countries in the hydrocarbon-rich Persian Gulf States account for half of regional income at 15% the proportion of the population. The strongest inequalities are observed in them, in particular between enjoying certain privileges citizens and the growing number of immigrants whose work is very poorly paid.

Russia — the fall of the iron curtain was on hand the richest

After 1989, the collapse of the Communist system was accompanied by radical changes in Russia: market liberalization of goods and services, massive privatization, the strongest inflation. Average income grew, but the same applies to inequality: the oligarchs is the subjugation of the resources (especially oil), and instability in employment are more widespread.

As a result, the share of the 50% poorest in the national income fell from 30% to 20% since 1989, while the share of the richest has increased from 25% to 45%. Anyway, in connection with the lack of data on these figures it is necessary to look with caution: the Communist period was accompanied by a strong, but hard to give the measurement of inequality in terms of rights and quality of life.

Africa is becoming poorer in relation to other continents

It should be noted that one region still remains behind the process of convergence of world income: we are talking about black Africa, where average wages grew three times slower than the rest of the world from 1980 to 2016. The reason for this was a series of political and economic crises.

With the exception of a few countries, there are very little statistical data to assess the level of inequality on the continent. Anyway, the few available data indicate an even stronger variation than it followed from previous estimates. For example, the inequality is very strong in South Africa, a legacy of the old apartheid policies.

The trend will worsen if nothing changes

According to economists, if state does not act, inequality will continue to grow in the coming decades. The pace, in 2050 the assets of 0.1% of the richest (in China, EU and USA) will be the property of the whole of the middle class.

"If the country will follow a moderate course, as in Europe, they will reduce inequality and poverty", — experts believe.

How? The introduction of progressive taxation to reduce inequality after taxes and alienate the rich from the accumulation of property. In addition, to facilitate access to education (required for employment with higher wages) and increase investment in health.

Marie Charrel (Charrel Marie), Marie de Verges (Marie de Vergès), Philip Eskand (Philippe Escande)


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