Growing global income disparity

For any country to grow and sustain itself today, a certain level of social and political awareness among its people is required, which can only come with prosperity

An International Panel on Inequality has pointed out that the global income inequality has reached ‘emergency levels’, endangering democracy and social cohesion. The report says that during the last 15 years the rich have grown more richer, while the poor have become poorer.

Despite numerous welfare models being implemented across nations, the gap between the rich and the poor continues to widen. In India, the inequality is even more pronounced. India’s richest 1% increased their wealth by 62% between 2000 and 2023, according to a recent report commissioned by the G-20. This trend reflects global patterns of rising wealth concentration.

The study found that the richest 1% of people in the world captured 41% of all new wealth created between 2000 and 2024, while the bottom half of the global population received only 1%. Increasing wealth inequality is a worldwide crisis that endangers democracy and social cohesion.

The study, led by Nobel Prize-winning economist Joseph Stiglitz, warns that global inequality has reached “emergency levels”, putting economic stability and climate progress at risk. Inequality erodes trust in institutions, fuels political polarisation, reduces participation among poorer citizens and fellow residents, and creates social tensions of different kinds.  The report was prepared by the G-20 Extraordinary Committee of Independent Experts on Global Inequality, including economists Jayati Ghosh, Winnie Byanyima and Imraan Valodia.

Around 2.3 billion people now face food insecurity, up by 335 million since 2019, and half the world’s population still lacks access to basic health services, with 1.3 billion people pushed into poverty by medical expenses. One in four people worldwide now regularly skip meals, while wealth has reached the highest level in history.

However, the experts opine that the problem of inequality can be tackled through international cooperation. The expert panel’s recommendation for the creation of a new body, the International Panel on Inequality (IPI), deserves serious consideration. Working on the lines of the Intergovernmental Panel on Climate Change (IPCC), the proposed body would track inequality trends worldwide and give governments clear, reliable data to guide policies. This is very crucial because the report warns that the countries with high inequality are seven times more likely to face democratic decline than those with fairer wealth distribution.

Over the past 40 years, the average income of individuals in the bottom 50% of the world’s population has increased by $358, while the top 1% recorded an increase of $1,91,000, at a constant 2024-dollar rate, the report said. The findings should prompt policymakers to find ways and means to bridge the ever-increasing gap.

The rich are steadily getting richer in the world’s fourth-largest economy, but the poor are getting poorer. Earlier this year, the World Bank reported that India had managed to lift 17 crore people from extreme poverty between 2011-12 and 2022-23. The Centre patted itself on the back for a job well done, even as the methodology for reporting poverty estimates came under scrutiny. Efforts to reduce poverty should make a qualitative difference on the ground. While economists are generally not keen on the imposition of a wealth tax, the government must ensure that the super-rich contribute their fair share to the exchequer.

In India, the study further reveals, the richest have added to their wealth by 62% between 2000 and 2023, as compared to China, where it is 54%. The Indian story needs a closer look. India’s rapid growth from the tenth-largest economy in 2014 to the fourth-largest today, rings hollow, as the study seems to ignore the plight of the bottom 50% who are fighting for survival.  Even if we ignore the bottom section, or lower class, of society, which is surviving mostly on welfare schemes and has negligible political representation, India’s middle class, considered the growth engine of the Indian economy, is also finding it extremely difficult to sustain its middleclass ethos, as the middle-class status demands a certain level of consumption that is in tune with the current times, which the middle class seems to be struggling to cope with in the face of rising inflation and reducing income.

The report also demonstrates that high inequality is fuelling pandemics and increasing vulnerability. The past few years have seen the African continent facing simultaneous pandemics – with Covid-19 and the continuing AIDS pandemic overlapping with mpox, Ebola and the spread of tuberculosis, among others. Recently, Namibia declared a new mpox outbreak.

Moreover, progress on addressing social inequalities relating to gender, sexuality and race has stalled. As the report notes, we can act on those inequalities. The inequality-pandemic cycle goes like this: Inequality makes communities and countries more vulnerable to disease outbreaks becoming pandemics. Inequality also undermines effective response, which prolongs pandemics and makes them deadlier and more economically disruptive. Inequality between countries globalises this vulnerability, increasing the risk of future pandemics through unequal access to international finance and to the latest science. And then, when pandemics hit, they increase inequality between people and between countries, furthering the cycle.

It’s not just that low-income populations are more vulnerable during pandemics, but also that inequality undermines pandemic responses. Eight of the world’s 20 most unequal countries are in Africa, where so many pandemics are colliding. The report shows that the bigger the gap between the rich and poor in a country, even considering levels of poverty, the higher the levels of HIV infections, AIDS deaths and Covid-19 death rates have been. It’s harder to coordinate effective responses in highly unequal societies where instead of being “in it together” the elite and wealthy act to exit and pass their pandemic risk off to others.

The biggest impact of economic inequality in India, and the world, has been on society. As education and healthcare are almost inaccessible to the poor, their participation in nation-building becomes negligible, and they are reduced to being mere vote banks for politicians. Furthermore, it is a threat to the democratic process in the country.

For any country to grow and sustain itself internationally today, a certain level of social and political awareness among its people is required, which can only come with prosperity. In a country where half the population is forever struggling to make both ends meet, such attempts are met with indifference, leading to political polarisation and disintegration of society.

(Asad Mirza is a New Delhi-based senior commentator.)