Modern Inequality: Statistical Challenge or Global Disaster

Modern Inequality is also known as the gap between rich and poor, income inequality, wealth disparity, etc. The term usually refers to inequality among individuals and groups within a society, but can also refer to inequality among countries, and includes sub-terms like “equality of income” and “equality of opportunities”.

As John W. Schoen, from NBC News says, the real question here is “whether the playing field is level. Equality of opportunity isn’t just a matter of fairness. No society can expect to thrive if it doesn’t fully tap the talent and ability of its entire workforce — including those who happen to be born poor.

In 2009 a group of University of York academics stated and demonstrated that “income inequality is bad for our health, well-being, and welfare”. But why this issue can be considered a global disaster?

• Scientists have confirmed that inequality has psychosocial effects causing insecurities about social status, with knock-on effects for stress levels, cognitive performance and emotional stability.
• Greater inequality leads to shorter spells of economic expansion and more frequent to severe boom-bust cycles.
• We live in a society where the wealthiest seem to have better luck tipping the playing field in their favor. Wealth generates access to those who make the rules; those rules can be written to further generate more wealth for the wealthy.
• Privatization and the doctrine of maximizing value for shareholders have increased the amount of economic activity focused on extracting the largest possible short-term profit.
• Increasing inequality depresses demand since consumption levels depend more on the wages of those at the lower end of the income scale than the profits of the wealthy.
• We are increasingly unhealthy with the growing difference in life expectancy between rich and poor areas.
• Even in the most developed countries, households rely increasingly on debt to maintain their lifestyles with rising asset prices, especially in residential housing, worsening this.
• We live in an era of unprecedented prosperity, comfort, and extravagance, yet we find ourselves more isolated and unhappy than ever.

We strongly recommend visiting the Inequality.org website where you can find a lot of graphics and diagrams supporting the facts we’re bringing below.

Tracking levels of world inequality can pose a variety of statistical challenges for researchers. Different nations, for starters, tally income and wealth in different ways, and some nations barely tally reliable stats at all.

The share of the global population defined as “poor” — those making less than $2/day — has fallen since 2001 by nearly half, to 15 percent. Overall, the world has become “wealthier” compared to the turn of the millennium. Notably, those in the middle-income bracket making between $10 and $20/day have nearly doubled their global presence, from 7 to 13 percent.

Good News? Yes, of course…, but please keep reading.

Nearly three-quarters of the world’s adults own under $10,000 in wealth. This 71 percent of the world holds only 3 percent of global wealth. The world’s wealthiest individuals, those owning over $100,000 in assets, total only 8.1 percent of the global population but own 84.6 percent of global wealth.

Western and European countries host the lion’s share of the world’s millionaires. Some 78 percent of the world’s millionaires reside in Europe or North America, with nearly half of these millionaires calling the United State home. The only non-Western nations with a significant share of millionaires: the industrial powerhouses Japan, China, and Taiwan.

Ultra high net worth individuals” — the wealth management industry’s term of art for deep pockets worth more than $30 million — hold an astoundingly disproportionate share of global wealth. These wealth owners own 12.8 percent of the total global wealth, yet represent only a tiny fraction of the world population.

The world’s 10 richest billionaires, according to Forbes, own $505 billion in combined wealth, a sum greater than the total goods and services most nations produce on an annual basis.

Wealth disparity in the United States is running twice as wide — and more — as wealth gaps in the rest of the industrial world.

The top 1 percent in the United States hold an average $15 million in wealth, a total only comparable to the prosperous microstate of Luxembourg. No other nation’s top 1 percent own even half of the wealth the top 1 percent’s in the United States and Luxembourg hold.

Capemini and RBC Wealth Management define a “high net worth individual” as someone with at least $1 million in assets”. The vast bulk of the world’s millionaires holds less than $5 million.

A small share of the world’s millionaire population holds a large majority of world millionaire wealth.

The United States dominates the global population of high net worth individuals, with over 4.3 million individuals owning at least $1 million in financial assets (not including their primary residence or consumer goods).

The United States has become home to more than twice as many adults with at least $50 million in assets as the next five nations with the most super-rich combined.

The middle class in the United States has less than half the wealth share of middle classes in much of the rest of the developed world.

As of March 2016, Forbes reported that the world hosted 1,810 billionaires, over double the 793 billionaires Forbes counted in 2009, at the depth of the Great Recession. These 1,810 billionaires together hold $6.5 trillion in wealth.

The 3.4 billion adults in the world with less than $10,000 to their name, Credit Suisse noted in October 2015, together hold $7.4 trillion in net worth, a $200 billion decrease from the previous year’s estimate of $7.6 trillion net worth.

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Summarizing

This above-described situation is ineffective and unsustainable: the pursuit of higher returns for the already wealthy cannot persist forever. With wealth refusing year on year to trickle down, debt has been used to plug the wage-consumption gap for the rest. This is also very dangerous…, like a time bomb.