Review by Inês Tavares
The World Inequality Report 2022, published by the World Inequality Lab and coordinated by Lucas Chancel, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, is a report on global inequalities that incorporates data and analyses related to the pandemic crisis.
This work provides an extensive set of data on global inequalities, along with in-depth analysis. The report is divided into 10 chapters: (1) global economic inequalities; (2) global inequalities from 1820 to the present; (3) rich countries, poor governments; (4) global wealth inequalities; (5) female labor income on a global scale; (6) global carbon inequalities; (7) the path to wealth redistribution; (8) [a discussion on] taxing multinational corporations or taxing the wealthy; (9) global versus unilateral perspectives on tax justice; (10) and a final chapter on emancipation, redistribution, and sustainability. These latter three chapters engage in a discussion about different options to combat inequalities, drawing from various experiences across the globe and historical moments. It’s worth noting that both gender income inequalities and carbon emissions inequalities are new topics presented in this report that were not addressed in the previous one published in 2018 (Facundo et al., 2018).
This report is rich in statistical information, providing a wealth of empirical data that allows for a more precise and well-founded analysis of global inequalities. The deeper exploration of wealth distribution issues in this report compared to the previous one reflects the progress of the work done by the World Inequality Lab.
The report concludes, foremost, that the wealthiest individuals have increased their fortunes, widening the gap between the rich and the poor. Indeed, in 2021, the top 10% owned 52% of global income, compared to 8.5% owned by the bottom 50%. When focusing on wealth, these figures increase significantly, with the top 10% owning about 76% of global wealth and the bottom 50% owning about 2% of global wealth. This is a pertinent statistic that helps to better understand the scope and magnitude of growing inequalities. It’s noteworthy that, as expected, the pandemic led to an increase in wealth inequalities between the top and bottom echelons. Indeed, between 2019 and 2021, the wealth of the wealthiest 0.001% increased by 14%, compared to the total wealth growth of 1%.
When analyzing incomes, the Middle East/North Africa (MENA) region is the most unequal, while Europe is the least unequal region. For instance, in Europe, the top 10% earn 36% of incomes, whereas in MENA, they earn 58%. It’s also noteworthy that Europe is the only region where the middle 40% [1] represent more income than the top 10%.
The authors present the Theil Index, a particularly relevant index that compares, in percentage terms, inequalities within countries versus inequalities between countries. They observe that inequalities between countries have been decreasing since 1980 (representing 57% of global inequality that year, compared to 32% in 2020), while inequalities within countries have been increasing. Indeed, in 2020, about one-third of global inequalities were between countries, with the remaining two-thirds represented by inequalities within countries. Analyzing the Theil Index since 1820, it’s notable that inequalities between countries consistently increased until 1980 (+46 p.p.), in contrast to inequalities within countries (which decreased by the same percentage points), and from that point onwards, the trend reversed, with inequalities within countries decreasing by 25 p.p..
In a comparison between the public and private sectors, the study shows how, in most wealthy countries, the private sector has substantially increased its wealth over the last 50 years, while the public sector has seen its wealth diminish. An example of this is the UK, where the wealth of the public sector decreased from 60% of national income in 1970 to -106% in 2020 (-166 p.p.), while the percentage of national income from the private sector increased by over 300 p.p.. However, this increase in private sector wealth was also uneven, both within countries and globally: of the additional total wealth accumulated since 1995, the top 1% captured 38%, while the bottom 50% captured only 2%. In fact, since 1995, the wealth of the richest individuals has grown by 6 to 9% per year, compared to an average annual wealth growth of 3.2%.
The report provides an interesting analysis of gender inequalities, offering a first estimate of female labor income worldwide from 1990 to 2020. Analyzing the data in an aggregated perspective, it’s possible to understand that over these three decades, women’s share of global labor income increased from 30.6% to 34.7% (+4.1 p.p.). Although the value increased every year, the fact that in 2020, women represented only about 35% of global labor income (compared to 65% for men) demonstrates that gender inequalities are still very pronounced at this level. When comparing the evolution every five years, it’s observed that between 2015 and 2020, the growth was more modest (+0.5 p.p.). When analyzing this evolution by region, it’s noted, first and foremost, that all regions seem to show an increase in values in recent years, except for China, which has consistently decreased its percentage since 1990. The region with the highest values in 2020 was Russia and Central Asia (around 40%) and the region with the lowest values was MENA (around 15%). All regions are below 50%, a value that would represent gender equality in labor income.
According to the authors of the report, global income and wealth inequalities are accompanied by ecological inequalities and inequalities in contributions to climate change. Indeed, and analyzing CO2 emissions on a global scale, the top 1% emit 17% of emissions and the top 10% emit 48%, while the bottom 50% emit only 12%.
Indeed, as can also be seen in a news item released by the Inequality Observatory in 2021, both Chancel’s report (2021) – whose data is also used in this report – and the report by Oxfam International and the Institute for European Environmental Policy (2021),[2] reveal that “global inequality in per capita emissions is due to sharp inequalities in average emissions between countries (or regions) and also due to more expressive inequalities in emissions within each country (or regions)” (Cândido, 2021).
When analyzing these inequalities by region, the difference in emissions between the top 10% in North America (73 tons per capita per year) and the top 10% in other regions is noteworthy, with the wealthiest 10% in sub-Saharan Africa emitting 7.3 tons per capita per year. The differences between regions are relatively consistent, as North America tends to have higher values for the top 10% (73 tons per capita per year), as well as for the middle 40% (21.7 tons per capita per year) or the bottom 50% (9.7 tons per capita per year), followed by East Asia (38; 7.9; 3.1, respectively), Russia and Central Asia (35.1; 10.2; 4.6, respectively), MENA (33.6; 7.3; 2.3, respectively), Europe (29.2; 10.6; 5.1, respectively), Latin America (19.2; 4.7; 2, respectively), South and Southeast Asia (10.6; 2.5; 1, respectively), and sub-Saharan Africa (7.3; 1.7; 0.5, respectively). Therefore, it’s worth mentioning the very significant differences between the top 10% and the rest, especially the bottom 50%, in all regions, as it’s not just a problem of rich countries and poor countries, since the top 10% of all regions have high emission values, often higher than the bottom 50% of any region, including in the comparison between the top 10% of poor countries versus the bottom 50% of rich countries. Thus, the authors conclude that climate policies related to emissions should be aimed at the wealthiest polluters (namely the top 10%), rather than the poorer or intermediate populations, such as carbon taxes, as these are much less polluting and are already, tendentially, within the climate targets for 2030 set by rich countries.
The modern welfare states built in the 20th century, associated with notable progress in health, education, and increased opportunities for the entire population, were achieved through increased progressive taxation. In this sense, the authors argue that a similar evolution will be necessary in the 21st century to respond to the challenges of this century.[3]
The previous World Inequality Report (Facundo et al., 2018), published in 2018, argues that the gradual rise in income and wealth inequalities observed since 1980 is the result of political choices focused on deregulation and liberalization of economies. Four years later, this report reinforces that thesis, noting that inequalities are a political choice, and it’s necessary to learn from both policies already implemented in various countries and other historical moments to rethink paths to fairer development.
References
Notes
[1] In the original text, “Middle 40%” refers to the 40% of the population between the top 10% richest and the bottom 50% poorest.
[2] It’s possible to find a news article about these reports at https://www.observatorio-das-desigualdades.com/2021/11/11/19354/.
[3] To further deepen the discussion on taxation, in addition to the report under review, it is advisable to consult The State of Tax Justice 2021 and Susana Peralta’s article in the newspaper Público, titled “Os impostos que os ricos não pagam e o que podíamos fazer com eles [The taxes the rich don’t pay and what we could do with them],” which delves into the discussion between the two reports.
