Hussein Shobokshi
AS far as wealth and income is concerned, people tend to compare themselves to the people around them rather than to those who live on the other part of the world. For example, the average Frenchman probably does not care how many Chinese exceed his own standard of living, but that Frenchman surely would take note if he started lagging behind his fellow citizens. Yet where inequality is concerned, it also makes sense to approach the world as a single community, not only for the differences in living standards within France but also for those between rich French people and poor Chinese or vice versa.
During the past century, economic inequality in the developed world has traced a massive U-shaped curve — starting high, curving downward and then curving sharply back up again. In the year 1915, the richest one percent of Americans earned roughly 18 percent of all national income. Their share plunged in the 1930s and remained below ten percent through the 1970s, but by 2007, it had risen to 24 percent.
In household wealth rather than income, the rise of inequality has been even greater, with the share owned by the top 0.1 percent increasing to 22 percent from nine percent three decades ago. In 2011, the top one percent of US households controlled 40 percent of the nation’s entire wealth. And while the US case may be extreme, it is far from unique: All but a few of the economies of the Organization for Economic Cooperation and Development (OECD) for which data are available experienced rising income inequality during the period from 1980 to 2009.
The French economist Thomas Piketty has famously interpreted this data by arguing that a tendency toward economic inequality is an inherent feature of capitalism. He observes the middle of the twentieth century, during which inequality declined, as an exception to the rule, produced by essentially random shocks like the two World Wars and the Great Depression, which led governments to adopt policies that redistributed income.
Much discussion has taken place between rising economic inequalities in the developed world recently, along with a generalized sense that the problem has grown to intolerable proportions. But at the same time, there has been little movement to address the situation; instead, there is tacit acceptance of many specific forms of inequality and the processes that produce it. The result is widespread discontent together with practical passivity. As growth slows in mature economies across the developed world, economic inequality has reached new heights. Defined in terms of the shares of disposable income of households across the economic spectrum, adjusted for varying needs, inequality today in the United States is significantly higher than it was a generation ago. The same is true in the United Kingdom, and even less laissez-faire countries, such as Germany and Sweden, have seen inequality increase dramatically.
Signs of modernization are the linkages among economic, social, ideational, and political trends. As changes take place through the system, developments in one sphere can drive developments in the others. But the process doesn’t work in just one direction, with economic trends driving everything else, for example. Social forces and ideas can drive political actions that reshape the economic landscape. Will that happen once again, with popular majorities mobilizing to reverse the trend toward economic inequality? In the long run, probably people around the world increasingly favor reducing inequality, and the societies that survive are the ones that successfully adapt to changing conditions and pressures. Despite current signs of paralysis, democracies still have the vitality to do so.
In today’s globalized world, there is room for national governments to take steps to reduce inequality. For too long, politicians concerned about inequality and poverty have portrayed the problems as regrettable but unfixable. Yet by and large, the solutions lie in their own hands.
