March 2022
Mounting income and wealth inequalities are among the most pressing issues of our time. People around the world are becoming aware of their detrimental impact on our social and economic lives, and are looking for solutions. Having access to accurate and comprehensive data on inequalities is therefore crucial if we are to collectively take the right actions and decisions. The World Inequality Report 20221 recently published by the World Inequality Lab and co-authored by Thomas Piketty, makes a decisive contribution to this debate. …
The first lesson of the report, which is hardly a surprise, is that we live in a highly unequal world. In 2021, global income amounted to €86 trillion (US$122 trillion)2. If that income had been evenly divided among the 5.1 billion adults on Earth, each of them would have earned €16,700 ($23,380) over the year. The actual outcome was of course quite different. The bottom 50 per cent of the world population earned only 8 per cent of total global income (€2,800 on average), while the top 10 per cent earned 52 per cent of that same total (€87,200 on average). Inside that upper group, the world top 1 per cent, which consists of only 51 million people, earned 19 per cent of the total. An even smaller group, the top 0.1 per cent, got 8 per cent of the total, as much as the bottom 50 per cent.
The income distribution is thus very unequal. But the allocation of wealth is even worse. The bottom 50 per cent of the world population owns only 2 per cent of global net wealth (€2,900 on average, typically in cash, deposits, land or housing, once debts have been subtracted). In other words, the poorest half owns almost nothing. At the other extreme, the top 10 per cent owns 76 per cent of global wealth, and inside that group, the top 1 per cent owns as much as 38 per cent. To summarize, the world suffers from very high income inequality and extreme wealth inequality. …
This brings us to the second lesson of the report: inequalities are not inevitable or mechanically determined by the level of economic development; on the contrary, they stem from political and institutional choices, which differ across regions and countries. As a consequence, they can be acted upon. …
In the context of the planetary ecological urgency, the report also explores inequalities in contribution to climate change. The analysis builds on computed individual carbon footprints, which correspond to the carbon emissions generated by one’s own consumption and investments. On average, each individual on the planet emits 6.6 tons of CO2 per year3. But this global average covers wide disparities. The global 50 per cent bottom emitters contribute an average of 1.6 tons, while the top 10 per cent emitters contribute 31 tons, and the top 1 per cent as much as 110 tons. In other words, half of total emissions are caused by one tenth of the population, and just one hundredth of the population emits about 50 per cent more than the entire bottom half. …
The third lesson of the report is thus that climate policies, if they are to be both efficient and accepted, have to be designed by taking inequalities into account. The rich are the ones who must bear most of the adjustment, directly by slashing their emissions, and indirectly by financially compensating the poor for their carbon mitigation efforts.
The report concludes by making policy proposals for redistributing income and wealth and addressing the challenges of the 21st century. In particular, it stresses the importance of progressive taxation, by showing how a modest global progressive wealth tax on multimillionaires would generate significant revenues for governments, which could be reinvested in education, health, and the ecological transition. It is to be hoped that the detailed and persuasive evidence on inequalities presented in this report will help convince citizens and global leaders that such a tax reform, and more generally a radical redesign of our economic system, is urgently needed.
1. The report’s website: wir2022.wid.world
2. In the report, monetary amounts are expressed in Purchasing Power Parity (PPP), which means that they are converted into euros using exchange rates adjusted for differences in the cost of living across countries. In particular, at PPP, €1 = US$1.4 = ¥5.
3. Other greenhouse gases such as methane (CH4) and nitrous oxides (NOx) are also included in these figures, after conversion into their CO2 equivalent.
