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The Wide Wealth Gap

Global Press Network | Jan 8, 2007

The unleashing free-market and capitalist forces deepened the gap of inequality between capitalist and worker, rich and poor, across the globe and as well as within the national boundaries. Though most of the rich countries enjoyed a strong economy with low levels of inflation and unemployment; the strong economy, however, has not resulted in a steady rise in income for all group of people. Several economic reports indicate that inequalities of wealth ownership and income are accelerating in all parts of the globe. Wealth inequality now reached at a monstrous level. Worldwide, the richest 1% owns over $515,000 of assets each (property, shares, cash, etc) which is 40% of the world’s wealth, totaling $125 trillion.  

The richest 10% own 85% of the wealth, while the bottom half of the population (50%) own only 1.1% of global wealth. Globalisation, is a phenomenon that is said to bring positive change for everyone; yet there are over 1,000,000,000 people struggling to survive on less than $1 a day, most of whom live in the Africa and Asia. Most of the ‘super-rich’ people are footed in the USA, Europe and in few Asian countries including Japan and South Korea, and few more elites are growing in many of the developing countries as well.

Acceleration of inequality is taking place for a century or more. In 1913, per capita GDP (total national output divided by the population) was 22 times higher in the rich countries than that of the poorest countries. By 1970, it was 88 times higher. But after globalisation began to accelerate in the early 1980s, the gap widened severely; in the early twenty first century GDP in the rich countries was 267 times that of the poorest countries. Inequality within the poorer, developing countries also increased at in the 80’s and in the 90’s. China, for instance, which has experienced growth of over 9% a year, is one of the most unequal countries in the world. The average income of the bottom 20% of the population is less than 5% that of the top 20%. Luxury sales are increasing in Russia, China and India because of a growing wealthy class, but at the same time the poor in those countries dies in hunger.  

In the mid-1970s, the most affluent 10 percent of Argentina's population had an income 12 times that of the poorest 10 percent. By the mid-1990s, that figure had grown to 18 times, and by 2002, the income of the richest segment of the population was 43 times that of the poorest. In contrast, in 2005, average Canadians had earnings of $38,010, compared to the $9 million average salary earned by the top 100 CEOs. The lowest-paid CEO took home a mere $2.8 million, while the top-paid raked in a whopping $74 million.  

Big retailers like Primark, Asda and Tesco claim they have a 'living wage' policy and uphold 'ethical standards' for workers overseas; yet they are supplied by subcontractors who, in Bangladesh and in Pakistan pay workers $0.50 an hour. A living wage would be about $45 per month, while most workers earn only around $20 a month for a 60-hour week.

A study by the World Bank’s Independent Evaluation Group showed only eleven countries experienced reductions in poverty, marginal at best, while 14 had the same or worsening poverty rates over the last five years despite the bank’s extensive poverty reduction efforts. In China, Romania, Sri Lanka and many Latin American and African countries, fast expanding economies improved incomes of many, but benefits were limited by an instantaneous increase in economic inequality, putting most of the benefits in hands of the wealthy people and not enough in the poor households.

Building more open political and social institutions to allow the poor and historically subordinate groups, such as Afro-descendants and indigenous people, to gain a greater share of agency, voice and power in society may reduce the income inequality in the developing countries while protecting and enforcing the property rights of the urban poor is another way on minimizing the gap in the poorer countries. Different approach is required for the rich and wealthy countries such as progressive taxation and efficient income distribution.  

There is no single factor behind the increase in income inequality. Growth is a lucrative term in the economy and in most of the cases comes along with the income inequality. If the real incomes of society's poorest people are rising but not as quickly as are those of society's wealthiest people- everyone is materially better off even though income inequality is on the rise. Challenge is to minimize the gap. Achievement so far is way below then the expectations.



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