Last month, the debate about world’s growing inequality intensified. Just before the Annual meeting of the World Economic Forum (WEF) in Davos, Oxfam published a report showing that world’s 26 richest individuals own the same wealth as the poorest half, while in 2017 that number was ‘still’ 43. In 2018, the wealth of the world’s billionaires increased by 12%, while the poorest half of humanity saw their wealth shrink by 11%. At the WEF, critics like Dutch historian Rutger Bregman, Oxfam executive director Winnie Byanyima and ‘Winners Take All’ author Anand Giridharadas pointed to the participants’ responsibility for exacerbating inequality. Giridharadas has argued that many billionaires approach philanthropy as a kind of branding exercise maintaining the current system. Instead of talking about philanthropy, billionaires in Davos should be talking about taxes, Bregman concluded. Especially Bregman’s remarks on taxes stirred up debate. In February, billionaire Bill Gates tweeted a chart showing how humanity had made progress in terms of reducing poverty over the last two centuries. The tweet sparked an intense online debate about global poverty. Jason Hickel responded in The Guardian that the $1.90-a-day line is be too low and that the number of people able to afford basic necessities on a daily basis had actually decreased. As emphasized in a Bloomberg article, the question about what the world’s richest should do about the growing inequality has remained unanswered for over a decade now, with a possible social backlash against the rich becoming more likely.
In wealthy countries, life is precarious for a growing number of people. The problem of growing inequality in these countries is not so much the fact that a small group of individuals get wealthier, but rather that the most vulnerable are still struggling to obtain basic necessities. The effects of this struggle are becoming ever more visible. In the U.K., for instance, almost 20% of children under 15 live in a home where the parents cannot afford to put food on the table. And in the U.S., life expectancy has dropped for the third year in a row, but only for poorer people as they are more likely to be overweight, smoke, and drink than their wealthier counterparts. While last summer U. S. president Trump’s Council of Economic Advisers concluded that the country’s war on poverty “is largely over and a success”, that feeling is not shared by those who are experiencing financial insecurity, struggling to pay for costs of living, healthcare, quality housing and good food.
The precarious circumstances of the current young generation has led to the rise of Millennial socialism. This is remarkable in the U.S., traditionally a profoundly anti-socialist country. Especially the young generation is burdened with the financial insecurity resulting from the Global Financial Crisis, In the U.S., the wealth gap between generations is growing, younger generations are weighed down by student debt and stagnant wages. This feeds the feeling that that economic growth has mainly benefited the rich and that the global elite currently in power is not taking accountability for the growing inequality. Politicians like Bernie Sanders and Alexandria Ocasio-Cortez respond to this feeling saying that a system that allows billionaires to exist while some people don’t have access to public health is wrong. Alexandria Ocasio-Cortez has called for a 70% marginal tax rate on people who earn over $10 million a year. In addition, in the run-up to the 2020 elections, democrats are distancing themselves from the heavily funded former progressive candidate Hillary Clinton and from the self-funding billionaires (like Michael R. Bloomberg) who are considering a run for the Democratic presidential nomination. Moreover, similar to Labour in the U.K., they promise young Americans free college tuition in times of the student loan debt crisis.
In the future, technology may further drive inequality. At the WEF, panelists from the political and technological domain all agreed that 4IR technologies such as AI could further exacerbate inequalities and that such technology could better be harnessed to ensure welfare reached those who needed it. The rise of AI puts at risk the current jobs of low-skilled, uneducated workers, while creating prosperous new industries that don’t employ very many workers. Because the largest companies in the world by market value in 2018 are now tech giants, Californian governor Gavin Newsom has proposed a “digital dividend” that would let consumers share in the billions of dollars made by technology companies in the most populous U.S. state.
As measures to elevate those living in poverty or precarious conditions are not going to improve lives in the near future, the debate on inequality will intensify. The effects of living in such conditions become more visible; this will further feed the awareness that a large part of society is not experiencing progress. As a result, dissatisfaction with the wealthy elites who are in power will grow, something already embodied by the Yellow Vests movement. Anti-billionaires populism might rise and the growing popularity of socialist ideas, even in a liberal minded country like the U.S., could point to a future where the redistribution and wealth social safety nets will be introduced. The question of how further technological advancements will either divide or serve entire societies remains the big unknown.
- Growing unease with excessive wealth, polarization between different classes in Western societies
- Social movements and unrest, backlash against global elites in the shape of national Yellow Vests like movements
- Stricter tax policies, measures against tax-havens
RISKS MARKED ON THE RISK RADAR AS NUMBER 1: rising inequality