Unequal wealth distribution has been at the root of the world's many ills. But in recent years the inequality has accelerated alarmingly, warns the anti-poverty charity Oxfam. The warning came on the eve of the annual meeting of the world's most richest and powerful now being held at Davos, Switzerland. From 44 per cent share the one per cent ultra rich had in the world's wealth in 2009, it has now risen to 48 per cent and by next year it will be more than 50 per cent.
Currently, though, of the 52 per cent wealth, an overwhelming 46 per cent is owned by the rest of the richest fifth of the global population, leaving for the 80 per cent of the population to share only 5.5 per cent of the economic pie. While an adult in this group boasts an average wealth size of only $ 3,851, his or her counterpart in the top echelon is awash with the average wealth size of $2.7 million. If this is not staggering enough, just try to grasp with the reality that the rest of the population has to make do with a meagre $1.25 a day.
The indication is clear enough that the rich are getting richer and the poor poorer. Global wealth registered an increase from $117 trillion in 2000 to $262 trillion last year. What is significant is that the sluggishness of the overall global economy did not at all prevent personal wealth from surging ahead at times at a break-neck pace. If the rate of maldistribution of wealth were to continue at last year's rate, the richest one per cent is supposed to control the entire wealth of this planet within the next 23 years, hypothetically speaking. The Credit Swisse, the Swiss-based financial services company, in its latest global wealth report has tracked down the reason for the rising inequality to the 2008 global financial crisis. Indeed, it has rightly detected the malaise.
Since 2008, the values of financial assets have gone up and wages have either stagnated or even declined. The report is also categorical that economic recovery has been skewed in favour of the very rich for obvious reasons. Rising inequality is linked to a surge in paper wealth the world over. Also trillions of dollars were pumped into the financial system by the central banks where interest rates were lowest ever and on easy terms and condition. No wonder the global wealth grew by 8.3 per cent in 2013, the highest ever recorded. The annual rise of $20.1 trillion is a trend since 2008 leading to wealth increase at 20 per cent above the pre-crisis peak and 39 per cent above the most recent low in 2008.
The surge in the asset values is what is behind the creation of a number of billionaires and millionaires. In the aftermath of the financial meltdown in 2008, state treasuries around the world were generously opened to bail out the financial system. On the other hand, central banks started printing money in order to maintain values of financial assets. This was to the advantage of the rich. Their assets did not undergo erosion of values at the initial stage when that was quite inevitable and then again it was them who could make good use of the money available on easy terms. Question does not arise for the poor to derive benefit from such a liberal move by the central bank.
On the contrary, the bottom rung's sufferings continued to mount. Social services were curtailed in order to make available the bailout money. Industries and companies took advantage of the crisis in retrenching employees often leading to unemployment or slashing of wages. Evidently, these were the reasons for the unprecedented social inequality. Today wealth is 6.5 times income, which is the highest in the post-war history. So long the post-war average was less than five times. This, according to the Credit Swisse, has created conditions for a new financial collapse. Abnormally high wealth income ratio has always prompted recession in the past.
Given the prevailing socio-economic condition, the world's poor and the unprivileged may not cause the social upheaval or revolution, but the capitalist system is showing cracks and it may stumble under its own weight. The world recovered from the systemic weaknesses and breakdowns in the past, thanks to a combined effort to prop it up. In the past collective efforts by world leaders could weather the storms. The last time the task proved particularly daunting. They may not, however, be lucky each time. The intractable contradictions rooted in the capitalist system have reached such a stage where solution to those seems beyond scholarly recipe.
Even in the most repressive financial regime of the zamindars in this part of the world, extreme poverty was hardly encouraged. The top boss was generous enough but in the absence of a highly developed system, things often went wrong and poverty at times became endemic, thanks to repressive surrogate taxmen (nayeb and gomosta). Today, economic theories are well grounded and yet economic meltdown cannot be averted. Here lies food for thought for the policy-makers and academics alike. The disparity in income and wealth distribution is a result of sly moves by the privileged. The will to share is enough for the purpose. There is need for drawing the line to know how much is enough and too much.
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