1% of the World Have 50% of the Wealth. Now What?
Yes, you heard that right. And the income gap tends to increase. According to an even more recent study conducted by Oxfam, 82% of the wealth created in 2017 went to 1% of the world’s richest individuals. And 1 in 10 people tries to make the ends meet having only $2 per day. To give you better proofs that this is not empty complaints, we did some research and are ready to back our claims up with more numbers.
Let’s take a look at the graph below. If your salary is close to an average U.S. income of approx. $35k per year, it’s not impressive at all. You’re on the verge of impoverishment in comparison to those mastodons we observe in top 1 percent average income stats. You must admit that before you’ve seen this figure, the difference between poor and rich doesn’t seem to be so critical. After you spend 1 minute staring at this gap visualised in a graph, it does.
Figure 1. Source: UC Berkeley
However, this problem is inherent not only in the USA (although there it is more vivid than in EU countries, for instance). The economic inequality can be measured by the national Gini coefficient. The closer is to 0, the better. In simpler terms, the darker the region is colored on the map below, the less even income distribution it has.
Figure 2. Source: Wikipedia
The number of millionaires is also growing. According to another report prepared by Credit Suisse, this parameter grew by 1100 individuals in the USA, by 237 in Germany, and by 202 in Australia. At the current moment, there are 36m millionaires worldwide — this comprises 0.7% of the adult population who possess $128.7TN of the wealth (see the figure below).
Figure 3. Source: Credit Suisse Global Wealth Report 2017
Why is Economic Inequality Only Growing?
The share of the world wealth belonging to the 1% of richest people increased from 44% in 2010 to 51% in 2017. Oxfam says it may reach 55% in 2020 at this pace. So why does it happen?
Figure 4. Source: Oxfam
The first cause is globalization. Reducing inequality on a global scale, it is widening the income gap within each country. Globalized economy creates an international demand for high-skilled workers, thus their salaries rise. On the other hand, there is a lower demand for low-skilled workers, so they receive much smaller compensation than before. However, some experts consider it an inevitable “side-effect” of an increased national economic growth.
The second cause is technology. Let’s dwell a bit more on the situation arisen around low-skilled workers. They are massively yielding their positions to mechanisms that can perform repetitive functions no worse than humans. Automation is undoubtedly the right thing for an overall development, but it doesn’t bode well for manual workers.
The last major cause is tax cuts. The income tax for the richest was falling down during the past 60 years as reported by Congressional Research Service. Although this is the US. data, we know that this country is the main contributor to inequality. About 40% of the richest people in the world reside in the USA. That’s why such a loyal policy towards the highest-income taxpayers has so dire implications.
Can We Solve These Inequalities in Our Lifetime?
Economic inequality is indeed a heavy burden. Some might say: “This issue is intractable, we faced inequalities during the entire existence of humankind. It’s a sort of our nature, the struggle is meaningless.” But is it?
Let’s recall those times when entire nations and classes were exploited by others. Slavery, offerings, inquisition, crusades — all those processes so common in the past are massively denounced now. All reasonable people regard this as complete bigotry.
Let alone the Dark Ages, we don’t need to go far in the search for absurd inequalities. Women couldn’t vote until 1918. The black population were “second-class” people until 1964. Homosexuals were recognized as mentally ill until 1992 when homosexuality was declassified by the World Health Organization. Racism, sexism, and homophobia are still on the agenda, but we see a lot of positive tendencies that give us hope. Hope that someday we will wake up in a free world without biases.
The same can happen to economic inequality when people are ready for change. Are we at the cusp of a tipping point now? The question remains open.
But Wait, Probably Blockchain May Help
Blockchain is a revolutionary technology not only for the financial markets but also for the society. Some erroneously assert that blockchain = cryptocurrency such as Bitcoin, Litecoin, Ethereum, etc. Yes, these concepts are interrelated, but blockchain has a wider sense. Let’s get it explained in terms of dealing with inequality.
As we mentioned above, 1% of individuals holds 50% of the wealth — it is centralised in only a few hands. The majority of companies are also politically centralised and controlled by that 1 % of people. And those are exactly the corporations we purchase goods and services from.
The essence of blockchain is decentralisation. This technology, on the contrary, ensures trade without intermediaries and makes income distribution fair and transparent. It becomes more than possible after the rise of eCommerce: we can use blockchain-based digital applications to organize a deal without giving money to a third party.
A great example of a decentralized platform is OpenBazaar. It is a global marketplace that resembles Amazon, but here you pay zero platform fees. OpenBazaar connects people directly via a peer-to-peer network. No one controls this marketplace and no one holds its net worth. All users equally contribute to the platform. Thus, all users benefit. This process can be synthesised in a concept of sharing economy.
Such a collaborative approach based on blockchain is not the only key to reduce inequality. Blockchain helps to democratize everything, including funding for startups. The more small businesses operate in the domestic market, the healthier is the national economy. ICO funding is an option that makes funding possible even for those who couldn’t even dream about being funded a decade ago. Examples like this abound.
Let’s recap: economic inequality and uneven redistribution of the wealth is one of the greatest modern challenges. Storm clouds are gathering: the gap becomes too wide. Still, we have a good old proverb — “it’s always darkest before the dawn”. To our minds, the Blockchain invention is that first glint of light we can see at the end of the tunnel.
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