Global economic inequality

November 17, 2019

Unless the growing economic inequality is addressed, we shall continue to see seismic shifts in the political landscape towards more radical ideologies and geopolitical instability


As long as poverty, injustice and gross inequality persist in our world, none of us can truly rest.—Nelson Mandela

The impact and success of the Yellow Vests’ protests in France, the ongoing crises in Chile and Lebanon seem to have caught most people off-guard, especially the local establishment. This should never have been the case. The seeds of discontent were sowed over decades, courtesy widespread policymaker apathy.

The proletariats are fed up with the two-track economic system: the spoils are shared at the top, while the bottom-of-the-pyramid struggles with their day-to-day existence.

Between 1988 and 2011, the income of the poorest 10 percent increased by less than $3 per year while the top 1 percent increased their income by more than 180 times this amount. Thomas Piketty’s research shows no income increase for the bottom 50 percent over the last 30 years, whilst the top 1 percent have seen a 30 percent increase over the same period.

As the ramifications of growing economic inequality start to shake the socio-economic and political landscape worldwide, this issue is now firmly in the mainstream dialogue.

Several economists had raised alarm bells much earlier upon the emergence of this phenomenon.

In 2013, academics were enthralled by French economist Thomas Piketty’s magnum opus: Capital: in the 21st Century. Monsieur Piketty used brilliant research and analysed data sets going back 200 years to highlight the growing chasm between the haves and have-nots over the last few decades. This work is likely to win him a Nobel prize.

Piketty’s work was not without strident critics. However, well before Piketty, economists had been working to measure, understand and identify potential solutions to income inequality. Prominent amongst them were Professor Tony Atkinson and two Nobel prize winners Paul Krugman and Angus Deaton.

Economic inequality in the age of global media

It is generally accepted that inequality has always existed; its scale has risen and ebbed across the ages. It can be pointed out that, before the industrial age, all wealth and power were in the hands of a few people while the masses were subject to horrific living conditions across much of the globe.

While modern inequality levels may pale in comparison to those extreme times, technology has fundamentally reshaped the public perception and reaction to economic disparity.

Economic inequality is more virulent when it passes through generations creating a privileged minority who have access to the best education and healthcare and, using their considerable resources, can manipulate the tax and regulatory systems in their favour. This then develops into a vicious circle where a small minority of the rich keep getting richer (accumulating more and more wealth) at the expense of the majority.

Through internet and electronic media, people across the globe are more aware of what they are missing vis a vis the global elite. The differences in lifestyles, living conditions, education and healthcare standards are patently obvious and communicated effectively.

The anger and frustration have manifested themselves through emergence of extreme political ideologies even where democratic systems exist. Emergence of far-right politics in Europe, and the Brexit vote are clear indications of this.

In case of Brexit, London, which contributes 22 percent of the country’s GDP (with only 12 percent of the population), voted overwhelmingly (60 percent) in favour of ‘remain’. The north (and other economically deprived regions) had other ideas. It is worth noting that London has a GDP contribution larger than that of Saudi Arabia and London’s housing stock is estimated to be equal to the GDP of Brazil.

In case of emerging (and mostly less democratic) countries, people, are desperate to change the status quo. Thousands have attempted to flee Africa (and Asia), in an often-deadly journey, to reach Europe. In addition to the human tragedy this has created an immigration crisis in the EU fuelling right-wing support. The case of 39 illegal immigrants’ bodies recently found in UK is a sad example.

Even in Indian politics, there is a clear shift to the right. Economic inequality is rife in a country where the number of Forbe’s billionaires is smaller only than those of China and USA, yet more than 50 percent of the population lives below the poverty line.

Inequality in Pakistan

There is limited but interesting data on Pakistan. An average adult in Pakistan has a wealth of around USD5,174 and more than 99 percent of the population have wealth less than USD100,000. This is unsurprising giving relative poverty of the country. Even though overall income is low, its distribution is (relative to its South Asian peers) less skewed with a Gini of around 30. Nevertheless, the conclusion is stark. Pakistan faces extreme poverty according to global benchmarks and an average Pakistani is one of the least wealthy people in the world.

The gross inequality is clearly manifesting itself with Pakistan’s poor showing (even against its South Asian peers). In terms of gender inequality, Pakistan ranks 148th, above only Yemen, according to World Economic Forum (WEF).

Even more alarmingly, the World Health Organisation (WHO) reports that 45 percent of children under five suffer from stunted growth in Pakistan (the percentage for developed countries is typically ZERO). These are the youths of tomorrow, who will never develop to their full mental and physical capabilities to support the economy in a growing population. If this trend continues, inequality within society will only rise.

All this in a country with one of the highest proportion of youth in its population. Prospects of wealth and prosperity give hope and ambition. If these are taken away, the outcome can be catastrophic in the sixth most populous nation.


Inequality, by definition, is a relative term. While this truism holds, inequality should be viewed with two lenses. Extent of inequality and absolute scale of wealth and income that go with it. Similarly, inequality exists both within and between societies and the latter often gets overlooked by politicians who are too engrossed on their internal exigencies.

The message is clear to the establishment, and the political powers that be, that something needs to change. And it needs to happen fast. Unless the growing economic inequality (both within and between economies) is addressed, we shall continue to see seismic shifts in the political landscape towards more radical ideologies and geopolitical instability.

The PTI government came to power on the back of a populist agenda which promises a more egalitarian society. This won them votes but, going with the trends in India and France, they need to deliver. Patience is wearing thin on the ground.

The writer is a chartered accountant with several years of banking experience in Europe and the Middle East

Will growing inequality in Pakistan trigger seismic shifts towards radical ideologies?