The world needs a summit to tackle climate and wealth inequalities

The latest World Inequality Report highlights the historical and political roots of income and wealth inequalities and their correlation with climate change
The least we can do is have a dialogue on how those who can afford to and who emit more carbon should pay higher taxes to foster a more inclusive world

Andrew Sheng

Published: 1:30am, 18 Dec 2021

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Life is unfair but what can we do about it? The world continues to tolerate the growing injustice of inequalities in income, wealth and, most recently, vaccine distribution.

French political economist Thomas Piketty and his colleagues at the World Inequality Lab has just published the World Inequality Report 2022, a gold mine of data and insights. I found at least three nuggets.

First, inequality is primarily a political issue. We can all do something about it, but since politics has been captured by money, the few remain more equal than the many. Between 1995 and 2021, the wealthiest 1 per cent captured 38 per cent of the growth in global wealth, whereas the bottom 50 per cent had a pitiful 2 per cent share.

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Similarly, the richest 10 per cent take home 52 per cent of the global income, whereas the bottom 50 per cent earned only 8.5 per cent of it.

The report showed why these inequities could not be reduced despite increases in average income and wealth per capita. The progressive tax rates where the rich paid more than the poor, introduced in the first half of the 20th century to deal with inequality, were dismantled in the 1980s.

The neoliberal free-market philosophy preached low taxes and small government to encourage entrepreneurship, but effectively handed more income and wealth to the elite.

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Piketty’s second historical insight is that Europe, and later America, got rich on the back of the Industrial Revolution and colonisation. In 1820, inequality between countries made up only 11 per cent of global inequality, meaning most of it was domestic.

But intercountry inequality rose when the West advanced with industrialisation and resource extraction from the colonies. That peaked in 1980 when it represented 57 per cent of global inequality.

Since then, the rise in income for China, India and other newly independent countries has narrowed the gap with the West; but, by last year, domestic inequality had risen again, to account for 68 per cent of global inequality. This meant developing countries, even as they got richer, saw domestic inequalities worsen.

In short, the rich are the same everywhere. They have more and want more.

But there is a twist. One reason the rest has caught up with the West, as the report put it, is that: “Nations have become richer, but governments have become poor”. In essence, because the governments in Europe, North America and Japan have used debt to tackle slow growth since the 1980s, private wealth grew at the expense of public wealth.

The third report insight is that inequalities and climate change are highly correlated. Between 1850 and last year, nearly half of the historical carbon emissions was accounted for by North America (27 per cent) and Europe (22 per cent). China accounted for 11 per cent, but has become the largest emitter, although per capita emissions remain lower.

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A recent International Monetary Fund study pointed out that “the richest countries represent only 16 per cent of the world population but almost 40 per cent of CO2 emissions.

“The two categories of the poorest countries in the World Bank classification account for nearly 60 per cent of the world’s population, but for less than 15 per cent of emissions.”

Yet the COP26 UN climate conference debate was all about whether China, India and other emerging markets that are increasing their carbon emissions should do more in pledging to get to net zero.

The entanglement between emissions and levels of wealth suggest that climate policies should focus on making those responsible for emissions pay more for remedial action.

The bottom 50 per cent of the population in Europe emits around 5 tonnes of carbon per person per year, with their counterpart class in East Asia emitting 3 tonnes, and in North America, 10 tonnes.

But the top 10 per cent account for 29 tonnes in Europe, 39 tonnes in East Asia and 73 tonnes in North America. Indeed, the top 1 per cent in the US accounts for 269 tonnes of carbon per person per year, compared with 139 tonnes for the top 1 per cent in China. The rich everywhere are the biggest carbon emitters.

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All this suggests tackling climate change and social injustice is part of a total political package, cutting across nations. It’s one thing to promise to get to net zero, it’s another to design the programmes to deliver. Each government will face huge resistance from vested interests that want to delay or greenwash any action.

The report has made some excellent suggestions on tackling inequality, such as progressive tax measures and a global asset register, which are bound to be controversial. But, to be effective, they need global cooperation. No single country can impose higher tax rates or tougher action without being undercut by another.

Governments have a chance to fix global inequality. They must seize it

I have to agree with inequality blogger Branko Milanovic that the recent Summit for Democracy was the wrong idea, because it tried to divide the world into two opposing ideological camps. The priority should be to work together globally to tackle inequalities that require domestic action against vested interests.

The next global summit should be about how to tackle inequalities. Given the complex issues raised by Piketty and his colleagues, the least we can do is have a democratic, transparent and constructive dialogue on how those who can afford to and who emit more carbon should pay more taxes to foster a more sustainable and inclusive world.

Andrew Sheng writes on global issues from an Asian perspective