Inequality: the scourge of the twenty-first century

Rising inequality is a ubiquitous problem, encompassing every geographical region and nation in the world. Inequality can be contended to have replaced unemployment as our most vital economic issue. After nearly six decades of declining inequality from the time of the First World War, the process has reversed itself with a vengeance, and we may be about to surpass the very high levels of inequality that prevailed in 1914. The causes are multifarious, including accelerating globalisation, plutocratic politics, excessive emphasis on ‘meritocratic’ pay, declining public expenditure, and social protection combined with the high rates of return on ‘capital’ compared to the overall economy’s growth rate. Inequality between nation-states may be declining because of the rise of China, but within countries, inequalities are increasing everywhere. Excessive inequality prevents social mobility and contains the seeds of social conflict and even civil wars. Most crucially, excessive and rising inequality makes democratic politics and governance unsustainable. High inequality may be a causal factor behind the decline of democracy and the rise of autocracy and populism that we are witnessing globally. In the ultimate analysis, the reduction of inequality necessitates wealth taxes.