Rising inequality is a global trend that has negative economic and social consequences. While inequality has increased almost everywhere, there are some regional variations. Absolute inequality, which measures the actual income or wealth difference between groups, has risen nearly everywhere. Relative inequality, which measures the ratio of incomes between groups, has declined in some places. Within countries, rising inequality is now the main driver of increased global inequality. High and rising inequality can undermine economic growth, increase economic insecurity, weaken social cohesion and democracy, and threaten multilateral cooperation. Addressing inequality is important to create a more stable global economic and political environment.

1. Rising Inequality and Its Discontents
Anis Chowdhury
Adjunct Professor
Western Sydney University
University of New South Wales
a.chowdhury@westernsydney.edu.au
Presentation at the Khazanah Research Institute
18th January 2019, Kuala Lumpur

2. Outline of presentation
1) The global mega trend – rising
inequality
2) Inequality’s discontents
–Economic insecurity
–Undermining democracy
–Threatening multilateralism

3. Inequality – the mega trend
Inequality is on the rise:

4. But the picture is much more nuanced
Important variations in inequality trends within each
region:
• Steeply rose in most countries
• Declined in some countries
• Relatively stable in some countries
• A decline during the 1990s and until the mid-2000s but
then a clear increase after the 2008 financial crisis
• First a rise, and then a fall since the 2008 financial crisis
• Decreased between countries

5. Relative vs. Absolute inequality
• An example
$10
$50$50
$250
$0
$50
$100
$150
$200
$250
$300
1990 2017
Person 1 Person 2
• Income of both persons 1
& 2 increased by 5 times
between 1990 & 2017.
• Their relative inequality
remains the same –
person 2 is 5 times richer
than person 1
• But their absolute
inequality increased from
$40 to $200

6. Global inequality
• Global inter-personal inequality – among citizens of
the world, regardless of national borders
• Rise in absolute
inequality
• Decline in
relative
inequality
Source: WIDER

7. Unprecedented rise in absolute inequality
• Absolute inequality rose in all regions
• Both relative and absolute inequality
rose in the US, Europe, South Asia,
Sub-Saharan Africa
• Only in Latin America, relative
inequality declined

8. Within country inequality driving global
inequality
• Global inequality:
sum of between
& within country
inequality
• Developing
countries catching
up, between
country inequality
declined
• But within
country inequality
continues to grow

9. Wealth concentration continues
• World’s richest 1%, with
more than $1 mill., own
45% of the world’s wealth.
• Adults with less than
$10,000 in wealth make up
64% of the world’s
population but hold less
than 2% of global wealth.
• “Ultra high net worth
individuals” with more than
$30 mill. hold 11.3% of
total global wealth, but
represent only a tiny fraction
(0.003%) of the world
population.

10. Extreme wealth accumulated on the backs of
poorly paid workers

11. Richest 1% reaped a much greater share of
economic gains

12. Inequality in Asia & the Pacific - mixed
• In South-East Asia,
the picture is mixed:
• Increased in
Indonesia, Lao,
Vietnam & Singapore
• Decreased in Malaysia,
Thailand, Cambodia,
Timor-Leste &
Philippines
• However, the
population-weighted
Gini coefficient rose
from 32.6 to 39.1
Source: ESCAP

13. Asia-Pacific worst wealth inequality
Source: ESCAP

14. The Asian ‘miracle’ no more
• Number of extreme poor declined dramatically
• But economic insecurity rose sharply
• Between 1988 and 2012, the wealthiest 5% of
the region's population increased their personal
consumption by almost $400 a year, compared
with less than $30 for the bottom 20%
• The region has also seen the emergence of a
new class of super-rich, with billionaire wealth
now equivalent to almost 9% of regional GDP.

15. Absolute inequality worsens in Malaysia
9,000
3,000
1,000
16,000
6,000
2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
T20% M40% B40%
1995 2016
• Income of T20% increased
1.8 times
• Income of M40% and B40%
increased 2 times
• That is, relative inequality
declined
• Gini declined from 0.56 in
1975 to 0.40 in 2016; but still
too high
• Absolute gap increased
• Wealth inequality very high
and rising (Lee & Khalid,
2016)
Source: Khazanah Research Institute

16. (2)
Inequality’s discontents

17. Why worry about rising inequality?
• 2014 Pew Global survey, 77% of Malaysians think
the gap between the rich and poor is a big problem
• Increases economic vulnerability directly
–Stifles growth in aggregate demand
–Fuels debts and external imbalances
• Increases economic vulnerability indirectly
–Weakens social cohesion & democracy
–Undermines multilateralism

18. All forms of debt increased
by the middle of
2017

19. Rising global debt & slowing economy – a
recipe for crisis
• Since 2007, global debt has increased from $167 trillion
to $247 trillion in the first quarter of 2018. Total debt
levels are 320% of global GDP, an increase of around
40% over the last decade.
• It required a record $8 trillion of freshly created debt to
create just $1.3 trillion of global GDP.
• Still growth is slowing, while the massive debts
intended to achieve growth are accumulating.
• This is a crisis waiting to happen.

20. Threat to social cohesion
• Socrates – indiscriminate wealth
deteriorates peace and order.
• Aristotle – inequity a source of conflict
and anger.
• The State fundamental to ensuring peace
and prosperity through the procurement
of justice and social equality.

21. Rise of populism weakens democracy

22. Protectionism rises
• World has racked up 7,000 protectionist
measures since crisis

23. G20 trade barriers

24. Perfect storm
• The rise of populist ultra-nationalist politicians in
Europe and declines of democratic polities
elsewhere, including in the US.
• The “new sovereigntists” and false prophets of
American exceptionalism
–are undermining multilateral cooperation when
needed most.
• Economic crisis or slowdown may elevate geo-
political tensions, exacerbating the negative feedback
loop for a ‘perfect storm’.

25. Thank-you