In their new report analysts from Morgan Stanley listed countries with the highest levels in the world. The 77th page document written by 24 economists leaves no doubt that economic system has been on the wrong path for at least two decades.
The world is wealthier but inequality within many countries is increasing. In 2014 global GDP per capita was 2.4 above the level of the mid-1990s. Growth rate of middle income countries was above average level and the advanced economies developed significantly slower. “The high income countries GDP per capita (PPP) was 26.5 times that of low income countries in the mid-1990s, and in 2014 the ratio had shrank to 25.3.” – said Morgan Stanley analysts in the report. The ratio of high to medium income countries has also shrunk.
The global economy grew in the last two decades but only small portion of citizens benefited. “Within many developed and developing countries the distribution of income within the households is more unequal now than in it was two decades ago” – concluded economists. The gap between top earners and bottom 10 percent “has widened persistently”. The same is true between top 10 and bottom 40 percent.
The main reason of inequality is widening gap is widening gaps in market income sources: gross-earning, self-employment income and capital income. Emergence of new types of disrupting economies, which Uber is only one symbol and new innovations disrupted almost all of industries liquidating thousands types of jobs. Millions of workers and small business owners face reality of competing with giants like Amazon, Apple or… Uber. Until now economy has not grown significantly thanks to these new developments but millions of households lost their economic foundation.
As human labour has become cheaper and more obsolete, the economic growth has been more capital-intensive. But capital income became more concentrated over last two decades upping total income inequality level, for instance in Sweden from 8 percent in mid-1980s to 13 percent in 2014.
Wealth inequality is higher than income inequality not only because financial and real estate assets are unevenly distributed but also because many accrue to the top both income and wealth of households – said Morgan Stanley economists. Most of that wealth can be inherited which only perpetuates concentration and inequality.
The sobering numbers are well-known but it is worthy to quote another authoritative source like new Morgan Stanley report: “Among rich countries, the top 1 percent of households accounts for 18 percent of total OECD households wealth, and the top 10 for 50 percent. By contrast the bottom 60 percent owns 13 percent, and the bottom 40 percent accounts for only 3 percent.”
The Morgan Stanley concludes that faced with stagnant wages, high debt and rising costs, the middle class is eroded by rising inequality.