Wealth inequality widens

Credit Suisse brings out a Global Wealth Report every year. The current year’s report takes up for specific discussion the issue of wealth inequality. The term “wealth” in the report covers only household wealth and refers to the value of assets at current prices; it includes in other words capital gains and hence the effects of speculative factors.

The first thing to notice is the remarkable increase in wealth inequality that has occurred in the capitalist world after the 1970s, ie, from the time that the new ascendancy of finance capital began. In the United States for instance between 1910 and 1970 the share of the top 10 percent of households in total household wealth declined from 81 percent to 64 percent; after 1970 it has increased markedly from 64 to 75 percent. Likewise the share of the top 1 percent of households in total wealth declined between 1910 and 1970 from 45 to 28 percent; but it has increased thereafter from 28 to 34 percent. And more or less the same picture holds for the other advanced capitalist economies.

As on 2014, “very high inequality”, defined as a situation where the top decile has more than 70 percent of the total household wealth, characterised Hong Kong, Switzerland and the United States among the advanced economies. But it characterised as many as a dozen “emerging market economies”, namely Argentina, Brazil, Egypt, India, Indonesia, Malaysia, Peru, Philippines, Russia, South Africa, Thailand and Turkey. (China and Taiwan are among the “high inequality”, as distinct from “very high inequality”, countries, where the share of the top decile in total household wealth is above 60 percent but less than 70 percent).

What is more, between 2000 and 2014, among the economies where there was what the Report calls a situation of “rapid rise” in inequality, defined as 0.5 percentage-point increase, or more, per annum in the share of the top decile in total household wealth over the reference period, these so-called “emerging market economies” were well-represented. “Rapid rise” occurred in China, Egypt, Hong Kong, Turkey, Korea, India, Russia, Argentina and Taiwan. It is as if the wave of rising wealth inequality, starting from the advanced capitalist world, spread across to the “emerging market economies” over time.

Even among the countries picked out by the Credit Suisse report as exhibiting a “rapid rise” in wealth inequality, however, India stands out.

The increase in wealth inequality in India between 2000 and 2014, the period under study, has been truly phenomenal. And this comes out not so much from the percentage share of the top decile in total household wealth, which, though it increased from 65.9 to 74 over the period, was overshadowed by the increase in several other countries, as from the increase in the share of the top percentile. The share of the top 1 percent in the total wealth of households has increased from 36.80 percent in 2000 to a phenomenal 49 percent in 2014! The share of the top 1 percent in total wealth in India today is thus larger than the share of the top 1 percent has ever been in the United States, the archetypal capitalist economy, in its entire history over the last century.

There are two tendencies necessarily associated with such concentration of wealth. First, such concentration of economic power inevitably leads to a concentration of political power.

Second, this concentration of economic-cum-political power is invariably used for bringing about a still greater concentration of such power. This has been clearly visible in India. The super rich corporate elite has used every device in its armoury to project Narendra Modi as the right person to lead the nation, and has largely financed his successful election. And in return the Modi government is introducing labour market “reforms”, cutting down social sector schemes and even the MGNREGS and diverting funds towards “boosting the confidence of the investors”, and has announced ambitious schemes of “disinvestment”, all of which are part of the agenda of the super-rich.

By: Prabhat Patnaik