The Gap Widens between the Rich and the Poor under Globalization
Ali Tawfik al-Sadek Al-Hayat - 22/01/07//
A recent study on the World Distribution of Household Wealth has highlighted a great imbalance in the distribution of wealth at the level of countries, regions as well as between the high, medium and low income groups. The study, which includes data on the wealth and income in 229 countries and political entities around the world, including 21 Arab countries, is conducted by four researchers under the auspices of the Helsinki-based World Institute for Development Economics Research of the United Nations University (UNU-WIDER).
This great imbalance in the distribution of wealth portends economic, political and social instability that should be dealt with before it is too late. The study reports that the richest 1% of the world's adults alone owned 40% of total global household wealth in the year 2000, the richest 2% of the world's adults owned more than half of global household wealth, and that the richest 10% of adults accounted for 85% of the world total wealth. In contrast, the bottom half of the world adult population owned barely 1% of global wealth. This far unequal distribution definitely raises curiosity and wonder on the part of politicians and those in charge of the economic policies, as well as those who are responsible for the domestic, regional and global peace and security in the rich countries and poor countries alike. All of them should wonder about such a concentration of wealth in a relatively small portion of the world's population and its effects on growth, development, stability, civil peace and the creation of job opportunities for the increasing numbers of newcomers to the labor markets and the jobless, who are waiting for job opportunities that suit their skills and experience.
According to the WIDER study, the concept of the 'wealth' is net worth, i.e. the value of physical and financial assets less liabilities. Employing this concept, the study estimated global household wealth at $125 trillion in the year 2000, equivalent to exchange rates, or $20,500 per capita given that the world's population in 2000 was 6 billions. However, this global average conceals large disparities between different countries as the highest per capita wealth amounted to $181,000 in Japan and the lowest was $180 in the Democratic Republic of Congo.
The study classified the world's 229 countries and political entities into five levels on the basis of average per capita income as defined by the World Bank (WB): the high-income group, whose average per capita income is $9076 or higher, including the Organization for Economic Co-operation and Development (OECD) 24 states; the high-income non-OECD countries' group, which includes 43 states; the average medium-income group, average per capita income ranges between $2936 and $9075, and includes 39 states; the average low-income group, whose average per capita income ranges between $736 and $2935, and includes 58 states; and the low-income group, whose average per capita income is equal to $735 or less and includes 65 states.
The WIDER study included 21 Arab countries, whose share of the world's wealth reached 1.82% and their populations about 4.8% of the world population. The average wealth of the Arab individual is roughly $7818. The Arab countries were divided into four groups. The first includes four countries in the high-income group countries, namely Bahrain, Kuwait, Qatar and the United Arab Emirates (UAE), as their share in the world's wealth and population hit 0.7% and 0.2% respectively, and the average per capita wealth amounted to about $131,000. The second also includes four countries in the average high-income group, namely Lebanon, Libya, Oman and Saudi Arabia, as their share in the world's wealth and population hit 0.36% and 0.54% respectively, with an average per capita wealth of $16,000 in Saudi Arabia and $6,000 in Libya. The third includes eight States in the average medium-income group, namely Algeria, Egypt, Iraq, Jordan, Morocco, Syria, Tunisia and Djibouti, as their share in the world's wealth and population hit 0.73% and 3.03% respectively. Their average individual wealth ranged between $10,000 in Syria and $2,000 in Algeria. The fourth includes five countries in the low-income group, including Mauritania, Somalia, Sudan, Yemen and Comoros, as their share in the world's wealth and population hit 0.03% and 1% respectively. The average individual wealth in these countries ranged between $1000 in Mauritania and $600 in Yemen.
The multiplier of share of each group in wealth to its share in population measures inequality among groups, on the grounds that the equal distribution among groups means equal distribution of wealth and population. This means that the multiplier is the same. In fact, the data shows that the multiplier in the OECD group amounted to about 5.6 and 3.6 in the non-OECD group, while it is far less than only one in the other groups. At the level of Arab countries covered by the study, the multiplier of the high-income group has reached 3.5 and less than one in the other groups. The redistribution of the Arab nations' share in the world's wealth among the Arab countries in different groups shows that more than 38% of the Arab States' share of wealth owned by 4% of Arab countries in the high-income group, while about 21% of the Arabs live in the low-income countries' group and have about 1.6% of the Arab countries' share wealth.
It is worth mentioning that wealth, with its different physical, financial and human ingredients, is a source of income. So, the relationship between wealth and income is very close. Individuals, as well as institutions and nations, who have great wealth, have also high incomes. However, it seems that the structural change took place in the distribution of income in many industrialized countries between factors of production, work and capital in favor of capital. A recent IMF working paper (December 2006) attributes the structural change in the shares of work and capital in the factors of production, globalization and technological progress to changes in labor protecting laws. Such a development contributes to the interpretation of growing inequality at the national level in many industrialized countries, as evidenced by the data of Human Development Reports. It should be noted in this regard that the scales of inequality in income or expenditure in the Human Development Report 2006, as well as in previous years, do not include recent data for the Arab countries. This, however, does not help to assess the progress of such countries in the Millennium Development Goals (MDGs) set for 2015.
*Mr. Al-Sadek is a lecturer at the American University of Sharja
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