Inequality reaches a record high in the US, but which countries are worst off?

Five years after Lehman Brother's collapse, one group has fared spectacularly well: the richest 1 per cent. The world's superpower is now worryingly dependent on the financial fortunes of just 1.35m taxpayers. But where in the world is inequality the grea

It’s now almost five years since Lehman Brothers collapsed, precipitating a global financial crisis. In the US, one group has fared significantly better than the rest as the country struggles out of recession – the richest 1 per cent.

Recent data from the Internal Revenue Service shows that the incomes of the richest 1 per cent of Americans increased by 31 per cent between 2009 and 2012, while the incomes of the bottom 99 per cent grew less than 1 per cent. There’s a good Economist chart to illustrate this here. The share of national income flowing to the richest 1 per cent has now reached a record high of 19.3 per cent.

So how does this compare internationally? The UK has little reason to feel smug. According to a report this February by the Resolution Foundation, the richest 1 per cent of Britons own 10 per cent of national income.

The Organisation for Economic Cooperation and Development (OECD) warned earlier this year that inequality was increasing across its 34 member countries. It has rated its members according to levels of inequality using the Gini coefficient (which measures the extent to which the distribution of income varies from perfect equality.) The UK ranks 28th out of 34 countries, and the US fares even worse at 31. Only Turkey, Mexico and Chile are more unequal than the US. Meanwhile Slovenia, Denmark and Norway are three OECD nations with the most equal income distribution. You can find the full list here.

The Gini coefficient can’t distinguish between different distributions of inequality, in that it doesn’t tell you if inequality is high because the top 1 per cent hold a huge proportion of national wealth, or if the majority of the country’s wealth is held by the top 25 per cent. The Gini coefficient also depends on up-to-date GDP data, which is especially hard to extract from developing countries. This can sometimes make comparison hard.

The CIA world fact book, for instance, compares 136 countries in terms of inequality, but some of the data it uses is over 15 years old. Here the US ranked 95th out of 136 in terms of inequality, with the UK in 76th place, and Sweden, Slovenia and Montenegro topping the list. The most unequal countries were Lesotho, South Africa and Botswana.

One conclusion that can be drawn is that both the UK and the US may be wealthy nations, but compared to their wealthy peers they stand out because of the wide gap between rich and poor. This has all kinds of implications. Rising inequality raises moral questions about fairness and social justice, and some researchers believe that inequality holds back economic growth. There’s also a worry that as the economic power of the richest 1 per cent increases, their political power increases with it.

In the US, for instance, the richest 1 per cent pay 37.4 per cent of income taxes – leaving the world’s superpower worryingly dependent on the financial fortune of just 1.35 million tax payers. Similarly in the UK, 30 per cent of government tax revenue comes from just 308,000 earners in 2012.
 

A homeless man rests along Wall Street in front of the New York Stock Exchange. Photo: Getty

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

Photo: Getty
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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.