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.

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Hannan Fodder: This week, Daniel Hannan gets his excuses in early

I didn't do it. 

Since Daniel Hannan, a formerly obscure MEP, has emerged as the anointed intellectual of the Brexit elite, The Staggers is charting his ascendancy...

When I started this column, there were some nay-sayers talking Britain down by doubting that I was seriously going to write about Daniel Hannan every week. Surely no one could be that obsessed with the activities of one obscure MEP? And surely no politician could say enough ludicrous things to be worthy of such an obsession?

They were wrong, on both counts. Daniel and I are as one on this: Leave and Remain, working hand in glove to deliver on our shared national mission. There’s a lesson there for my fellow Remoaners, I’m sure.

Anyway. It’s week three, and just as I was worrying what I might write this week, Dan has ridden to the rescue by writing not one but two columns making the same argument – using, indeed, many of the exact same phrases (“not a club, but a protection racket”). Like all the most effective political campaigns, Dan has a message of the week.

First up, on Monday, there was this headline, in the conservative American journal, the Washington Examiner:

“Why Brexit should work out for everyone”

And yesterday, there was his column on Conservative Home:

“We will get a good deal – because rational self-interest will overcome the Eurocrats’ fury”

The message of the two columns is straightforward: cooler heads will prevail. Britain wants an amicable separation. The EU needs Britain’s military strength and budget contributions, and both sides want to keep the single market intact.

The Con Home piece makes the further argument that it’s only the Eurocrats who want to be hardline about this. National governments – who have to answer to actual electorates – will be more willing to negotiate.

And so, for all the bluster now, Theresa May and Donald Tusk will be skipping through a meadow, arm in arm, before the year is out.

Before we go any further, I have a confession: I found myself nodding along with some of this. Yes, of course it’s in nobody’s interests to create unnecessary enmity between Britain and the continent. Of course no one will want to crash the economy. Of course.

I’ve been told by friends on the centre-right that Hannan has a compelling, faintly hypnotic quality when he speaks and, in retrospect, this brief moment of finding myself half-agreeing with him scares the living shit out of me. So from this point on, I’d like everyone to keep an eye on me in case I start going weird, and to give me a sharp whack round the back of the head if you ever catch me starting a tweet with the word, “Friends-”.

Anyway. Shortly after reading things, reality began to dawn for me in a way it apparently hasn’t for Daniel Hannan, and I began cataloguing the ways in which his argument is stupid.

Problem number one: Remarkably for a man who’s been in the European Parliament for nearly two decades, he’s misunderstood the EU. He notes that “deeper integration can be more like a religious dogma than a political creed”, but entirely misses the reason for this. For many Europeans, especially those from countries which didn’t have as much fun in the Second World War as Britain did, the EU, for all its myriad flaws, is something to which they feel an emotional attachment: not their country, but not something entirely separate from it either.

Consequently, it’s neither a club, nor a “protection racket”: it’s more akin to a family. A rational and sensible Brexit will be difficult for the exact same reasons that so few divorcing couples rationally agree not to bother wasting money on lawyers: because the very act of leaving feels like a betrayal.

Or, to put it more concisely, courtesy of Buzzfeed’s Marie Le Conte:

Problem number two: even if everyone was to negotiate purely in terms of rational interest, our interests are not the same. The over-riding goal of German policy for decades has been to hold the EU together, even if that creates other problems. (Exhibit A: Greece.) So there’s at least a chance that the German leadership will genuinely see deterring more departures as more important than mutual prosperity or a good relationship with Britain.

And France, whose presidential candidates are lining up to give Britain a kicking, is mysteriously not mentioned anywhere in either of Daniel’s columns, presumably because doing so would undermine his argument.

So – the list of priorities Hannan describes may look rational from a British perspective. Unfortunately, though, the people on the other side of the negotiating table won’t have a British perspective.

Problem number three is this line from the Con Home piece:

“Might it truly be more interested in deterring states from leaving than in promoting the welfare of its peoples? If so, there surely can be no further doubt that we were right to opt out.”

If there any rhetorical technique more skin-crawlingly horrible, than, “Your response to my behaviour justifies my behaviour”?

I could go on, about how there’s no reason to think that Daniel’s relatively gentle vision of Brexit is shared by Nigel Farage, UKIP, or a significant number of those who voted Leave. Or about the polls which show that, far from the EU’s response to the referendum pushing more European nations towards the door, support for the union has actually spiked since the referendum – that Britain has become not a beacon of hope but a cautionary tale.

But I’m running out of words, and there’ll be other chances to explore such things. So instead I’m going to end on this:

Hannan’s argument – that only an irrational Europe would not deliver a good Brexit – is remarkably, parodically self-serving. It allows him to believe that, if Brexit goes horribly wrong, well, it must all be the fault of those inflexible Eurocrats, mustn’t it? It can’t possibly be because Brexit was a bad idea in the first place, or because liberal Leavers used nasty, populist ones to achieve their goals.

Read today, there are elements of Hannan’s columns that are compelling, even persuasive. From the perspective of 2020, I fear, they might simply read like one long explanation of why nothing that has happened since will have been his fault.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.