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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Can Nicola Sturgeon keep Scotland in the EU?

For Sturgeon, Scotland's rightful place is in the EU. If that means independence, so be it.

In the aftermath of the EU referendum, when Remain voters were still nursing their hangovers, a meme began to circulate on Scottish Facebook pages. It was an image of Nicola Sturgeon, the First Minister, her arms outspread, with a simple message: “F***in’ calm doon. Am oan it.”

At a time when British politicians are mired in the kind of chaos seen once in a generation, Sturgeon has emerged as a figure of calm. While her fellow Remain campaigners were speaking tearfully to news cameras, she addressed EU citizens, telling them: “You remain welcome here. Scotland is your home and your contribution is valued.”

When Boris Johnson declared, “Project Fear is over,” she retorted on Twitter, “Project Farce has now begun.” Her message has been retweeted more than 6,000 times. Faisal Islam, the political editor of Sky News, remarked on air that she seemed to be “the person with the most thought-through plan”.

Sturgeon now presents herself as Scotland’s anchor to Europe. Yet critics view her actions as those of a veteran independence campaigner seizing a chance denied to her by the Scottish referendum two years ago. In reality, she is working for both objectives.

It is hard to imagine now but the Scottish National Party was once suspicious of the idea of an independent Scotland in Europe. The idea took hold thanks to Jim Sillars, the Labour MP who led the 1976 breakaway that formed the Scottish Labour Party. He defected to the SNP in the early 1980s and became one of its strongest pro-EU advocates. The promise of an independent state within a larger framework was soon a mainstay of the party’s campaigns. The 1997 manifesto promised voters “the restoration of self-confidence and the creation of a modern democracy in the mainstream of European life”.

In the early years of the Scottish Parliament, Sturgeon’s approach to the EU was one of a negotiator, not an idealist. In 2003, she put forward a motion that the Scottish Executive should oppose the reduction of Scottish seats in the European Parliament from eight to seven. “Scotland, with no seat on the Council of Europe, no commissioners and fewer MEPs than comparably sized independent member states, has little enough influence in the EU,” she argued.

Her interest in representation emerged again in 2005 when she described an EU proposal on software patents as “a serious threat” to developers. She noted that: “There was apparently no Scottish minister at the Council to represent Scottish interests, the UK instead being represented by an unelected member of the House of Lords.”

Sturgeon’s commitment to work with the EU has not always been reciprocated. In the Scottish referendum, as deputy first minister, she promised the continuity of EU membership. Yet José Manuel Barroso, the then president of the European Commission, said it would be “extremely difficult, if not impossible”, for an independent Scotland to join. Some consider his statement to have been crucial to the success of the No campaign.

When the EU referendum arrived, Sillars, the architect of the SNP’s Europhile agenda, criticised the “love affair” that he believed his party was indulging in and joined the campaign for Brexit. Sturgeon made a different calculation. She threw herself into the Remain campaign, though she was careful not to stand alongside David Cameron. She played down the Scottish independence line – when asked, in the run-up to the vote, if she was a unionist, she described herself as “an enthusiastic European”.

She turned her reputation as a “nippie sweetie” to her advantage. Once viewed as a dour machine politician, now Sturgeon was warm to voters while cutting Boris Johnson down to size. There was no need to scaremonger over Europe, she said. A positive campaign was enough. There is no doubt that she tapped in to the popular feeling: 62 per cent of voters in Scotland opted to remain in the EU, compared to 48 per cent in the UK as a whole. Every local authority area north of the border voted Remain.

As the referendum results rolled in, she prepared to go it alone. “There are no rules,” Sturgeon told Andrew Marr. “The status quo we voted for doesn’t exist.” To her, Scotland’s rightful place is in the EU and if that requires independence, so be it.

She offered to meet Brussels diplomats. She contacted EU institutions. She put forward a motion in the Scottish Parliament demanding “the Scottish government to have discussions” in pursuit of “protecting Scotland’s relationship with the EU”.

Yet Barroso’s warnings may come back to haunt Sturgeon. She has always painted a picture of an independent Scotland in Europe as one that is nevertheless tied to the British Isles. Its currency is the pound; Scots and the English move freely between Glasgow and Carlisle. EU member states may seize on her proposal, or use it as a way of repeating the rebuff of 2014. Sturgeon the nippie sweetie negotiator has her plan for a European Scotland. Now she must wait for Europe to answer. 

This article first appeared in the 30 June 2016 issue of the New Statesman, The Brexit lies