Economic Inequality

Economic inequality refers to disparities among individuals' incomes and wealth. And those differences can be great. Forbes counted a record 2,755 billionaires in the world as of 2021, when it finalized its most recent rankings. Meanwhile, the World Bank estimated that in 2021 more than 711 million people globally were living on less than $1.90 per day. That's actually a big improvement from 1990, when over 1.9 billion people lived in extreme poverty and the world had only 269 billionaires.

Some will look at these numbers as evidence that a rising tide lifts all boats. Over the past 30 years, global wealth has increased; overall, living standards have improved. And others will look at these numbers and think it's inexcusable that anyone lives in poverty when the world's billionaires are worth a combined $13.1 trillion. Of course, both statements can be simultaneously true.

Disparities like these—and the ones many people see in their everyday lives, where the homeless live in tent cities only miles from fancy condos—give rise to questions about economic inequality. What is it? How and why does it happen? Is it the natural order of things, or is the system rigged? Should attempts be made to make things more equal—for instance, by increasing taxes on higher incomes, as Sweden has? And is the pandemic going to make this inequality worse?

We don't have the answers. The causes of economic inequality are multifarious, and our society hasn't reached a consensus on what, if anything, to do about it, with political deadlock keeping things as status quo for the time being. What we can offer is some background and insight on the state of economic inequality in this country.

The essence of economic equality is how much money the least well off make compared to the most well off—and how wealth is distributed in a society. What assets do people own to tide them over during difficult times and to help them invest in new opportunities? These differences matter for several reasons.

Let's look first at the psychological aspect of economic inequality. We all compare ourselves to others. How satisfied we are with our income or net worth depends not just on how low or high those figures are, nor purely on what we can buy with our incomes or how comfortable our wealth makes us.

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