In recent decades, income inequality has increased in almost all OECD countries. The average income of the richest 10% of the population today is about nine times as high as the average income of the poorest 10%. Twenty-five years ago, it was seven times as high. While overall prosperity has increased in recent decades, growth has not been just, and not everyone has benefited.
Greater inequality fuels distrust, discontent and right-wing populism. Individuals whose income has grown less than others’ more often support radical right-wing parties, a new European study shows. The inclination to support these parties is greater among individuals who perceive their own income to be low if they live in a country where income inequality has increased more.
A Swedish study found that lay-off notifications among native-born workers in Sweden after the 2009 financial crisis led to increased support for the Swedish far-right nationalist party, the Sweden Democrats. This effect was greater in areas where a large share of low-skilled immigrants had moved. Another new Swedish study found that the Sweden Democrats have been particularly successful in areas where a larger proportion of the population are economic “losers” compared to the rest of the population.
In some countries, the reaction against increasing inequality is taking the form of demand for a stronger national state that detaches itself from international market relations. We see this most clearly in the US and the UK. Both countries are closing themselves off from the rest of the world: the US, by terminating and renegotiating trade agreements, and the UK, by leaving the EU.
It is not just liberal democracy that risks crisis when inequality increases. We are now facing one of humanity’s greatest challenges – the climate threat. Curbing the global rise in temperature demands difficult changes, costly measures and international cooperation. But for action to be possible, the transition to a low-carbon economy requires that costs are shared, and that economic prosperity is more equally divided.
If those who have already fallen behind also have to bear the cost of transition, there is an imminent risk that we will fail in this historically important task. When, as is the case in France, over 20% of the recent decades’ GDP growth has gone to the richest 1% (more than the share of the entire lower half of the income distribution), a proposed increase in the price of fuel becomes a provocation.