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The Complexity of Inequality

MUNICH – Since 2013, when Thomas Piketty published his much-discussed study of the distribution of income and wealth, inequality has been at the forefront of public debate in most advanced economies, blamed for everything from slow growth and stagnating productivity to the rise of populism and the Brexit vote. But inequality remains poorly defined, its effects highly variable, and its causes hotly debated.

Even the most basic question – how much inequality is too much – is virtually impossible to answer. There is no “natural rate of inequality” characterizing an economy in equilibrium, a level at which policymakers can aim. Instead, countries’ rates of inequality are measured against one another – a narrow approach that ignores everything from broader economic trends to differences in the impact of wealth inequality on populations in different social environments.

At a time when everyone seems to be complaining about inequality, wealth is, at the global level, more broadly distributed than ever. In the last 16 years alone, the number of people who qualify for inclusion in the global middle class – at today’s level, people with net financial assets of €7,000-42,000 ($7,400-$44,600) – has more than doubled, to over one billion, or about 20% of the world population.

And it is not just the middle class that is growing. At the end of last year, around 540 million people around the world could count themselves among the global wealthy, with net assets above €42,000. That is some 100 million, or 25%, more than in 2000.