Trend: Geographical inequalities are widening

A trend indicates a direction of change in values and needs which is driven by forces and manifests itself already in various ways within certain groups in society

Global shocks as the Covid-19 pandemic and the war in Ukraine are causing uneven damage for countries around the world. The number of people who could be pushed back into poverty or would fall into poverty for the first time is on rise. At the same time, current inflation has a stronger effect on the poorest households, with significant consequences on this megatrend.

Territorial inequalities are evident in terms of availability of infrastructure and public transport, access to services and digital connectivity. While rural areas are generally considered to be prime examples of the ’left-behind’ places, small and middle-sized urban areas, or even parts of cities can be affected in similar ways. The changes brought about by the pandemic can also serve as catalysts for transformation of cities into more liveable places.

The burden of climate change is being unequally spread around the world and this can become a self-reinforcing vicious cycle. Income and wealth inequality is growing and can be further exacerbated by an unequal access to migration as a way to improve living standards after the COVID-19 pandemic.

This Trend is part of the Megatrend Widening inequalities

Manifestations

Developments happening in certain groups in society that indicate examples of change.

Uneven distribution of shocks

Growth in developing countries was already suffering long-term decline before the war in Ukraine began. Low- and middle-income countries in Africa and South America were already facing increased food prices due to extreme climate and weather events, and the Covid-19 pandemic disrupted production efforts and global supply chains even more. The war in Ukraine could cause additional lasting damage to the economies of low- and middle-income countries, as many of these countries rely on Russia and Ukraine for a significant percentage of their wheat, fertilizer, or vegetable oils imports. These disruptions can increase poverty in developing countries, and pushed them into a debt crisis.

Signals of change: UN, Financial Times, Human Rights Watch, Care international, 

Current inflation has a stronger effect on the poorest households

Current inflation is very likely to have a stronger effect on the poorest households from developing countries. In 2022, the bottom 10% of the population in terms of income faced an inflation rate of 10.9%, which was 3% points higher than the inflation rate of the richest 10%. For example, the increases in gas and electricity prices will disproportionally hit poorer households, as they spend a much larger share of their total household spending on gas and electricity.  In practice, the bottom 10% of households in terms of income spend on average almost three times as much of their budgets on gas and electricity compared to the highest-income tenth (11% versus 4%). This and other price increases, for example food prices, are likely to further widen the gap between rates of inflation faced by the poorest and richest households and by consequence to widen inequalities in general.

Signals of change: IFS

Territorial development shapes people’s political views

Voters in the EU are most likely to support anti-European parties if they live in places defined by long-term economic decline, lower population density, fewer employment opportunities and lower levels of education. Contrary to a common perception, ageing and net migration are less significant factors. There are concerns that widening inequalities between territories could contribute to the socio-political polarisation of societies and growing anti-establishment sentiments in the locations that are lagging behind. 

Signals of change: JRC, JRC, EC

Climate change has uneven impacts 

It is well known that globally, the highest greenhouse gas emitting countries are the least vulnerable to climate change effects and that countries emitting the least amount of gases tend to be more vulnerable. Climate change is aggravating social inequalities. This applies both within and across countries. In a vicious cycle, initial inequality makes disadvantaged groups or countries suffer disproportionately from the adverse effects of climate change. It makes them more susceptible to the damage caused by climate hazards and subsequently decreases their capability to cope with and adapt to changes and recover from damages suffered.

Signals of change: JRC, McKinsey, UN DESA, Scientific reports, JRC

Global inequality of income and wealth is going up

Although many countries have reduced their numbers of people living in extreme poverty, global wealth and income inequality is growing. In the past decade alone the number of billionaires has doubled. The share of national income going to the top 10% of earners has either grown or stayed high in most parts of the world. Wealthier individuals are receiving higher returns for their wealth.

Decreasing numbers of children born, especially in developed countries, will result in wealth being transferred to fewer inheritors and this will drive greater concentration of wealth in the future. The concentration of wealth goes hand in hand with the concentration of power and with having too much influence on setting the rules of the game for everyone. This has become intensified by the COVID-19 pandemic. Excessive inequality threatens democracy and social cohesion and will eventually hold back economic growth.

Signals of change: World Inequality Lab, Inequality.org, ILO, World Bank

Interesting questions

What might this trend imply, what should we be aware of, what could we study in more depth? Some ideas:

• What if wealth inequalities grow so much that a large population becomes extinct?
• What if there is no food for everyone in the future?
• What if food inflation becomes unbearable for low-income households?
• What if food inflation becomes a significant threat to public health, through malnutrition and poor diets?
• Since anti-European voters tend to live in places with economic decline, should this not be considered by policy-makers when determining policies for rural development? If so, to what extent is it ethically appropriate?
• To what extent do current policies for rural and agricultural development sufficiently incorporate new trends (e.g. the availability of new sustainable technologies)?
• How much wealth and income inequality can society tolerate?
• Will the normalisation of remote working make more people relocate to less populated rural areas?
  • If so, what will this mean for the economic, social and political orientation of these rural places?
  • And what about the working places left behind, and other city centre living quarters?