Many worlds apart

A path-breaking study done last year by a group in Helsinki found that the world is far more unequal than we think: there is a Third World in the First World just as there is a Fourth World in the Third World.

Paranjoy Guha Thakurta

In everyday conversation, the gap between the rich and the poor often comes up for discussion. No Indian is unaware of the sharp inequalities that exist in our country, although many of us choose to ignore this uncomfortable truth. In the way we put up the window in the car in which we are traveling when a shivering girl-child puts out her hands towards us for a few coins, many of us tend to shut out aspects of the reality around us. We know and yet we don't.

In an hour or two, a family of four can easily blow up Rs 5,000 on a meal in a fancy hotel or restaurant. But how many of us realise that this is the amount an "average" Indian earns in two full months? The annual per capita income of this country is in the region of Rs 30,000. In other words, the arithmetic average of the total national income divided by each individual is currently around Rs 2,500 per month. Those living below the poverty line earn less than US$ 1, or Rs 45, a day—which works out to approximately Rs 1,400 per month. At least one out of four Indians lives below this internationally-accepted poverty line. Less frequently mentioned is that close to half of India's population of over one billion people lives on less than US$ 2 a day, or around Rs 90, which is just a little above our per capita income.

Many of us justify the inequality in our country by pointing towards the gap between the haves and the have-nots the world over. That is some consolation—for the world is indeed even more unequal than this country. In 2000, the richest two per cent of the adults owned more than half the world's total household wealth, the richest one per cent alone accounting for 40 per cent of global assets. This is one of the findings of a path-breaking study titled The World Distribution of Household Wealth that was conducted by a team of four researchers associated with the World Institute for Development Economics Research of the United Nations University (UNU-WIDER), based in Helsinki, Finland. The study, formally released on December 5, 2006, highlights the startling fact that the bottom half of the world's population owned barely one per cent of the global wealth.

Whereas the top half of the world possessed assets worth $ 2,200 (Rs 99,000) per adult, this figure stood at $ 61,000 (over Rs 27 lakh) for the richest 10 per cent of adults, and a stupendous $ 500,000 (Rs 2.25 crore) for the richest one per cent (some 37 million individuals) of the world's population. The average wealth of an adult in the US in 2000 stood at $ 144,000 (nearly Rs 65 lakh), against $ 181,000 (over Rs 81 lakh) in Japan, $ 1,900 (Rs 85,500) in Indonesia, and $ 1,100 (under Rs 50,000) in India, the UNU-WIDER study found.

Unlike rich countries like the US, where non-financial assets accounted for 58 per cent of the total wealth held by individuals, this proportion was much higher in countries like Indonesia (97 per cent) and India (95 per cent), where the overwhelming bulk of the wealth is held in the form of land, housing, agricultural assets (including livestock) and consumer durables. The study found an interesting paradox about the debt profile of people in rich and poor nations. Whereas many poor people are in debt, their levels of debt are relatively small by world standards. On the other hand, many people in high-income countries have a negative net worth and are, therefore, rather curiously, among the poorest people in the world in terms of household wealth.

Mao Zedong was the first to divide the planet into three worlds. Despite the disintegration of the Second World more than 15 years ago, it is noteworthy that there is a Third World in the First World just as there is a Fourth World in the Third World. Many believe that a fourth of the Indian population comprising tribals and those belonging to the lowest castes live in a Fourth World. Even if the world has become increasingly polarised between rich and poor, we have no room for comfort or complacency.

The UNU-WIDER study found that six per cent of the world's population that lived in North America had 34 per cent of global household wealth. Interestingly, wealth was more unevenly distributed in many rich countries than in developing nations. The top 10 per cent of the population held 70 per cent of the wealth in the US, against 40 per cent in China and 53 per cent in India. When one compares the two most populous nation-states, accounting for close to 40 per cent of the planet's population, India does not fare well in relation to China: the top half of the Indian population held 92 per cent of the country's total wealth against 86 per cent in China; alternatively, the bottom half of India held eight per cent of national wealth against 14 per cent in China.

So, the next time you visit a five-star hotel, spare a thought for how the other half lives.