The Middle East leads the world in income inequality

During the period 1990-2016, the top 10% of the population in the Middle East enjoyed about 60-66% of the region’s income.
Sunday 14/01/2018
Income inequality in the Middle East exists both between countries as well as within individual nations

The “World Inequality Report 2018″ has ranked the Middle East as the region leading the world in economic inequality. The Middle East, which is treated in the report as a bloc that includes Turkey and Iran, ranks just ahead of Brazil and South Africa in terms of income inequality among its citizens.

The report was published by the World Inequality Lab, a consortium of more than 100 researchers and economists who focus on global inequality dynamics. The lab, which maintains the World Wealth and Income Database, is led by five senior scholars, including Thomas Piketty of the Paris School of Economics.

Piketty’s groundbreaking book on income inequality, “Capital in the Twenty-First Century,” sold millions of copies, becoming a surprise best-seller in 2014. An Arabic language version was published in 2016.

The lab’s report claims that the share of income accruing to the top 10% and 1% of the population in the Middle East exceeded 60% and 25%, respectively, of total regional income in 2016. During the period 1990-2016, the top 10% of the popula­tion in the Middle East enjoyed, on average, 60-66% of the region’s in­come, while the bottom 50% accrued on average less than 10% of regional income.

By comparison, in 2016 the top 10% in Europe claimed 36% of national income, while 47% of US national income ended up in the pockets of the top 10% — and because Europe and the United States enjoy greater overall national wealth than most countries in the Middle East, the consequences of inequality are not as extreme.

Income inequality in the Middle East exists both between countries as well as within individual nations. “Inequality between countries is largely due to the geography of oil ownership,” the report stated, result­ing in the Gulf countries accounting for 42% of the region’s income in 2016 despite having only 15% of the region’s population.

Income inequality within Middle Eastern countries is more the result of entrenched elites — many of whom are from families that amassed wealth before independence — and a history of failed economic poli­cies, including poorly managed, or non-existent, income tax systems. In many countries, such as Egypt and Tunisia, the urban-rural income gap plays an important role in skewing national income distribution.

Inequality in individual countries — even those without oil resources — essentially reflects the region-wide averages. In Lebanon, for example, the top 1% of the population earns 23.4% of the nation’s income; in Egypt, 19.1% of national income accrues to the top 1% — a higher rate than in oil-rich Kuwait (17.7%).

In a region wracked by civil conflicts, sectarianism and religious extremism, the danger posed by ex­treme inequality cannot be underes­timated. Economic grievances were motivating factors in many of the “Arab spring” uprisings as well as in recent demonstrations in Tunisia.

Piketty, in a talk at the Issam Fares Institute of the American University of Beirut, described how economic inequality — and the resulting resent­ment it causes — played a power­ful role in the “Arab spring”: “The perception [was] that the govern­ments of [Hosni] Mubarak or [Zine el-Abidine] Ben Ali were keeping some of the wealth for a small group close to the regime while the rest of the population was living in terrible conditions not only as compared to these local elites but also as com­pared to the broader world.”

The World Economic Forum (WEF) in May surveyed its membership of more than 1,000 global companies and concluded that “rising income inequality and wealth disparity is the trend with the highest potential impact on the Arab world” and the primary factor leading to “polarisa­tion” of societies. The WEF pointed to North Africa as the Middle East sub-region “where income inequality could bring the deepest changes.”

Piketty said he believes that the countries of the Arab world must come up with a way to share the region’s vast, but unequally distrib­uted, wealth.

“I am for the Arab Union where you share resources,” he said during his talk in Beirut. “If you take the European Union, it’s not like we split equally all the tax revenues from Germany and others but at least you have reforms, organised redistribu­tion. It’s not like you have to beg for favours [from wealthy countries].”