The Nobel committee has brought attention to global inequality once again. The fact that Daron Acemoglu, Simon Johnson, and James A. Robinson were awarded the Nobel economics prize serves as a reminder that income inequality both within and between countries is as significant as issues like climate change, the AI "revolution," and aging societies.
It comes as a critical wake-up call. According to the Royal Swedish Academy of Sciences, the richest 20% of nations nowadays have almost 30 times the wealth of the lowest 20%. And despite poor countries are becoming richer, the gap still persists.
The recent Nobel laureates have offered convincing proof of the causes and continuation of international inequality. Politics and institutions are crucial, according to their results, which are described in depth in Acemoglu and Robinson's 2012 book "Why Nations Fail."
The book's conclusions that "inclusive institutions" make nations richer are supported by compelling factual data from ancient Rome to the city of Nogales, which is divided between Arizona and Mexico today. The preservation of property rights, democracy, and the rule of law set those systems apart from "extractive" arrangements in which a small governing class controls the majority of the wealth and resources.
Those extractive systems continue to exist on a worldwide scale. Based on the World Inequality Report, the richest 10% of people possessed 76% of the world's wealth in 2021, while the poorest 50% owned only 2%. Although it has decreased from over fifty times in 1980 to less than forty times recently, the average income gap between the richest 10% of nations and the poorest 50% of nations is still very large. Additionally, throughout the same time span, inequality inside nations has nearly doubled.
Acemoglu, a teacher at the Massachusetts Institute of Technology, and Robinson, who teaches at the University of Chicago, have both struggled to explain why certain nations, such as China and Singapore, have become significantly wealthier while maintaining less democratic systems. Their Nobel award, however, will bring attention back to a topic that might be overshadowed by other global issues, like as the battle against climate change and the demographic time bomb facing the developed world, as well as trends like artificial intelligence (AI), which Acemoglu has criticized.
However, their award holds significance for another reason. The democratic underpinnings of the biggest economy in the world may be put under pressure during next month's US presidential election. Thus, the Nobel committee's decision to honor research that emphasizes the value of strong institutions is all the more appropriate.