Embedded Files
Note: This section is somewhat longer than most other sections of the book, so you may wish to learn about it in two parts: first focusing on the basics of economic inequality, and then learning about what the Earth4All model suggests we do to reduce it.
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 5.1.1 The state as a system, which defines the state, its parts and their relationships, and some ways to classify states
Section 5.1.3 State functions, which explains the various roles of the state in providing goods and services, protecting the population, and stabilising and guiding change
Section 5.4.1 Two scenarios: ‘Too little, too late’ and ‘Giant leap’, which explains the role of scenario planning for economic transformation and outline the two future scenarios highlighted by the Earth4All model
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Section S.3 Systems diagrams and models, which explains the systems thinking in some familiar information tools as well as the symbols used to represent parts/wholes, relationships and perspectives.
Section S.5 Causal loops, feedback and tipping points, which explains the feedback loops that can stabilise or destabilise systems.
Section S.8 Leverage points, which describes various leverage points for systems change
Section S.9 System traps, which explains how system structures, like reinforcing feedback, too weak or late balancing feedback, and/or pursuing flawed goals, can create persistent problems.
Learning objectives:
explain the role of reducing income and wealth inequality for The Giant Leap scenario
outline the high-leverage recommendations from the Earth4All system model for improving income and wealth equality
In 2021, a few billionaires turned space travel into a personal competition. Jeff Bezos took a short rocket flight beyond Earth’s atmosphere. Richard Branson launched his own spacecraft just days earlier.
Their journeys were broadcast around the world at a time when life on the ground was very different for billions of people. The COVID-19 pandemic was still spreading. Hospitals were overcrowded, and millions of people died because they couldn’t get the care they needed. Millions more struggled to afford food, rent or medicine as they lost their jobs.
In recent years, the income and wealth of the ten richest men has exploded while billions have seen their incomes fall. The widely different impacts of the Covid-19 pandemic exposed the deep inequalities at the core of our economies.
Figure 1. Jeff Bezos, one of the world’s richest people launched himself into space at a time when millions were dying from the COVID-19 pandemic.
(Credit: NASA Kennedy, CC BY-NC-ND 2.0, Gustavo Basso, CC BY-SA 4.0)
What is economic inequality and why does it matter?
What is economic inequality and why does it matter?
Wealth is a stock, the total value of someone’s assets such as money, house, or investments. Income is a flow, the inflow of money earned from work or investments that enters a stock of wealth.
Economic inequality means that wealth and income are distributed unevenly and unfairly across a population. While some people earn billions and own multiple homes, others cannot afford food, housing, or medical care. According to Oxfam’s inequality report from 2023, the richest 1% of people captured nearly two-thirds of all new wealth created between 2020 and 2022. This amount was almost twice what the rest of the world received combined.
Economic inequality has negative economic, social, and ecological impacts.
Figure 2. Economic inequality means large numbers of people may struggle to meet their needs. There is less economic activity overall.
(Credit: Satjawat, licensed from Adobe Stock)
Economic impacts
When only a small group holds most of the wealth, there is less spending power in the rest of the population. This limits economic activity and reduces tax income that could be used for public services like schools, hospitals, and transport. More and more of the economy becomes focused on meeting the wants of the wealthy, rather than the needs of the majority. This is an issue of distributive justice, the idea that resources should be fairly shared in society.
Figure 3. Economic inequality fuels mistrust and social conflict.
(Credit: Jacob Lund, licensed from Adobe Stock)
Social impacts
Economic inequality increases mistrust, anger, and conflict. People are more likely to feel that the system is unfair. In highly unequal societies, it becomes harder to make collective decisions, and social cohesion declines.
Inequality also affects how people relate to each other. In unequal societies, people worry more about how they are seen by others. There is more status competition, social anxiety, and stress. Inequality weakens the trust that allows people to work together and build communities.
Countries with high inequality tend to have more mental illness, lower life expectancy, and worse physical health, even when average income is high.
Figure 4. The richest 10% of the world’s population are responsible for 50% of CO2 emissions.
(Credit: Oxfam)
Environmental impacts
The richest people consume far more than others. They fly more, own more land and vehicles, and use more energy. Their choices contribute disproportionately to climate change and other ecological damage.
At the same time, the poorest communities are often the most exposed to pollution, heatwaves, and natural disasters caused by overconsumption of the rich.
How is inequality measured?
How is inequality measured?
One widely used measure is the Gini coefficient. It ranges from 0 (everyone has the same income) to 1 (one person has all the income). It’s based on how evenly income is distributed across a population. If you line everyone up from poorest to richest and compare the actual distribution to perfect equality, the Gini shows the size of the gap.
For example, in 2023 Czechia’s Gini was about 0.33, showing more equality, while South Africa’s was around 0.74, showing less equality (Figure 5). The graph in Figure 6 captures the relationship between the Gini coefficient and social and environmental factors mentioned in the earlier text.
Figure 5. The Gini coefficient by country, before taxes and benefits.
(Credit: Our World in Data)
Figure 6. There is a positive correlation between economic inequality and social and environmental problems.
(Credit: The Spirit Level at 15)
However, the Gini coefficient can be hard to interpret. Some economists prefer the Palma ratio, which compares the income of the richest 10% with the poorest 40%. The idea is that the middle 50% of the population tends to get a stable share of income, so what matters most is how much the top and bottom get. If the richest 10% take four times more than the poorest 40%, the Palma ratio is 4. It’s easier to understand and more focused on the extremes.
The Earth4All model recommends a simple guideline: no more than 40% of a country’s income should go to the top 10%. Today, in many countries, the top 10% take half or more of national income.
Why is economic inequality increasing?
Why is economic inequality increasing?
Economic inequality hasn’t always moved in the same direction. In the early and mid-20th century, many countries reduced inequality through progressive taxation (taxing high incomes and wealth at higher rates), strong unions to balance power between workers and business owners, and investments in education and public services. The richest 1% in places like the US, UK and France saw their share of income fall sharply as the distribution of income improved.
But starting in the 1980s, inequality rose again in many high-income countries (Figure 7). The United States, for example, has returned to levels of inequality not seen since the 1920s. Countries like the UK, Canada and Italy followed similar trends.
However, inequality is not inevitable. Japan, Sweden, France, and the Netherlands have kept income inequality relatively stable (Figure 8). These examples show that political choices about taxation, education, labour rights, and state welfare spending matter greatly.
Figure 7. Income share of the richest 1% over time. Some countries have seen increases since the 1980s.
(Credit: Our World in Data)
Figure 8. Income share of the richest 1% over time. Some countries keep this figure more stable.
(Credit: Our World in Data)
One of the strongest forces behind rising inequality is the success-to-the-successful system trap (Section S.9). People or organisations that already have power and resources are more able to gain more. They can afford better education, influence politicians to write laws in their favour, and invest in assets that generate more wealth. Meanwhile, those with less are left behind.
This creates reinforcing feedback loops (Figure 9 and Section S.5) Wealthy individuals and companies often shape policy through lobbying or media influence, a process called state capture (Section 5.2.3). These feedbacks strengthen inequality over time and make change more difficult.
Figure 9. Reinforcing feedback loops showing how increases in business size and market power lead to economies of scale and higher profits which lead to further increased market power (right) and political power (left).
What does the Earth4All model indicate we should do to reduce economic inequality?
What does the Earth4All model indicate we should do to reduce economic inequality?
The Earth4All model argues that inequality will not decline on its own. Powerful feedback loops continue to increase the gap between rich and poor. To break this pattern, the model recommends three high-leverage interventions (Section S.8):
Tame the excessive growth of income and wealth
Strengthen economic democracy
Create real economic security for all
These actions combine two important strategies. The first is redistribution, adjusting income and wealth after they’ve been earned, often through taxes or public transfers. The second is predistribution, changing the rules and structures before income and wealth are distributed. As discussed in Section 5.3.4 on Degrowth, both strategies are necessary for a fair and sustainable economy.
Weakening the excessive growth of income and wealth
Weakening the excessive growth of income and wealth
In many countries, the richest individuals and corporations accumulate huge wealth over time, while most people struggle to get by. This distorts the economy, as more and more activity is focused on serving the few instead of meeting everyone’s needs.
One response is to adjust how much people keep once they’ve earned income. For example, progressive taxation means people with higher incomes pay a larger share in taxes. Wealth taxes can apply to things like property; inherited assets; and capital gains, the profits made from selling stocks or land. Governments can also close legal loopholes in taxes that allow wealthy people to avoid paying their fair share, and ensure that tax laws are enforced.
Figure 10. Progressive taxation on personal income in the Philippines (2025). Higher incomes are taxed at higher rates.
(Credit: PWC)
Other strategies focus more on preventing economic inequality in the first place. One example is to limit extreme differences in pay between the top and bottom earners in a company, called a salary cap. States could influence this through rules that a business bidding for a government contract might be required to show that no one earns more than 20 times the salary of its lowest-paid worker. This type of rule sets expectations about fairness from the start.
Strengthening economic democracy
Strengthening economic democracy
Another key idea in the Earth4All model is that inequality grows when too few people have power over economic decisions. The economy becomes more equal when more people have a voice in shaping it.
One way to do this is by supporting strong trade unions. When workers organise together, they can negotiate for better wages and working conditions. This balances the power between employers and employees and helps to raise incomes and reduce inequality. States can protect the right to form unions, ensure that labour laws support collective bargaining, and invite unions into national discussions about wage-setting and workplace standards.
Another approach is to support worker ownership of businesses (Section 3.3.4). When workers also own the companies they work in, they share not only in the profits but also in decision-making. The government can encourage this by offering tax advantages, public funding, and legal support for cooperatives or employee buyouts.
Figure 11. Trade unions and employee ownership empower more workers to shape their work, pay and other conditions.
(Credit: Thirdman, Pexels license)
Governments can also directly create guaranteed jobs that support society and the environment, especially in places where unemployment is high. These public job programmes offer fair wages and working conditions, often in areas like healthcare, education, or ecological regeneration. They also raise expectations for what decent work looks like in the rest of the economy, with fair income, safe conditions, worker voice and equality.
Together, these strategies change not only how wealth is shared, but who gets to shape economic outcomes. They strengthen balancing feedback loops that prevent the accumulation of more power in the hands of those who already have it, stabilising society and building trust.
Strengthening economic security
Strengthening economic security
The third major strategy in the Earth4All model focuses on creating a basic level of financial security for everyone. It proposes a Universal Basic Dividend (UBD), funded through a Citizens’ Fund. This fund collects money from individuals and businesses earning income from our shared national resources such as oil and gas, mining, land, or digital data, and shares that money with the whole population. Each person receives an annual payment as their share of the returns.
The idea is based on the belief that natural wealth belongs to everyone. Private ownership of these resources is a legal agreement, not a natural law. If some people or companies profit from shared resources, called economic rents, then a fair portion should be returned to all citizens.
Figure 12. A universal basic dividend shares the benefits of our shared resources more widely.
(Credit: Earth4All)
A real-world example is the Alaska Permanent Fund, which pays every resident an annual dividend from oil revenues. The Earth4All model suggests extending this to more types of shared wealth and using it to give everyone a stronger foundation in life.
The UBD is not meant to replace public services or wages. It offers a basic level of income that helps people meet essential needs, take risks, and contribute to their communities. It also shifts our expectations. The economy and the resources it depends on should serve the wellbeing of everyone, not just reward the richest few.
However, some people raise important concerns. If the Citizens’ Fund is built on income from harmful activities like fossil fuel extraction or the sale of personal data, then it may end up supporting the very systems that harm people and the planet. In this case, people may feel rewarded for participating in extractive systems rather than changing them. UBD must be designed carefully to avoid this problem.
How can we get past the barriers to lessening economic inequality?
How can we get past the barriers to lessening economic inequality?
The richest people and powerful companies often resist fairer policies. They argue that taxes or regulations will harm economic growth or jobs. But evidence shows the opposite. Countries with fair tax systems, good public services, and strong worker protections often have higher wellbeing and more stable societies and economies.
To change this, we need to help more people understand how inequality affects everyone, not just the poor. Teachers, journalists, and community leaders have an important role. So does this textbook! When people learn that inequality is not natural or necessary, they begin to demand fairer systems.
Change is more likely when groups work together. Labour unions, climate activists, students, and social movements can build alliances. They may have different goals, but they share a desire for a more just and sustainable world.
Finally, fairness needs to be visible. When people receive a universal dividend, or see their taxes fund good schools or hospitals, trust grows. Visible fairness helps rebuild the connections that inequality has broken.
Activity 5.4.3
Activity 5.4.3
Concept: Systems, Power, Regeneration
Skills: Thinking skills (transfer, critical thinking), Research skills (information literacy)
Time: varies, depending on option
Type: Individual, pairs, or group
Option 1: Predistribution vs. Redistribution
Time: 20-25 minutes
In this section you learned that economic inequality is usually addressed with two broad approaches:
predistribution: Changing the rules and structures that shape how income and wealth are created in the first place. These strategies usually affect wages, ownership, or power in the economy.
redistribution: Adjusting who receives income or wealth after it has been created, usually through taxes, benefits, or public transfers.
Individually, in pairs or a small group, consider each of the strategies recommended by the Earth4All model. For each one, decide whether the strategy involves mainly predistribution or redistribution. Some might include both elements, but choose the one that seems most important. Make sure you can explain your choice.
Progressive taxation on income
Higher taxes on capital gains and property
Closing tax loopholes and improving enforcement
Setting limits on pay differences within companies (e.g. salary caps)
Supporting trade unions
Supporting employee ownership of businesses
Creating guaranteed public job programmes
Creating a Citizens’ Fund to collect resource income and paying a Universal Basic Dividend (UBD) to all citizens
Click below for sample answers
Progressive taxation on income
Redistribution - Adjusts how much income people keep after it’s earned
Higher taxes on capital gains and property
Redistribution - Targets existing wealth or asset-based income after it has been gained
Closing tax loopholes and improving enforcement
Redistribution - Improves fairness in how outcomes are adjusted after income and wealth are created
Setting limits on pay differences within companies (e.g. salary caps)
Predistribution - Changes wage structures inside companies before income is distributed
Supporting trade unions
Predistribution - Shifts power in the labour market to help shape fair wages and working conditions
Supporting employee ownership of businesses
Predistribution - Changes who owns and benefits from production before income is distributed
Creating guaranteed public job programmes
Predistribution - Provides direct access to decent work and fair income before relying on transfers or tax adjustments
Creating a Citizens’ Fund to collect resource income and paying a Universal Basic Dividend (UBD) to all citizens
Redistribution - Gives everyone a share of national income after it is collected through the fund
Option 2: Exploring inequality data
Time: 40 minutes
Step 1 - Choose data
Individually, with a partner or a small group, go to Our World in Data: Economic Inequality and choose one dataset or graph to focus on.
Step 2 – Understand the data
Use the chart controls to explore the data. Then answer these questions together:
What is this dataset measuring? Look at the title, and axis labels, choose several individual data points and explain them to one another to make sure you understand what the data is representing
What pattern or trend do you notice?
Which countries or time periods stand out? Why?
What story does this data tell about inequality?
Write down your answers or be ready to explain them to others.
Step 3 – Share and compare
Join another person, pair or group.
Take turns explaining the dataset you chose.
Ask questions about each other’s interpretations.
Look for similarities or contrasts between your findings.
Step 4 – Reflect
Consider this question, verbally or in writing:
Did anything in the data surprise you? What questions does it raise about inequality in the world today?
Option 3: Discussion of Universal Basic Dividend
Time: 40 minutes
A UBD is a regular cash payment made to all citizens, funded by a public wealth fund called a Citizens’ Fund. This fund collects income from natural or national resources and distributes a share of it equally to everyone.
Use a discussion format you are familiar with to consider this question:
Should every person receive a Universal Basic Dividend (UBD) from shared national resources like land, oil, minerals or data?
Before discussing, take time to brainstorm your own arguments for and against the idea. Then, click below and review more arguments. Classify each one as either supporting a Universal Basic Dividend or raising concerns about it. Also classify each argument as either strong or weak.
Arguments:
A UBD helps us see that natural and national wealth belongs to everyone equally.
For UBD / Against UBD
Strong argument / Weak argument
A UBD might replace or weaken the case for public services such as healthcare and education.
For UBD / Against UBD
Strong argument / Weak argument
A UBD gives people the freedom to say no to harmful or badly paid work.
For UBD / Against UBD
Strong argument / Weak argument
If the Citizens’ Fund relies on income from harmful activities like fossil fuels or surveillance, the UBD may support the wrong kinds of economic behaviour.
For UBD / Against UBD
Strong argument / Weak argument
A UBD is a simple way to reduce poverty without complex means testing (only giving payments to people who you determine are poor).
For UBD / Against UBD
Strong argument / Weak argument
A UBD could reduce pressure for deeper economic reforms if people are satisfied with a small dividend instead of demanding real change.
For UBD / Against UBD
Strong argument / Weak argument
Receiving a UBD builds social trust and strengthens social cohesion.
For UBD / Against UBD
Strong argument / Weak argument
A UBD might be captured or weakened by elites over time unless it is protected by strong public rules and oversight.
For UBD / Against UBD
Strong argument / Weak argument
A UBD is not enough on its own to guarantee economic security, but it helps create a more stable foundation.
For UBD / Against UBD
Strong argument / Weak argument
The money used for a UBD might be better spent on targeted services or investments that benefit those most in need.
For UBD / Against UBD
Strong argument / Weak argument
Arguments are adapted from Earth for All: A Survival Guide for Humanity, Earth4All Deep Dive: Tackling Inequality, and Universal Basic Dividend as a Form of Welfare, UCL Institute for Innovation and Public Purpose.
Option 4: Interview with Ingrid Robeyns, author of Limitarianism
Time: 90 minutes (60 for the video + 30 for discussion)
Watch this interview with philosopher Ingrid Robeyns on limitarianism, the idea that no one should have more wealth than they need for a good life. Use the questions below to take notes on the video.
After the video is finished, discuss this question as a group:
Should we allow people to amass large amounts of wealth?
Video questions (click here for a separate worksheet to use):
What is Ingrid Robeyns’ main argument about wealth?
How does she define limitarianism, and what is her answer to the question: how much is too much? 0:34 – 5:30What are some of the harms she says are caused by extreme wealth?
Think about her points on democracy, the environment, and basic fairness. 4:36 – 9:00What does Robeyns say about the idea that billionaires ‘deserve’ their wealth?
Do you agree with her? Why or why not? 5:00 – 9:00How does Robeyns explain the three kinds of action she believes are needed to reduce inequality?
What are structural, fiscal, and ethical actions—and how do they relate to the state and to individuals? 9:00 – 12:00What are Robeyns’ criticisms of the effective altruism movement?
Effective altruism is the idea that people should use evidence and reason to figure out how to do the most good, often by earning lots of money and donating it to effective charities.
Why does Robeyns believe this approach is not enough to reduce inequality or end poverty? 23:00 – 25:00What concerns does Robeyns raise about philanthropy?
Philanthropy is when wealthy individuals or organisations give money to support good causes, such as education, health care, or the arts.
What does Robeyns say are the problems with this kind of giving? How is it different from democratic decision-making about public needs? 25:00 – 27:00In what ways does Robeyns say economic inequality is linked to poverty?
How do her points connect to what you’ve learned in Sections 5.4.2 and 5.4.3 of the textbook? 3:35 – 4:30 and 48:00 – 54:00Final Reflection (synthesis question):
Ingrid Robeyns argues that large fortunes should not exist in a fair society. Based on what you’ve learned in the textbook and from this video, do you agree? Use examples from the video or from the textbook to support your view.
Ideas for longer activities and projects are listed in Subtopic 5.5
Checking for understanding
Checking for understanding
Coming soon!
Further exploration
Further exploration
Wealth for All: A Universal Basic Dividend - a set of resources from Earth for All that explains Universal Basic Dividend, providing examples and answering frequently asked questions. Difficulty level: medium
World Inequality Database - An organisation that aims to provide open and convenient access to the most extensive available database on the historical evolution of the world distribution of income and wealth, both within countries and between countries. Difficulty level: medium
Economic Inequality by Our World in Data - group of resources related to economic inequality
The Spirit Level at 15 - An update on the groundbreaking book that showed us how damaging economic inequality is for our economies, societies and Earth systems. Difficulty level: medium
Wealth: what it is & how it differs from Income and Why rich people get richer - In these two short videos, Gary Stevenson explains the difference between income and wealth, and the resulting dynamics of accumulation. Difficulty level: easy
The Lorenz Curve and the Gini Coefficient - Two videos explaining a way of calculating economic inequality used in some secondary economics courses. The two videos can be combined with Our World in Data’s choropleth map to explore country differences over time in the Gini coefficient. Difficulty level: high
Is limitarianism a solution for the super-rich? - a 3 minute animation about the idea of limitarianism, that there should be limits on the amount of wealth accumulated by the super-rich. Difficulty level: easy
No One Should Have More Than 10 Million Pounds - this ca. 60 minute interview with Limitarian author Ingrid Robeyns touches on many themes in the Regenerative Economics work, but is focused on economic inequality and what we should do about it. The interviewer Ash Sarkar asks exceptional questions. Difficulty level: medium
Interview with economist Thomas Piketty: capital and ideology - A ca. 20 minute Financial Times interview with economist Thomas Piketty, author of Capital in the Twenty-First Century and Capital and Ideology about the relationship between ideology and economic inequality and how to make our economies fairer. Note: Piketty has a strong French accent, so you may want to use the subtitles option in the settings to read as he speaks. Difficulty level: medium
What is decent work? A short video from the International Labour Organization explaining what decent work is. Difficulty level: easy
Sources
Sources
Berry, C. (2023, June 12). Universal basic dividend as a form of welfare. UCL Institute for Innovation and Public Purpose Blog. https://medium.com/iipp-blog/universal-basic-dividend-as-a-form-of-welfare-e11ed4349b07
Blink, J., & Dornton, I. (2020). Economics: Course Companion. Oxford: Oxford University Press.
Dixson-Declève, S. et al. (2022). Earth for All: A survival guide for humanity. Club of Rome. New Society Publishers. https://www.researchgate.net/publication/369144092_Earth_for_All
Hasell, J. (2023) - “How has income inequality within countries evolved over the past century?” OurWorldInData. https://ourworldindata.org/how-has-income-inequality-within-countries-evolved-over-the-past-century
Khalfan, A., et al. (2023, November). Climate equality: A planet for the 99%. Oxfam International. https://www.oxfam.org/en/research/climate-equality-planet-99
Kognity (2022). IB DP Economics HL FE2024. Stockholm: Kognity.
Oxfam International. (2024). Inequality Inc. Executive Summary. https://oi-files-d8-prod.s3.eu-west-2.amazonaws.com/s3fs-public/2024-01/Davos%202024%20Executive%20Summary%20English.pdf
Pickett, K. et al (2024). The Spirit Level at 15: The Enduring Impact of Inequality. The Equality Trust. https://equalitytrust.org.uk/evidence-base/the-spirit-level-at-15/
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Sarkar, A. (Host). (2023, February 15). Ingrid Robeyns: No one should have more than 10 million pounds [Video interview]. Novara Media. YouTube. https://youtu.be/JltQ7P85S1c
Stiglitz, J. E. (2013). The Price of Inequality: How Today's Divided Society Endangers Our Future. United Kingdom: W. W. Norton.
Webster, K. (2022). The long road to a social dividend. Earth4All. https://www.clubofrome.org/publication/earth4all-webster-social-dividend/
Terminology (in order of appearance)
Terminology (in order of appearance)
Coming soon!
Page updated
Google Sites
Report abuse