Pen’s Parade: The Stratospheric Heights of Inequality

It’s a good time to be a billionaire. This elite club of some 2,800 households (the top 0.0001 percent, or one in a million) saw their combined wealth grow by $2 trillion to reach $15 trillion in 2024. Expressed as a fraction of world GDP,  it has quadrupled from three to 14 percent since 1987. The world’s richest one percent now have more wealth than the bottom 95 percent put together.  

The sheer scale of this inequality can be hard to grasp. Dutch economist Jan Pen famously illustrated this in his 1971 book Income Distribution with a striking visualization:  a parade of people arranged by income, with their heights proportional to their earnings, marching past over the course of an hour. He used incomes in Britain as an example. At the start of the parade, the marchers are tiny, only gradually reaching average height after about 45 minutes. In the final six minutes—the top 10 percent of earners—their heights begin to rise dramatically, soaring to 20, 100, even 500 feet tall. In the last few seconds come the most successful stars and entrepreneurs, so immense that their knees are barely visible. Finally, at the very end, stands oil baron Jean Paul Getty, the soles of whose shoes alone are hundreds of feet thick. 

Scroll forward to today and apply this globally, and Pen’s Parade looks even more extreme. The highest paid CEOs are paid close to $200 million. Some sportstars are paid even more: Christiano Ronaldo tops the table at $260 million. With a global average income of $13,170 per head and an average height of around 5 foot 6 inches (1.66m), that would make Ronaldo over 20 miles high, or nearly four times the height of Mount Everest. But even that’s nothing: if Elon Musk’s disputed $56 billion Tesla pay packet goes through, he’d be well over 4,000 miles tall: that’s 800 times as high as Everest, and nearly two percent of the way to the moon!

If we look at wealth, rather than annual income, the picture is even more stratospheric. Total global wealth is around $500 trillion (around $63,000 per head with a global population of just over 8 billion). Musk’s fortune of over $400bn would make him close to 7000 miles tall, or nearly 3 percent of the way to the moon. The top 10 billionaires, if they stood on each other’s shoulders, would be 14 percent of the way there. The top 100, 40 percent. Stack them all, and they’d overshoot.

Measuring inequality of income and wealth

The sheer scale of these riches, and the extent to which inequality has increased, is scarcely conceivable. [Pity poor old Jean Paul Getty: thought to be the wealthiest man in the world in 1966, his then fortune of $1.2 billion (worth around $8.6 billion today) would put him about 330th on the world’s billionaire list, a mere 140 miles tall].

One reason for this growing concentration of wealth is that effective tax rates are sharply regressive at the top end of the income distribution. Billionaires currently face lower effective rates of tax than the rest of the population (22 percent of pre-tax income, compared to 37 percent for the poorest 50 percent of households in high income countries; for centimillionaires it’s also low at 28 percent). Capital (wealth) tax rates average only 0.3 percent, yet billionaire wealth has been rising at over 7 percent per annum since 1987. These low tax rates help drive greater wealth inequality over time, and make revenue raising even more challenging.

The contrast with development needs is striking. Average incomes in low-income countries (LICs) are only $900 per head, making the average LIC individual less than 4½ inches (11.5cm) tall in Pen’s parade by income. An estimated $4 trillion additional investment is required annually in developing countries to meet the sustainable development goals (SDGs). Yet development aid ($223 billion in 2023) is in trouble. Trump’s freeze on US assistance (the world’s largest bilateral aid provider) and the dismantling of USAID are the most extreme examples, but eight of the wealthiest nations announced cuts to official development assistance (ODA) in 2024. Other sources of finance will be needed to help meet the SDGs.

No wonder that proposals for a minimum tax on the world’s richest (a two percent tax on the wealth of billionaires for example could raise $200-250 billion annually, with a further $100-140bn if extended to centimillionaires) have attracted interest. In a warmly received move, the G20 agreed last November “to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed”. But that was then. Whether and how rapidly that will now proceed remains to be seen. The growing power and influence of the super rich is generating a lot of attention, and concern: a threat to global stability according to this poll (of millionaires). Five of the world’s seven richest men were at President Trump’s inauguration. 

Other reforms such as regulating harmful tax practices, improving transparency and sharing tax information, addressing tax avoidance and tackling illicit financial flows will all help. But the evidence suggests that global minimum taxation levels would be the most effective. All, however, face stronger headwinds. Trump’s planned withdrawal from the global deal on a minimum corporation tax does not bode well. 

Kudos to those who have committed to give away much of their wealth (though many have a very long way to go), and to the many “patriotic millionaires” who called on those at Davos to do more to tax the super rich and create a political economy that works for everyone. The stratospheric scale of inequality demands a response. Commitments to strengthen the taxation of high-net-worth individuals are still on the table for this year’s International Conference on Financing for Development (FfD4). Now is not the time to give up trying.