The Wealth Divide

the great divides

An in-depth assessment of how the megatrends will have a profound impact at the societal level, reveals that these megatrends, in combination, exert strong pressures for growing divides within society in three primary areas: The Wealth Divide, The Health Divide, and The Technology Divide.

the wealth divide

In terms of The Wealth Divide, changing demographics of much of the developed world means that in many countries in Europe, North America and Asia, fertility rates are at or below replacement levels.  This means that as successive generations inherit wealth from the previous generation, and if those countries remain dominant economically, then there becomes an increased concentration of wealth amongst fewer people in the developed world.  In contrast, sub-sarahan Africa currently has a fertility rate of 5.5 children per woman of childbearing age, meaning that the population of sub-sarahan Africa will continue to grow rapidly, and according tho the United Nations, likely to exceed 4 billion by the end of the century.  If this region remains weak economically, this, combined with the trend in the developed world, will have the effect of dramatically increasing the wealth divide between rich and poor nations. 

Within nations longer average lifespans implies that the length of retirement increases. As this in turn causes strains on social security systems, people will become more and more reliant on personal savings.  Those who have personal wealth that enables an income above their needs will grow wealthier with an increased lifespan, whereas for those whose personal funds are not sufficient to support a longer life will face old age in relative poverty.

While changing demographics is one of the major forces leading to a wealth divide, other megatrends also play a substantial role.  Advances in technology, particularly Artificial Intelligence will begin to disrupt many occupations that previously were immune, or indeed benefitted from technological advances, moving this disruption from primarily blue collar work to primarily white collar occupations.  Artificial Intelligence, coupled with Big Data is likely to have a big impact on financial markets, potentially increasing returns for those with capital to invest, exacerbating The Wealth Divide.

Peer to Peer platforms are also adding disruption to the workplace in many industries.  While this may prove beneficial to some, enabling them to make extra income in addition to regular employment, it is also creating a core of people who are looking to these platforms for their sole means of income, often at a much reduced rate compared to those in the traditional industry that is being disrupted.

The flood of people to urban centers, and the increase in demand for prime space in major cities, driving up real estate values, has led to some cities becoming "wealth ghettos" where only the extremely wealthy can afford to live in some major cities, while those who provide services to this wealthy elite increasingly have to resort to living in outlying areas away from the city center and commute, often having to spend a disproportionate amount of their income on commuting expenses.  This is leading to an increased wealth divide in major cities as well as an increased differential between urban and rural areas.

societal and business challenges posed by the wealth divide

While in the US, The Wealth Divide decreased substantially from the 1930s to the late 1960s with the advent of social security and the effects of the aftermath of WWII, since the late 1960s that trend has reversed and wealth inequality is greater now than at any time since before the stock market crash of 1929.  In recent years, the backlash against wealth inequality, and the perceived unfairness within society, has increased, demonstrated by everything from the "We are the 99%" movement alongside the Occupy Wall Street movement, to the election of President Donald Trump.  This pattern is being replicated elsewhere with wealth inequality rising in almost all western economies.  While this poses a major challenge to societies and governments, it also impacts businesses.  from shareholder and employee concerns about the escalating levels of executive pay, to the fragmenting of markets as a wealth divide strengthens in its customer base, businesses need to recognize the impact of The Wealth Divide on their many stakeholders, and how their response both addresses this challenge while seeking to position themselves to grow with any opportunities that this provides within their market space.