1. Discontent in an era of growth

Ceux qui ont dit que tout est bien ont dit une sottise : il fallait dire que tout est au mieux (Voltaire, 1759[1])

This edition of Perspectives on Global Development is about discontent. The report examines the origins, manifestations and consequences of discontent globally and explores what can be done about it. As the term is applied in this report, discontent is neither unhappiness nor anger; rather, it is a mental state created by frustration, unmet aspirations and powerlessness. It is also a collective rather than individual phenomenon. Discontent is not a term commonly associated with economics; its psychological and communal implications are better suited to sociological or political analysis. Economic factors are nonetheless central to the causes and consequences of discontent.

This report demonstrates that discontent is on the rise across the world, in advanced and developing economies alike. This chapter examines the global economy prior to the coronavirus (COVID-19) pandemic to confront what looks at first glance to be a paradox. Why was discontent rising around the world when gross domestic product (GDP) and wealth were rising almost uninterruptedly in countries at all income levels, poverty rates had declined, and the gap between rich and poor countries was narrowing? This chapter identifies four keys that both unlock this paradox and underline the importance of looking beyond GDP: the inequalities and vulnerabilities that characterised the growth in income and wealth over the past 30 years; the uneven trends in broader well-being measures over the same period; the negative impact of new patterns of production and consumption on social cohesion and individual well-being; and the environmental damage that has put humanity’s long-term survival at risk.

This report is written during the COVID-19 pandemic, which spread rapidly across the world during the first half of 2020 and continues to inflict a terrible human cost on a global scale in 2021. Much of the data in this chapter (and the rest of the report) pre-date the multiple crises triggered by the pandemic. While it is impossible to predict the long-term consequences of the pandemic, most developing economies are expected to take much longer to recover than advanced economies. Global poverty, unemployment and inequality have risen as a result of the pandemic, which has undone many of the gains in living standards achieved over the past three decades.

Over the three decades before the COVID-19 pandemic, countries world wide witnessed sustained GDP growth. Between 1990 and 2018, average GDP per capita almost doubled from USD 8 975 to USD 15 941 (United States dollar) (Figure 1.1). GDP growth rates were positive for all country income groups every year, except for low-income countries in 1992 and high-income countries in 2009. A remarkable feature of this period is that global GDP growth owed more to low- and lower middle-income countries than to high-income countries, indicating convergence between developing and advanced economies. Moreover, as discussed below, the period was marked by a steady decline in global poverty rates and the emergence of middle classes globally.

It should be noted, however, the global financial crisis in 2008-09 changed the complexion of the global economy. Although growth resumed thereafter in advanced economies, it was reliant on monetary stimulus, which inflated asset prices and benefited the holders of capital; meanwhile, austerity policies implemented to control debt levels choked growth and weakened public services (OECD, 2016[2]). The fates of Wall Street and Main Street diverged, exposing inequalities that did not go unnoticed. While developing countries weathered the storm, their growth prospects gradually weakened, policy space narrowed, and debt levels rose. As Kose and Ohnsorge (2019[3]) note, emerging economies became more vulnerable to economic shocks than they were before the global financial crisis. The global economy was poorly prepared for the COVID-19 pandemic (Box 1.1).

The period from 1990 to 2018 coincided with an intensification of globalisation, broadly defined as the expansion of economic and social relations between countries. Increased trade and a diffusion of global production reinforced income gains by lowering the cost of many goods, especially those produced in China. The effect has benefited consumers everywhere, but low-income individuals benefited particularly from the decline in prices of tradable goods (Fajgelbaum and Khandelwal, 2014[12]).

Recent decades have also been a time of unprecedented wealth creation. Between 2000 and 2019, aggregate global wealth per adult rose by 125% from about USD 31 400 to USD 70 840, with an average annual growth rate of 4.5%, far exceeding population growth (Figure 1.2). Wealth increased continuously during this period, except in 2009. After this point, a slightly higher proportion of people’s wealth consisted of financial assets, which recovered faster from the global financial crisis than non-financial wealth.

A new geography of wealth creation has emerged, marked by the growing prominence of Asian countries. There has been a relative shift of wealth from America and Europe to Asia (Figure 1.3), which has been a central theme of previous editions of this report, starting with 2010 (OECD, 2010[15]). Wealth creation has been particularly strong in China and India. Between 2000 and 2019, North America’s share of global wealth declined from 38% to 32% and Europe’s share from 29% to 25%. By contrast, China’s and India’s share of global wealth increased from 3% to 18% and from 1% to 3%, respectively.

The geographical distribution of income has also shifted in favour of Asian countries, at the relative expense of Europe, Latin America and the Middle East. In 1990, China and India were hardly present in the global top 10% of global income earners; by 2016, they represented a substantial share not only of the top 10% but also of the top 1%. North America remains the region with the largest proportion of ultra-high-net-worth individuals.

The three decades prior to the COVID-19 crisis witnessed a large decline in the proportion of the global population in extreme poverty. The global extreme poverty rate declined from 36% in 1990 to 10% in 2015 (Figure 1.4). The decline in poverty was particularly large in middle-income countries, largely China and India, although some 62% of the world’s extreme poor live in middle-income countries (World Bank, 2020[16]). In low-income countries, poverty has declined but remains widespread (Piketty, Saez and Alvaredo, 2018[17]).

The decline in poverty, often hailed as a central achievement of globalisation over the past 30 years, is not universally acclaimed. Philip Alston, a United Nations rapporteur on extreme poverty and human rights, questioned the adequacy of the global poverty measure of USD 1.90 per day, saying it was “scandalously unambitious” and reflects “a staggeringly low standard of living, well below any reasonable conception of a life with dignity” (Alston, 2020[18]). He said the benchmark hid the true extent of global poverty: using the poverty line for upper middle-income countries of USD 5.50 per day, poverty has hardly declined since 1990.

Combining absolute poverty data with a relative poverty indicator for a more welfarist approach to poverty reinforces this less positive analysis. This approach, used by Ravallion (2019[19]), generates a much higher number of people living in poverty globally: while the World Bank calculated that 10% of the global population was in poverty in 2014, this study calculates the number to be above 30%, or more than 2 billion people. In developing countries, the number of individuals in absolute poverty declined between 1990 and 2014, but the number living in relative poverty increased.

The majority of individuals who have left extreme poverty over the past 30 years are at great risk of falling back. According to Edward and Sumner, this “vulnerable” cohort has grown by 1.6 billion people in the past 30 years. A key factor behind their vulnerability is low social protection coverage, particularly in developing countries (Edward and Sumner, 2017[20]). Less than half the world’s population was covered by one or more social protection programmes before the crisis; in low-income countries, this stood at below 20% (Figure 1.5). In high-income countries, coverage is almost universal for the poorest quintile. Regional analysis shows the largest coverage gaps in South Asia and sub-Saharan Africa.

As Chapter 4 explains, the COVID-19 pandemic exposed the size of the vulnerable population globally and prompted an unprecedented scale-up in social protection in almost every country (Gentilini et al., 2021[21]). However, the majority of these emergency interventions were timebound, lasting four months on average, as developing countries struggled with the impact of the crisis on their public finances. While the pandemic has demonstrated the importance of universal social protection coverage, it is far from clear whether such an outcome will be a legacy of COVID-19.

Another success story of globalisation is the emergence of middle classes around the world. This is not the same as a “global middle class”, a term that would imply that the middle class in every country – regardless of country income level – enjoys the same level of income and security. However, the aspirations implied by middle-class status (and the frustration that emerges when these aspirations are not realised) are an important driver of discontent the world over, as Chapter discusses.

In 2018, more than 50% of the global population was classified as middle class, a phenomenon driven by the success of developing countries in reducing poverty (Kharas and Hamel, 2018[24]). Asia has accounted for the majority of growth in middle classes globally, with particularly strong gains in China and India, as well as a growing contribution from Southeast Asia (World Bank, 2018[25]). The middle class in Latin America grew from 21.1% to 35.4% of the population between 2000 and 2015, although it had started to shrink even before the COVID-19 pandemic (OECD/CAF/ECLAC/EU, 2019[26]). Africa’s middle class increased from 108 million people in 1990 to 247 million by 2013 (AUC/OECD, 2019[27]). Trends varied in the Middle East during the first decade of the 2000s: the middle class grew strongly in Syria and Tunisia but shrunk in Egypt and Yemen (Dang and Ianchovichina, 2016[28]).

Ravallion captures the vulnerability of the emerging middle classes (2010[29]). He calculates that 1.2 billion people joined the middle class (measured in income terms) in developing countries between 1990 and 2005, 80% of whom came from Asia and half from China alone. However, he recognises that “middle class” in the context of developing countries bears no relation to how the term is applied in advanced economies and that it has different implications even across developing countries: only 100 million of the 1.2 billion would be classified as non-poor in every developing country. The COVID-19 pandemic has exposed these vulnerabilities: 41% of Latin America’s population was classified as middle income in 2019; in 2020, this proportion fell to 37% (ECLAC, 2021[30]).

Meanwhile, the middle class in advanced economies has been shrinking. The middle class has shrunk in most OECD countries, amid meagre income growth, rising living costs and increasingly vulnerable employment (OECD, 2019[31]). Social mobility has also declined, with middle-class children less likely to achieve the same standard of living as their parents, much less exceed it. While almost 70% of baby boomers were part of middle-income households in their twenties, only 60% of millennials are today.

These diverse trends are captured by the “elephant curve” in Milanovic (2016[32]), which displays strong relative consumption growth between 1988 and 2008 for the first seven deciles of the global income distribution, a sharp decline in relative gains between the seventh and ninth deciles, then strong growth in the tenth. Edward and Sumner calculate that there are 2.2 billion people earning above USD 10 per day; among this number, the consumption of 400 million people in China and the 700 million people in the world’s richest decile has grown strongly, but gains in consumption have been below the global average for the remaining 1.1 billion (2017[20]).

The first key to understanding discontent in a time of plenty is that the gains in income and wealth identified have not been shared equally, either within or between countries. Within-country income inequality has risen in many countries, particularly among advanced economies, and remains high in a number of developing countries. It is an important component of the broader inequalities identified later in the report as a key factor behind rising discontent, weakening social cohesion and political upheaval. While there has been convergence in terms of the global income distribution and a decline in between-country inequality since 1990, China’s emergence has been by far the largest factor in both phenomena; many developing economies remain far behind advanced economies.

Income inequality across the population as a whole has increased in a number of countries that experienced rapid economic growth. Between 2000 and 2015, income inequality as measured by the Gini index1 increased considerably in a number of advanced economies, albeit from relatively low levels. It also increased in some developing countries, notably China and India (Figure 1.6). Income inequality declined in many middle-income countries in Latin America, although there is evidence that it started to increase after 2015 (OECD/CAF/ECLAC/EU, 2019[26]).

There are clear discrepancies in inequality among regions. The most unequal region is the Americas, where all countries in the sample below have higher Gini than the global median. Income inequality is also above the global median in most countries in sub-Saharan Africa but is more heterogeneous in Asia and Oceania (Figure 1.7). While inequality in almost all European countries is below the global median, the upwards trajectory is of concern.

Income growth and wealth creation have been concentrated among a relatively small group globally. Overall, it is estimated that today 82% of the global wealth belongs to the top 10% richest individuals, while less than 1% is in the hands of the lower half of the world population (Credit Suisse Research Institute, 2019[34]). Between 1990 and 2015, the income share of the global top 1% increased from 18% to 20%, with a peak at 22% in 2006 and 2007, while that of the bottom 50% has stagnated at around 9% (Piketty, Saez and Alvaredo, 2018[17]).

Income inequality tends to have a negative effect on life satisfaction. People in less equal countries (in terms of income) tend to be less satisfied with their lives (Figure 1.8). However, the channels through which inequality leads to discontent at a collective level are complex, as Chapter 3 explains.

Variations in economic productivity across regions are an important contributor to within-country inequality. The OECD demonstrates that “two thirds of OECD countries have regions where productivity, a proxy for wages and economic prosperity, have stagnated or declined for a decade” and that “economic gaps across small regions have … almost constantly increased since 2000, reflecting both an increasing concentration of economic activities in cities and the difficulties of small remote regions to keep pace with the national frontier” (2020[36]). The OECD calculates that “one in four persons in the OECD lives in a region that is falling further behind the high-productivity regions in their country” (2016[37]). According to the OECD, “[on] average, productivity in the least productive region of a country is 46% lower than productivity in its most productive region” (2019[38]). Box 1.2 examines fluctuating regional fortunes in China in recent decades and outlines how the government has responded.

The OECD also finds that “in one-third of OECD countries, productivity growth has been concentrated in a single, already highly productive, region that is usually home to the country’s largest city” (2019[38]). Although the story is much more complicated than an urban-rural divide, rural areas across the OECD are lagging. According to the OECD, “[in] 2017, GDP per capita in rural regions was 13 percentage points (p.p.) below the average, 16 p.p. lower in labour productivity levels and 8 p.p. lower in employment rates. Rural regions, especially those far from cities, have felt the effects of the 2008 global financial crisis more strongly, leaving many of them in a vulnerable position” (2020[39]). The report notes the demographic pressures facing rural regions, whose populations are ageing and getting smaller.

There are also significant inequalities between different groups within countries. An obvious example is the gender pay gap, which stands at 13% in the OECD and 20% across the world (OECD, 2019[40]). Pay gaps are driven by structural factors including horizontal and vertical segregation in the labour force; Chapter 3 examines the gender-based structural inequalities – and the discontent these generate – in greater detail.

Between-country inequality declined between 1988 and 2013 (World Bank, 2016[41]). However, this global convergence was driven principally by income growth in India and (especially) China: due to the size of their populations, rising household incomes in these countries have a major impact on the global income distribution. As Edward and Sumner argue, “between-country changes are so dominated by China’s rise that the fall in global inequality largely evaporates once China is excluded from analysis” (2017[20]). It is nonetheless important to note that China’s Gini coefficient increased from around 0.30 in the early 1980s to 0.49 in 2008 before declining (NBSC, 2017[42]; OECD, 2019[43]; Sicular, 2013[44]).

Income inequalities between countries remain very large. In 2018, among the sample of 187 countries for which data are available, GDP per capita in the richest country (Qatar) was 170 times higher than in the poorest country (Burundi). Using the global median GDP (equivalent to USD 12 316 in 2011 prices) as a benchmark, Africa stands out as the poorest region, with most countries far below the world median. By contrast, Europe appears the richest region, while in the Americas and Asia and Pacific regions, there are both relatively very rich and poor countries.

In 2019, the top ten wealthiest countries were found in Western Europe, North America and the Asia Pacific region, while the poorest nation were all in the Africa region and Haiti in the Americas. In Switzerland, the richest country in 2019, wealth per adult was 1 058 times higher than in Sudan, the poorest country. Looking at the evolution of wealth per adult since 2000 shows a diverging trend, with per capita wealth growing fastest in North America (Figure 1.9).

Rising discontent during a period of sustained economic growth underscores the need to look beyond GDP. People’s living standards are determined by a broad range of factors that are captured by the OECD well-being framework and other multi-dimensional welfare indicators. These elements include health, housing, life satisfaction, the quality of the environment, social connections, the quality of work, work-life balance, safety, and knowledge and skills (OECD, 2020[53]). Policies and strategies that specifically aim to achieve improvements across all these metrics are essential for sustainable and inclusive development (OECD, 2019[54]). To reflect the critical importance of environmental issues, the United Nations Development Programme’s Human Development Report 2020 introduced the Planetary pressures-adjusted Human Development Index, which takes into account countries’ carbon dioxide (CO2) emissions and material footprint (UNDP, 2020[55]).

A well-being indicator of particular relevance for this report is life satisfaction, which declined globally between 2006 and 2018, albeit with regional variations (Figure 1.13A). The global decline during this period was in large part driven by lower middle-income countries; life satisfaction declined sharply in this group after 2010. Over the same period, there was a sharp rise in negative feelings of anger, sadness and worry world wide: almost 40% of people reported feeling worried in 2018, up from 30% in 2006 (Figure 1.13B). However, saying that people are discontent because they are not satisfied with their lives does not advance our argument; other well-being indicators must be examined to find the cause of this dissatisfaction. As with measures of income and wealth, it is necessary to look beneath aggregate data.

Many well-being indicators have improved globally over the past three decades. Between 1990 and 2017, there have been significant increases in life expectancy, average years of schooling and access to improved sanitation facilities in countries at all income levels (Figure 1.14). A key factor behind these improvements was an expansion of fiscal space in developing countries, which financed a substantial increase in public spending per capita even in contexts of rapid population growth. Increases in public revenues have outpaced economic growth, leading to increases in tax-to-GDP ratios across developing regions: the average tax-to-GDP ratio for Latin America rose from 15.9% in 1990 to 23.1% in 2018, while for Africa, it rose from 13.1% to 16.5% over the same period (OECD/AUC/ATAF, 2020[56]).

Large inequalities in the quality of life exist across countries. For example, while the last three decades witnessed a great improvement in global health outcomes, particularly among low-income countries, inequality of life expectancy is still large across regions and countries (Figure 1.15). In 2018, average life expectancy ranged from 53 years in the Central African Republic to 83 years in Japan and Hong Kong, China.

There tend to be large inequalities in well-being within countries. For example, children in poor households have a much higher rate of stunting than those in rich households across developing countries in different income groups (Figure 1.16). The gap tends to be larger in both low-income and lower middle-income countries than in upper middle-income countries, where it is more extreme in countries with high levels of income inequality. Stunting reinforces inequalities by reducing the physical and cognitive development of children and thus reducing their capacity in adult life.

There are also regional dimensions to within-country inequalities. Using a composite well-being indicator for 26 OECD countries that combines income, unemployment and health, Veneri and Murtin show that regional disparities in multi-dimensional living standards are higher than for income alone (2016[57]). According to Brezzi and Diaz Ramirez, as much as 40% of the explained variation of OECD residents’ self-reported life satisfaction can be accounted for by regional characteristics and 60% by individual characteristics (2016[58]).

Certain well-being indicators worsened in the decade preceding the COVID-19 pandemic, most notably those related to nutrition. The number and rate of people who were malnourished increased between 2014 and 2019 in all developing regions except the Middle East and North Africa (FAO, 2020[59]). Close to 2 billion people were moderately food insecure in 2019. As Badie points out, the failure of governments and the international system as a whole to ensure that the global population has access to sufficient food at a time of unprecedented wealth weakens the legitimacy of local, national and global institutions alike (2020[60]). As much as 17% of total global food production went to waste in 2019 (UNEP, 2021[61]).

Slow progress towards achieving the United Nations Sustainable Development Goals (SDGs) demonstrates the distance from achieving an adequate standard of living for the global population. To analyse the trajectory of well-being indicators, it is necessary to consider not only the historical level but also the desired objective. The SDGs, agreed by the United Nations in 2015, represent a universal commitment by all countries to ensuring an acceptable standard of living. By the end of 2019, progress towards achieving the 17 goals was already behind schedule; as a result of the COVID-19 pandemic, many countries will fall even further behind (United Nations, 2020[62]).

The third key to understanding the rise of discontent is understanding the structure of economic growth over the past three decades, in particular how it has affected the global labour force. Employment is inextricably linked to living standards: as well generating an income with which an individual may improve their material quality of life (and that of their families), employment can also teach useful skills, improve self-esteem, enhance social interactions and provide a sense of security about the future. At the same time, work can also be a source of illness or stress, shrink time available for social interactions and be a source of vulnerability.

Employment is therefore a necessary condition for a good life, but it does not guarantee it. This section outlines how trends in global employment over the past 30 years, often linked to profound changes in the organisation of production and consumer behaviour, have adversely affected both the material and non-material benefits of work for large parts of the global labour force. It also explains how they have driven inequality within countries and given rise to a new global class: the precariat.

For all but the most highly skilled workers, labour is under pressure around the world. The labour share of income declined sharply between the 1980s and the global financial crisis in 2008-09; a similar decline occurred across developing countries, starting in the 1990s (Dao et al., 2017[63]). Over the past three decades, returns to capital have grown significantly more than returns to labour, and wages have not kept pace with productivity gains (Box 1.3). While workers are increasingly vulnerable to shifts in global production and the vagaries of international trade, liberalisation of international capital flows has made it easier for multinational enterprises and holders of capital to seek out returns from anywhere in the world and insulate themselves from risks.

Occupations have enjoyed various fortunes since the 1980s. Examining the employment share of various occupations in the United States between 1980 and 2010, Autor finds that the share of employment in managerial roles increased sharply over this period, while service employment and high-skilled (“white collar”) technical work also grew (2015[64]). Over the same period, there were steep declines in the employment share of skilled and unskilled blue-collar occupations. Similar trends have been evident across the OECD, where demand for high-skilled jobs has increased but has declined for mid-level skills, while demand for low-skilled jobs in the service sector has increased, driven by retail and personal care (OECD, 2020[65]). Shifts in production between advanced and developing economies associated with globalisation are part of this story, but so too is technology, changes in domestic demand and, to a lesser extent, demographic change (Tella and Rodrik, 2019[66]).

The accession of China to the WTO in 2001 was a defining moment in the recent phase of globalisation and in the evolution of labour markets in advanced economies. According to Acemoglu et al., job losses in the United States directly or indirectly linked to China’s increased prominence in the 2000s accounted for almost 20% of jobs lost in the country’s manufacturing sector between 1999 and 2011 (2016[67]). Declines in European manufacturing employment were also significant; while the impact might have been lower in countries with strong labour protection, the China shock made it harder for the unemployed to find work (Aghelmaleki, Bachmann and Stiebale, 2019[68]).

There is growing concern that many developing countries, especially in Africa and Latin America, are deindustrialising before developing large-scale manufacturing sectors. Although internationally competitive firms specialising in particular products often exist in these regions and are integrated into global value chains (GVCs), this does not guarantee the growth of a broad-based manufacturing sector. This so-called premature deindustrialisation poses major challenges for employment creation, formalisation, diversification and productivity growth. This is a particular concern for Africa’s rapidly growing (and increasingly urban) working-age population, for whom decent employment opportunities are scarce (AUC/OECD, 2019[27]).

The dislocation and vulnerability of workers associated with global trade have been compounded by rapid technological change since the 1990s. The Third Industrial Revolution, which spanned the period between the late 1960s and the first decade of the 21st century, was characterised by advances in computing technology that powered the rise of automation, the birth of the Internet and advances in telecommunications more broadly. These changes were a critical enabler of globalisation. In the Fourth Industrial Revolution (also known as IR4), which began around 2010, technology is blurring the distinction between the physical, digital and biological spheres through advances in artificial intelligence, the Internet of Things, the capacity to harness big data, and 3D printing (World Economic Forum, 2016[69]).

Technological change, particularly in automation, is weakening job security. Some 47% of jobs in the United States are at high risk of being automated (Frey and Osborne, 2017[70]). The average proportion of jobs at risk is 14% in the OECD but varies greatly across countries (Nedelkoska and Quintin, 2018[71]). A major change in automation is that it is not just routine tasks that are at risk; as the OECD notes, “with the advent of Big Data, artificial intelligence, the Internet of Things and ever-increasing computing power, non-routine tasks are also increasingly likely to become automated” (2017[72]).

As technology has evolved over the 20th and 21st centuries, so too has the organisation of production. Fordist production systems that revolutionised production in the first half of the 20th century evolved to focus less on scale and cost efficiency and more on differentiation, providing customers with products that were tailored to their specific needs, often through the addition of services. These changes entailed a shift in the structure of employment: demand increased for white-collar workers adept at using new technologies and administering differentiation and just-in time supply chains designed to eliminate waste (a major focus of the Toyota Production System, for example), while automation reduced demand for routine manual work. As globalisation has intensified, with a concomitant lengthening and complexity of supply chains, production is ever-more international.

The advent of IR4 is accelerating the post-Fordist evolution in production techniques and demand for different types of worker. It has also fundamentally altered the structure of employment and consumption patterns, primarily through the impact of the platform economy, which functions as “a digital service that facilitates interactions between two or more distinct but interdependent sets of users (whether firms or individuals) who interact through the service via the Internet” (OECD, 2019[73]). It includes (although is not limited to) the gig economy, whereby piece work is outsourced to individuals with appropriate skills, who are essentially self-employed independent contractors.

Individuals in the gig economy are less protected and less connected to each other. Employers gain “wider and more flexible access to talented workers, including those with specialised skills, as well as a faster hiring process, lower costs and potentially round-the-clock productivity”, while workers enjoy greater flexibility to find work that interests them, perhaps even abroad (OECD, 2019[73]). However, workers in the gig economy are often not covered by social security arrangements or other forms of worker protection. Moreover, they might have minimal interaction with other workers in the same sector. As such, today’s workforce is ever more atomised and their capacity to act collectively severely constrained.

Social protection systems in OECD countries are struggling to adapt to the changing structure of work, with large gaps in coverage emerging. In the case of the gig economy, for example, who should be responsible for employer contributions to social insurance schemes, how can involuntary loss of work be determined in the absence of an employer, and how should benefit calculations and means tests take into account fluctuations in income (OECD, 2018[85])? In the absence of an employer, new employment arrangements have been accused of free-riding on welfare states that provide income support of last resort.

Consumers are becoming more connected in diverse ways. E-commerce, whereby consumers purchase goods and services on line rather than in person, was increasingly prevalent globally even before COVID-19 struck; restrictions imposed to control the pandemic have accelerated this phenomenon and with it the retail market share of platforms. Another innovation driven by the platform economy is its collaborative potential: in the so-called sharing economy, consumers are able to share products, with a group of people thus sharing the cost of an item they will use only intermittently rather than each having to purchase an item themselves.

The costs incurred by individuals using the platforms that facilitate these exchanges are typically extremely low. However, the providers are able to generate revenues by selling the data these interactions generate to third parties. There are clear efficiencies built into the platform economy, which is capable of linking buyers and sellers on an individual basis, as well as advertisers and target consumers. However, these efficiencies should be considered against the evidence of a high degree of market concentration among the leading platforms and their ability to gain a competitive advantage over traditional retailers in tax terms.

The speed, scope and complexity of IR4 is disrupting societies. All four industrial revolutions have changed the way people live, work and interact, and thus have had a profound impact on society as a whole. The high speed, broad scope and complex mechanisms with and through which these changes occur under IR4 is compounding this upheaval. Individuals and industries that are able to lead or at least keep pace with advances associated with IR4 are able to derive significant gains in income and wealth that will be much harder to access for those that are not. As IR4 becomes more pervasive in day-to-day life, reshaping not only production and consumption but also the relationships between citizens and institutions, it has ever-greater potential to divide people between those with the skills and resources to navigate digital societies and those without. Exclusion means not only inferior employment prospects but also diminished capacity to participate in society as a whole.

The majority of the world’s working population are in informal employment and, as a consequence, confront high risks and vulnerabilities, as amply demonstrated by the COVID-19 pandemic. The informal workforce comprises some 2 billion workers, representing 61% of the total including agriculture and 50% excluding agriculture (ICLS, 2003[86]; ICLS, 1993[87]; ILO, 2018[88]). Some 1.7 billion informal workers, or 85%, work in the informal economy. In low-income countries, nearly 90% of the labour force work in the informal economy and face high job insecurity and poor working conditions (ILO, 2019[89]). These workers are likely to account for a significant proportion of the new precariat (Box 1.4).

In developed countries, some 18% of workers are engaged in informal employment (OECD/ILO, 2019[90]). Non-standard forms of employment, which are not informal but which are characterised by self-employment, temporary work and independent contracting, have grown rapidly in the 2000s across several OECD countries, especially among the young. Some of these jobs, particularly in the gig or platform economy, are linked to technological advances, but many others are in traditional personal services, where employers are looking to maximise their flexibility through new employment relationships and part-time contracts (OECD, 2019[91]).

Stable employment is increasingly rare. Across European OECD countries, 69% of employees who have been unemployed have histories of non-standard dependent employment. Workers with these contracts have proven especially vulnerable during the COVID-19 pandemic; before the crisis struck, the OECD calculated that non-standard workers were 40% to 50% less likely to receive any form of income support when out of work than standard employees (OECD, 2020[65]).

In many countries, developed and developing, having a job does not guarantee a decent living standard or an escape from poverty. In 2018, workers in moderate or extreme poverty accounted for more than half of employment in low-income countries and more than one-quarter in lower middle-income countries. Working poverty is particularly common among informal economy workers, for whom the incidence is twice that found among formal workers (OECD/ILO, 2019[90]).

According to ILO and UNICEF, progress in reducing child labour stagnated between 2016 and 2020: shortly before the COVID-19 pandemic, 160 million children – almost one in ten children worldwide – were working. Half of them were engaged in hazardous work (ILO/UNICEF, 2021[92]). The authors expect child labour to rise further as a result of the pandemic unless there is a major scale-up of social protection in developing countries.

The vulnerability of the precariat is reflected in a large inequality in social insurance coverage between the bottom and top income quintiles. As social insurance is mainly provided to workers in the formal sector, and formal employment accounts for a small proportion of the labour market in most low- and middle-income countries, social insurance coverage is extremely low globally. Indeed, as Figure 1.19 shows, there is almost no coverage for people in the bottom of the income distribution and very low coverage for the better-off households in low-income countries. The gap varies significantly among middle-income countries; it is as high as 40% and above in countries like Brazil, Mexico and Thailand, while there is no gap in countries such as Bosnia and Herzegovina.

The employment prospects for young and migrant workers are not promising. Changes to the nature of employment have often affected young workers more than older generations, which are more likely to have been engaged in standard forms of employment. Since the 1990s, successive cohorts of young workers in OECD countries have been increasingly less likely to enter the labour market in middle-skill jobs and are now likely to be in low-level jobs that are below the level for which they are educated. Meanwhile, in developing countries and especially across Africa, young people are particularly likely to be in informal employment (Lorenceau, Rim and Savitki, 2021[102]).

COVID-19 has demonstrated the key role of migrant workers. Across Europe and other regions, migrant workers are particularly likely to be in low-skilled, non-standard employment. The COVID-19 pandemic has demonstrated the critical role they play in the economy. According to Fasani and Mazza, on average across Europe, 13% of key workers are immigrants, a figure that rises in sectors such as personal healthcare workers, drivers and food processing (2020[103]). At the same time, mortality among ethnic minorities has been high relative to the population as a whole in a number of European countries (Crouch, 2020[104]).

The environmental impact of global economic activity provides the fourth key to understanding today’s discontent. As this section outlines, the world faces multiple environmental crisis, including rising temperatures, biodiversity loss and pollution, which entail the destruction of natural systems on which humanity depends for its survival. It has been posited that humanity is living through – and directly responsible for – the sixth mass extinction on earth in 540 million years (Barnosky et al., 2011[105]). Global environmental movements, in particular Fridays for Future, have grown rapidly in recent years and are increasingly influential on the world stage.

There are clear links between economic growth and environmental damage (Acheampong, 2018[106]; Aye and Ebruvwiyo, 2017[107]). It is estimated that human activities each year consume more than 1.7 times the resources generated by the biosphere, and it requires 20 months for the earth to regenerate what humans use in a year (Global Footprint Network, 2017[108]). Incorporating a country’s environmental footprint within the Human Development Index (HDI) has a large impact on national rankings: more than 50 countries drop out of the very high human development group (UNDP, 2020[55]). Meanwhile, Costa Rica, Moldova and Panama move up at least 30 places on the HDI once their environmental impact is taken into account, underlining that environmental costs are not an inevitable result of economic progress but rather the outcome of policy choices (Dang and Serajuddin, 2020[109]; Wu, Zhu and Zhu, 2018[110]).

Environmental degradation is taking a toll on people’s physical and mental well-being. Lawrance et al. demonstrate the severe impact of climate change on people’s mental health (2021[111]). The negative effects of air pollution on happiness and life satisfaction have been observed across Europe (Ferreira et al., 2013[112]) and globally (Welsch, 2007[113]). Climate change and deforestation also take a toll on subjective well-being (Krekel and MacKerron, 2020[114]; Maddison and Rehdanz, 2011[115]).

Global CO2 emissions closely reflect humanity’s environmental impact since the first Industrial Revolution and are the principal driver of climate change. The earth’s average temperature between 2016 and 2020 is expected to be the hottest on record at a level 1.1°C higher than in the period 1850-1900 (generally known as pre-industrial levels) (WMO, 2020[116]). Temperature increases attributable to human activity are already responsible for significant proportion of heat-related deaths across the world, especially in Asia and Latin America (Vicedo-Cabrera et al., 2021[117]). However, the consequences of climate change extend beyond rising temperatures: they are behind an increasing frequency and intensity of high-impact weather events, such as droughts, storms and flooding, which cause massive human and economic damage.

Between 1970 and 2020, extreme weather caused more than 11 000 disasters, took 2 million lives and caused economic losses of USD 3.6 trillion: over these 50 years, the number of disasters and their economic cost increased by five and seven times, respectively (WMO, 2020[118]). By 2050, the number of people at risk of flooding will increase from 1.2 billion to 1.6 billion, while the number living in areas with severe water shortages will increase from 1.9 billion to 2.7-3.2 billion (WMO, 2020[119]).

Per capita CO2 emissions increased from 4.2 to 5.0 metric tonnes between 1990 and 2014, closely following upwards trends in GDP per capita (Figure 1.20). Over this period, high-income countries had a carbon footprint that was more than ten times larger than that of low-income countries. However, carbon emissions have evolved unevenly across country income groups. While a downward trend in emissions has been observed in high-income countries since 2010, the reverse is true in upper middle-income countries and, to a lesser extent, in lower middle-income countries.

A “polluter elite” has emerged that mirrors the growing inequalities discussed in this chapter (Kenner, 2019[120]). According to the United Nations Environment Programme, “the combined emissions of the richest 1% of the global population account for more than twice the combined emissions of the poorest 50%” (2020[121]). The same report finds that to limit global temperature increase by 2050 to 1.5°C, as set out by the Paris Agreement, this elite would need to reduce their current emissions by a factor of 30 while the emissions of the poorest 50% could still increase by around three times their current level. As this report identifies, the question of how countries can reduce emissions in ways that reflect these vast discrepancies are an emerging source of political tensions in many places.

Shifts in global industrial production are changing the distribution of emissions. Wealthier countries have exported manufacturing (and thus the associated carbon emissions) to developing countries, thereby allowing them to reduce their carbon footprint without changing consumption patterns. Initially, this trend led to a sharp increase in emissions by China, but changes in the structure of China’s production and an associated fragmentation of regional value chains have resulted in emissions shifting to countries such as Indonesia, Thailand and Viet Nam (Meng et al., 2018[122]).

Developing countries are bearing the brunt of climate change, despite their minimal contribution to global emissions. Countries that rely more on agriculture for subsistence and economic activity are more susceptible to changes in temperature and extreme weather. At the same time, many developing countries lack the financial resources to invest in climate change mitigation, such as flood defences, as well as early warning systems (EWS). According to the World Meteorological Organization, one in three people are not covered by EWS, most of whom live in least-developed countries (LDCs); almost 90% of LDCs and small-island developing states identified EWS as their top priority for mitigating climate change but most lack the financial resources and capacity required to establish such systems (2020[118]).

As countries start to plan long-term reductions in carbon emissions to achieve “net zero” by 2050 (meaning the same volume of carbon emissions is removed from the atmosphere as is produced in a given year), developing countries are dealing with the immediate reality of the climate crisis. As African Development Bank President Dr. Akinwumi Adesina said in April 2021, Africa “loses USD 7 billion to USD 15 billion a year to climate change, and this will rise to USD 50 billion per year by 2040…Africa is not at net zero. Africa is at ground zero” (Harvey, 2021[123]). The cost of dealing with the impacts of extreme weather events and other consequences of climate change is worsening developing countries’ debt situation, compounding the financial impact of the COVID-19 pandemic. At the same time, as Chapter 5 explains, a number of developing countries are reliant on exports of hydrocarbons to finance their development.

Biodiversity loss poses an existential threat to humanity. Global economic activity is having an ever-larger impact on the natural world: more than 33% of the world’s land surface and nearly 75% of freshwater resources are now devoted to crop or livestock production to feed the growing global population and adapt to changing consumption patterns (IPBES, 2019[124]). This is associated with a sharp decline in the abundance of species and massive degradation of natural systems; approximately 1 million species are threatened with extinction. This will have dire consequences for earth’s human inhabitants, for example by destroying food systems and posing threats to global health, as demonstrated by the COVID-19 pandemic.

Deforestation continues at a rapid pace in the Global South. Deforestation is threatening ecosystems and human lives due to the loss of biodiversity, scarcity of natural resources, and pollution (FAO and UNEP, 2020[125]). Forest area measured as a percentage of land area is decreasing everywhere and at a particularly rapid rate in lower middle-income and low-income countries (Figure 1.21). Biodiversity in developing countries is also increasingly threatened by invasive alien species, which globalisation has helped to spread outside their natural habitats and climate change has allowed to settle in new environments (Early et al., 2016[126]).

Meanwhile, human beings are increasingly exposed to air and water pollution, which cost at least 9 million lives annually (UN Environment, 2019[127]). As measured by global concentrations of fine particulate matter less than 2.5 µm in diameter (PM2.5), air pollution increased rapidly from 1990 and reached a peak in 2011 far above the World Health Organization’s annual safety threshold of 10 µg/m3 (Figure 1.22). Air pollution has decreased in high-income and upper middle-income countries and increased in lower middle-income and low-income countries, especially in Africa. Air quality in advanced economies is four times better than in lower middle-income countries, and almost three times better than in low-income and upper middle-income countries. Today, the most polluted regions are South Asia and the Middle East and North Africa.

This chapter provides the global context for the rise in discontent discussed in this report over the past 30 years. It explains that there is no paradox behind the fact that discontent has worsened during a period of sustained economic growth: gains in income and wealth achieved in the three decades before 2020 were unsustainable socially, environmentally and politically. They gave rise to widening inequalities and were accompanied by social upheaval caused by changes in the way people live and work. In telling this story, the chapter reinforces the inadequacy of GDP growth as an indicator of development or living standards. It also demonstrates that developing countries continue to face immense economic, social and environmental challenges even though they were an important driver of global growth.

These trends do not explain global discontent in themselves. As the following two chapters discuss, discontent is a complex phenomenon to diagnose and understand. Although economic factors are important, so too are sociological and political factors: discontent has a broad set of short- and long-term, contingent and structural causes that vary across countries. Nonetheless, there will be evidence of the four keys to discontent identified in this chapter throughout the report.

The chapter also demonstrates that global trends contribute to discontent and that the response to discontent must, to a certain extent, therefore be international. International co-operation on the environment is critical and urgent, but it cannot end there: improving living standards, providing secure employment and fostering social cohesion are the bedrocks of national development but they are also projects with a strong global dimension.


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← 1. The Gini index measures the extent to which the distribution of income (or, in some cases, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution. A Lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting with the poorest individual or household. The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. Thus, a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality (World Bank, 2020[13]).

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