The richest 10% can help the world’s poor. Here’s how

CHENNAI: Few things are more surprising than data about income inequality around the world. Our intuitions about this can be wildly off the mark. In the Netherlands, the average person’s income over two weeks is more than the entire yearly income of the average person in Malawi. Global income inequality is staggering.

But we can also flip this insight around. Given vast inequality, those of us living in rich countries — even on an average income — find ourselves in an extraordinary position to do good.

In this article, we explain the data that shows the scale of this opportunity and explore how those in rich countries might seize it. Less than 2% of the income of the top 10% global earners equals the entire annual income of the poorest 10%

Here’s the question that shifted our perspective on global inequality: how much would it take from the richest 10% of people in the world to match that of the poorest 10%?

Our colleague Pablo Arriagada calculated the answer using data from the World Bank’s Poverty and Inequality Platform, which revealed that it takes less than 2 cents out of every dollar. That’s less than one-fiftieth of their income, or one week of income in a year.

The second revelation that shifted our perspective on global inequality is that we are in the richest 10%. When we think of global inequality, it’s easy to picture “the rich” as someone else — those with garages full of sports cars or taking private trips to space. But the richest tenth of the world includes us and likely many others who don’t intuitively think of themselves as “the rich”.

For a one-person household, an annual post-tax income of $20,000 puts you in this category. That income bracket captures more than half the population in rich countries, like the Netherlands, USA, or Germany. Realising this is both sobering and empowering. It means we’re not just observers of global inequality — we’re participants with big levers to act on it. We can reduce it.

Here are three ways those in rich countries can help those in poor countries.

1. Support global redistribution through government foreign aid: Foreign aid still dwarfs private philanthropy and is one of the biggest channels of global redistribution. Some of its accomplishments have been remarkable:

· Gavi, the Vaccine Alliance, has vaccinated hundreds of millions of children against diseases and has been estimated to have saved 1.5 million lives.

· Between 2004 and 2023, the United States dedicated just under 0.2% of its national income to foreign aid programmes. Still, its program combating the HIV epidemic, primarily in low-income countries, has saved an estimated 19 million lives. And that represents just one programme among many.

· A recent study in The Lancet estimates that USAID programmes helped prevent over 91 million deaths between 2001 and 2021, including 30 million child deaths.4

Foreign aid is far from perfect, and money can easily be wasted on ineffective programmes. But its challenges and inefficiencies are arguments for improving efficiency rather than cuts.

People may disagree on how useful foreign aid is. But rich countries have seen that it can work, and they’ve committed to continuing to help the poorest countries.

In 1981, the major foreign aid donor countries made a promise at the UN: at least 0.15% of their national income would go to the world’s least-developed countries. That’s far less than the 2% mentioned at the start of the article. These least-developed countries, such as Malawi and Mozambique, are home to populations largely among the poorest 10% of the global income distribution.

Over the years, the major donor countries repeated their pledge. However, according to the most recent data (from 2022), most countries failed to honour this promise. The chart shows the 20 OECD countries giving the most aid (as a percentage of their national income) to the world’s poorest nations. Only three countries met the target in 2022: Luxembourg, Sweden, and Norway.

Given the extreme global inequality outlined earlier, increasing aid to the least developed countries represents a modest step toward addressing a profound imbalance — one that rich nations have repeatedly promised but failed to take.

Many countries, including the US and the UK, have proposed aid cuts instead. Projections indicate that the American reductions alone could lead to 14 million additional deaths by 2030.

It can feel like there’s not much one person can do about government cuts. But this isn’t a reason to despair. People in rich countries can not only demand that their governments do better; each of them also has the power to make a difference through direct donations that reach those in need.

2. Address global inequality through charitable giving: Reaching the world’s poorest was once extremely complicated for individuals. But today, reliable channels exist that handle the logistics for you.

For evidence-based giving, GiveWell researches and ranks charitable organisations by their cost-effectiveness, helping donors find where their contributions will have the greatest measurable impact. Their research shows that many of us can save a child’s life through simple interventions, like providing vitamin A supplements to children in low-income countries or distributing bed-nets to protect against malaria.

When it comes to addressing global inequality, one charity that stands out is GiveDirectly. While charities often face criticism for high administrative costs, this cash transfer organisation gets donations directly to people with limited overhead. For every $10 donated, $8 goes directly to those in need. These direct cash transfers reach families in countries with particularly high poverty rates, like Malawi, Mozambique, Rwanda, Uganda, and Kenya.

Giving money directly to poor households really does help. A meta-analysis of randomised controlled trials on such cash transfers to low- and middle-income countries shows a clear pattern: when poor people receive cash, they use it to improve their lives. They spend it on essentials like food, school fees, and healthcare. This improves their well-being, reduces stress, and leads to healthier and taller children.

Additional studies have also shown that cash transfers increase recipients’ use of health services. There’s also extensive research examining potential negative consequences, and common concerns appear to lack solid empirical support.

3. Raise awareness of global inequality: Let’s return to where we began: the gap between our expectations and the reality of global inequality. For this, we want to share an insight from a paper by political economist Gautam Nair.

Take a moment to consider: what do you think is the global median income? In his paper, Nair asked a large, representative sample of Americans about the global median income. He discovered that they think the median income is much higher than it is. On average, they overestimated this figure by a factor of 10.

Because Americans think people globally earn far more than they really do, they underestimate their own relative income. In other words, they imagine they are only a little richer than the typical person worldwide, when they are vastly richer.

American citizens are ten times richer than they believe, compared to the global median. This reminded us of seeing the 2% figure for the first time, challenging how we thought about global inequality.

This gap between perception and reality matters when it comes to foreign aid and charitable giving. Nair’s research revealed that correcting false beliefs can directly impact a person’s willingness to support people in poorer countries.

When participants learned the actual global median income, their generosity increased considerably. They not only expressed support for higher foreign aid spending, but also changed their behaviour: their willingness to donate to international charities rose by 55% compared to those who remained unaware of the true global income disparity.

Once they become aware of their relative position in the income distribution, many people want to help the poorest people more. If understanding these facts can spark generosity, even talking about the statistics in this article with someone could be a small but meaningful first step. Perhaps some people decide to act on this and use their opportunity to help those at the other end of the income distribution.

BLURBS

Less than 2% of the income of the top 10% global earners equals the entire annual income of the poorest 10%

Many countries, including the US and the UK, have proposed aid cuts instead. Projections indicate that the American reductions alone could lead to 14 million additional deaths by 2030

When poor people receive cash, they use it to improve their lives. They spend it on essentials like food, school fees, and healthcare. This improves their well-being, reduces stress, and leads to healthier and taller children

When participants learned the actual global median income, their willingness to donate to international charities rose by 55% compared to those who remained unaware of the true global income disparity