The 1% : Why does it exist?

The 1% of the world's population that owns 45% of the wealth in the world, if you have read something about the income distribution then you might have heard of the 1%. Multi-billionaires, owners of several businesses are counted in this 1%, some names that might pop up could be Jeff Bezos, or Elon Musk if you're in a debate with someone about the 1%. And that is very much true as well, there is a proportion of the population that is seriously wealthier than you or me. But why does this inequality exist? 

Firstly, the wealth distribution stems from capitalism, the motive of profit making makes it important in a capitalist society that every worker is paid according to their productivity and their importance of designation in the company. That’s why a data analyst is not earning the same as the CFO and a CFO is not earning the same as the owner of the business. And that is a sole reason why the 1% exists, productivity.

Let’s look at the classical music for example, what names come to mind? You may say Bach, Beethoven, Mozart, add two more names to the list, Brahms and Tchaikovsky, 5% of the music they composed covers 50% of the classical music repertoire. So, the 1% exists here as well, in terms of listeners, a small minority of classical composers cover a majority of classical listeners playlists. You can apply this to sports as well, Nadal, Federer and Djokovic combined hold 62 major tennis titles between them for the last two decades.  

Vilfredo Pareto was an Italian economist who introduced the world to 80/20 rule, which roughly states that a minority of population owns the majority of resources, 80:20 depicts the ratio of the majority to minority population. This rule is a gospel for economists that holds true in various situations, for example, 20 of the teams in the NBA have won roughly 75% of the championships, from those, Boston Celtics and Los Angeles Lakers have won nearly half the titles combined, a minority accounts for most of the rewards.

The fundamental here is the power of accumulated advantage, the minority only needs a slight edge over the others to slip past the majority and this advantage gets bigger over time. A game of monopoly for example, every player starts with the same amount of money but as the game progresses, players start losing money and in the end there is one winner, who has the most money collected. Hence, even if you take all the wealth in the world and distribute it evenly among the whole population on the face of the earth, the wealth will still travel back in the hands of a much smaller group in time, and that is because some people are more productive than the others.