Dr Yim-fai Luk
31 December 2025
In 2025, despite the threat posed by Donald Trump’s disruptive reciprocal tariffs and various other uncertainties, the global economy fortunately maintained a degree of resilience and recorded growth of about 2.7%. At this turn of the year, while attention is naturally on short-term changes and transitions, some long-standing and deeply entrenched issues such as climate change, income inequality, debt crises, geopolitical conflicts, and internal imbalances in major economies should not be overlooked. During the year, these problems showed no signs of improvement and, in fact, deteriorated.
To take a longer view, after a quarter of the 21st century has passed, the progress of human society has propelled production and wealth to historical highs. According to initial estimates from the International Monetary Fund, global GDP in 2025 was approximately US$117 trillion (at current prices), and McKinsey & Company estimated global real wealth at around US$600 trillion, excluding financial wealth in which assets and liabilities offset each other (see Note 1). If these figures are divided by the global population of 8.3 billion, the per-capita GDP amounts to about US$14,000, while the per-capita real wealth comes to US$72,000. Of course, we cannot―and should not―pursue absolute equality in distribution. However, comparing these figures with reality can serve as a reference for the current global economy. Clearly, behind these macro figures, the financial circumstances of most individuals fall short of these average figures.
Income and wealth inequality is a universally recognized personal experience and an inescapable reality. Regarding the latest situation, reference can be made to the World Inequality Report 2026, released just three weeks ago (see Note 2). As generally expected, the report points out that global income and wealth inequality not only persists, but also keeps deteriorating. At present, the richest 10% of the world population earn 53% of the total global income, a share higher than 52% in the same report published in 2018. The bottom 50% of the population earn only 8% of the total income, down from 10% in 2018. Compared with income, the distribution of wealth is even more unequal. Currently, the richest 10% of the world population own 75% of all wealth, whereas the lowest 50% of the population hold just 2%. As for the super-rich, who account for merely 0.001% (approximately 56,000 people) of the world population, they possess 6% of all wealth—three times that of the less well-off 50% (about 4.1 billion people) of the world population. In addition, calculating the increase in wealth over the past three decades from 1995 till the present shows that the wealthiest 1% not only have a much higher initial wealth base but also enjoy a higher growth rate, creating the phenomenon of “the wealthy getting wealthier”.
For those with limited income or wealth, without any significant changes, they can plan how best to live within their means. Nevertheless, in the ever-shifting world today, large fluctuations in both income and expenditure are common. In recent years, amid the coronavirus pandemic, trade wars and tariff wars, supply chain disruption and reorganization, wars and sanctions, climate change together with natural and human disasters, the resulting opportunities and obsolescence from rapid technological development have been affecting the income and spending of governments, corporations, and individuals, casting a shadow of uncertainty over economic life. Those in extreme poverty and at the bottom income scale are particularly vulnerable. Economic insecurity has become an issue in human development and economic well-being.
Apart from poverty and low income, economic insecurity also refers to the anxiety individuals and families feel when they lack the resources, institutional safeguards, or other coping capabilities in the face of economic risks, leading to concern over decline in living standards. These risks are multifaceted, covering employment, healthcare, housing, education, social security, etc., which can become problematic in an economically uncertain environment. That being the case, the relatively vague concept of “insecurity” is difficult to define and even harder to measure. As an interesting example, an annual survey conducted by the US Federal Reserve asks a sample of 12,000 adults if they have enough cash and savings to meet unexpected expenses of US$400, such as car maintenance or medical costs. In the survey undertaken over the past three years, only 63% of the respondents say they do while the remainder report that they will have to rely on credit cards, borrowing, or selling household possessions to cover such expenses. Moreover, 13% of respondents even say they are simply unable to raise the extra US$400. Even in the US, the country with the highest production and wealth worldwide, 37% of its population is financially vulnerable. This no doubt reflects the nation’s extremely unequal income and wealth distribution, as well as its relative low personal savings rate. In America, individuals or families who find themselves in a similar situation are described as “asset limited, income constrained, employed” (ALICE). Recently, the video-game term “kill line” has been borrowed by Chinese netizens to describe this financial tipping point, making it a hot topic across Chinese online media.
It goes without saying that economic vulnerability is not confined to low-income Americans. According to the United Nations World Social Report 2025 (see Note 3), a staggering 60% of the global population is, for various reasons, in a state of economic insecurity. This includes more than 800 million people living in extreme poverty, with per-capita daily consumption of US$3 or less. US$3 per day is the latest extreme poverty line set by the World Bank. Even at the World Bank’s poverty line of US$8.3 per person per day for upper-middle-income countries, this level of consumption does not provide a sufficient sense of security. Once hit by an economic shock, people at this level are likely to fall into extreme poverty. Currently, approximately three billion people live on between US$3 and US$8.3 per day. In other words, one-third of the people in the world are in this situation. Moreover, even for those with employment income that allows a certain level of consumption, job stability is in question amid global economic uncertainty. Most jobs in developing countries are in the informal sectors and lack protection under labour laws and institutional safeguards. Workers whose jobs are influenced by tariffs and supply chain reorganization are even more susceptible to insecurity. The rapid advancement of innovation and technology in recent years has tended to favour capital and skilled labour, while easily displacing unskilled workers, thereby aggravating the anxiety of those at the bottom of the labour market.
Economic insecurity would directly dampen consumption desire unless income and consumption levels have fallen to the bare minimum required for basic subsistence. China’s consumption rate has long remained low at 40%, which cannot be regarded as unrelated to the economic insecurity of individuals and families. In contrast, with a consumption rate remaining high on a long-term basis despite being at the centre of global economic uncertainty, America may, on the surface, seem to be free from concerns over low consumption. However, upon closer inspection of the data, it is not hard to find that consumption power in the US mainly lies in the hands of high-income and wealthy individuals. Currently, the top 10% of American households by income account for close to half of the country’s total spending. This share was merely one-third in the 1990s, with consumption growth among low-income households trailing far behind their wealthier counterparts.
Economic insecurity is not just an economic issue; it also directly affects social and political affairs. It reduces the ability to withstand risks and losses, and one way to minimize risks is to maintain a sceptical and cautious attitude towards others and new developments. Long-term economic stratification and entrenched class divisions also reduce cross-class communication and the sharing of social experiences. All these factors undermine social harmony and cohesion. If economic pressure and insecurity are perceived as the outcomes of social injustice or the deprivation of personal rights, they could give rise to alienation and even resentment towards authority and institutional symbols, e.g. social elites or government departments.
Economic insecurity contains a considerable degree of personal psychological factors and represents the subjective probability before events occur. Retrospective macroeconomic data cannot capture the inner struggles of ordinary people. As 2026 draws near, the global economy appears to have safely weathered the turbulence of the past year, yet the present political and economic landscape remains only the beginning of a great transformation of the century, fraught with unpredictable twists and turns in many domains. Hopefully the global economy will steer clear of severe shocks, and the pressure will not fall entirely on low-income populations.
Note 1: https://www.mckinsey.com/mgi/our-research/out-of-balance-whats-next-for-growth-wealth-and-debt
Note 2: https://impact.hkubs.hku.hk/wp-content/uploads/2026/02/291775-World_Inequality_Report_2026.pdf
