Inequality in a Global Context

When it comes to wealth and income inequality — a subject I have discussed at length here —  the news is rarely positive. As the following graph makes succinctly clear, the issue has worsened dramatic over the last few decades.

Income includes household wages and government transfers. Source: Census / Colin Gordon. Credit: Quoctrung Bui / NPR

While the most recent data in these sorts of graphs are around seven years old, newer evidence suggests the problem is still prevalent, if not worsening — at least in the United States.

According to an interesting new paper on global income distribution conducted by economists Branko Milanovic and Christoph Lakner, the global pictures regarding income inequality is far more nuanced, if not positive. As NPR reports, the study found that globalization — the same mechanism that plays a large, though hardly solitary, role in rising inequality — has had the opposite effect, broadly speaking.

Essentially, they look at inequality at a global scale, accounting for the world’s population as a whole rather than breaking it down country-to-country (as is usually the case).  S what happens if you look at the change in income over the past few decades for everyone on Earth? Here’s what the graph of the data shows:

Income is defined as per-capita income. Source: Milanovic and Lakner (2014). Credit: Quoctrung Bui/NPR

So what does this mean? Basically, people in the middle of the global income distribution — mostly concentrated in China and India, as as well as a few other developing Asian countries — have had the biggest gains in come by percentage. In fact, the average American, like most others in the developed world, would fall at the far right of this graph, at the top of the global income distribution.

So in a global context, the typical developed-world individual is capturing the lion’s share of income growth. Assuming this is truly the case (I await for more research and scrutiny to be certain one way or the other) that does not make inequality any less worrisome, now and especially in the long-term. Worldwide, we are still finding far too much wealth concentrated at the top amid austere policies, insufficient investment in the public good, and the persistent absolute poverty of hundreds of millions of people.

An increasingly transient global elite is still capturing the lion’s share of investment — as made depressingly clear by the revelation that 85 individuals hold more wealth than 3.5 billion people. Too many countries are mired in the same old problems despite the ever-growing generation of wealth that never seems to be reflected in higher wages, incomes, or public investments. Even if some people in this arrangement have it worse than others, the fact that many have it worse than they should given the capital potential is a problem, for most individual countries and the world at large.

Those are just my brief thoughts. What are your opinions?


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