Summary

The complex trend for increased income inequality since the 1980s is marked by an acute disparity in degrees of inequality between and within countries, including when these are at similar stages of development. Although extreme poverty has substantially declined, relative poverty has remained constant, while wealth is concentrated in the hands of a minority of individuals. International institutions and governments are becoming increasingly aware of the need to combat inequality, but they are doubly limited in their capacity to regulate and redistribute by the boom in privatization and the high incidence of tax evasion.

A trend toward increasing inequality

While inequality between populations take many different forms (living standards, access to global public goods), changes in income inequality across the world occupy a central and controversial place in the debate on globalization.

International inequality (i.e. between nation states) can be measured by differences in per capita GDP at purchasing power parity (PPP) and differ depending on whether or not they are weighted by population for each country. The unweighted figures have been constantly rising since the early nineteenth century due to greater increases of wealth in the richest countries and populations. When weighted, international inequalities increased strongly from the 1850s, stabilized in the 1950s and even more in the 1980s, and have declined slightly since the 2000s. Indeed some so-called developing countries have caught up with the rich countries. These are the “newly industrialized countries” (South Korea, Taiwan, Singapore) and countries with low wages and high technological capabilities (China, India). Other developing countries have joined the poor countries, increasing the gap between the rich and least developed countries (LDCs).

Internal and global inequality

Internal inequalities within societies (measured by the Gini Index) diminished noticeably in the first half of the twentieth century, before increasing to various degrees in over fifty percent of countries. Globalization has fueled growth, but led to greater inequality in the countries of the South and in China, and also greater gender inequality. The lack of social redistribution and the internationalization of the labor market have led to a bias in favor of skilled work and increasing global competition in the low wage sector. In rich countries, inequality was held in check during the post-war period of the Trente Glorieuses (1945-1975), but began increasing again in the 1980s due to significant increases in high incomes, a greater concentration of income from capital, lower tax rates (halved in the United States and the UK) and social security benefits rising at a lower rate than real wages.

Global (or world) inequality measures inequality between individuals within the global population using the global Gini Index and reflects the combined measurements of weighted international inequality and internal inequality. According to the World Inequality Database, since the 1980s, the richest 1 % have benefitted from twice the income growth of the poorest 50 %, who have, however, also seen their incomes grow (particularly in China and India). Conversely, the incomes of the middle 49 % have stagnated and sometimes dropped. Across the world, the increase in inequality has been highest in Russia, India, the United States and China, has remained high in the Middle East, Brazil and sub-Saharan Africa and is more moderate in Europe.

Income inequality: divergent trajectories, 1980-2016

Source: World Inequality Database, http://wid.world 

Comment: The curves show the proportion of income owned by the most affluent sections of the populations in some states or regions between 1980 and 2016. Inequalities are more marked in the South (the Middle East, Africa, and Brazil) – where over half the national wealth is concentrated in the hands of the richest 10% – than they are in Europe. In India, inequality clearly increased over the period, in 2016 reaching the level of Brazil. This was also true of China and, to a lesser extent, the United States.

Relative poverty and ultra-concentrated wealth

The number of people living in extreme poverty has gone down by two-thirds since the early 1990s, but 700 million people were living on less than $1.90 a day in 2015, mainly in sub-Saharan Africa and South Asia. Poverty is also present in the rich countries, where social models were undermined by a financial crisis that initially affected the poorest individuals and extended to new social categories (the working poor, single-parent families, young people, etc.). The United States is one of the developed countries where poverty is most widespread and has been increasing since the early 2000s.

Multidimensional Poverty Index, 2005-2015

Source: S. Alkire and U. Kanagaratnam, “Multidimensional Pover ty Index-Winter 2017-2018: Brief Methodological Note and Results”, Oxford Pover ty and Human Development Initiative, University of Oxford, “OPHI Methodological Notes 45”, 2018.

Comment: This is a composite poverty indicator: a single value is calculated for each country by combining ten criteria that consider the number of privations in terms of health, education, and standard of living; but only for countries “of the South,” (i.e. the Southern hemisphere) which are in principle more affected by poverty. India has the largest numbers, with over 600 million individuals, while there is also a strong prevalence (percentage of population) in sub-Saharan Africa (especially from Burkina Faso to Somalia).

The most notable development in inequality is the massive enrichment of 1 % of the population. According to Oxfam, in 2017, the world’s eight richest people – all men – owned as much wealth as the 3.6 billion poorest. According to the Credit Suisse Research Institute, 1 % of the richest people owned more than half the wealth of the world’s households.

Billionaires according to Forbes, 1999-2018

Source: Forbes, www.forbes.com/billionaires 

Comment: The illustration shows the profile of billionaires in the world. According to Forbes magazine, their number has multiplied by 5 in 20 years. In 2018, there were over 2,000 of them, the great majority consisting of men (90%) and older people (three-quarters aged between 50 and 80). The “invisible” industries such as services and sales, telecoms and finance, banks and insurance are the main sectors of activity on which this concentration of wealth is based.

Branko Milanović has shown that four-fifths of global income inequality is linked to the country and, to a lesser extent, the social group into which a person is born, and only one-fifth to current state of the economy, personal merit or luck. This leads people in poor countries to aspire to migrate to richer countries.

Increasing privatization in rich and emerging countries has probably reduced the capacity of states to combat inequality, notably in China and Russia. Reductions in public ownership and the prevalence of tax evasion limit the ability of governments to regulate the economy and redistribute income in order to keep inequality in check.

In developed countries, income inequality is reduced by around one-third through taxes and direct payments. Such redistribution is more limited in developing countries, due to alternative political choices and lower, less progressive taxation and expenditure. Alerted to the damaging consequences of excessively high levels of inequality for economic growth, the IMF suggests governments should implement a wealth tax and green taxes, increase tax on the income from capital and real estate, strengthen and universalize social protection provision and invest in education, health and gender equality.

Keywords

To quote this article

" Rich and Poor " World Atlas of Global Issues, 2018, [online], accessed on Mar 15 2021, URL:
https://espace-mondial-atlas.sciencespo.fr/en/topic-contrasts-and-inequalities/article-1A01-EN-rich-and-poor.html

References

  1. World Bank, Monitoring Global Poverty: Report of the Commission on Global Poverty, 2017.
  2. Credit Suisse Research Institute (CSRI), Global Wealth Report, 2017.
  3. Deaton, Angus, The Great Escape. Health, Wealth and the Origins of Inequality, Princeton, Princeton University Press, 2013.
  4. International Monetary Fund, IMF Fiscal Monitor: Tackling Inequality, 2017.
  5. Holton, Robert J., Global Inequalities, New York (N. Y.), Palgrave Macmillan, 2014.
  6. World Inequality Lab, World Inequality Report 2018, 2017.
  7. Larrère, Catherine, “ La justice environnementale,” Multitudes, 36, 2009.
  8. Maertens, Lucile, “Les pauvres à la merci des dégradations environnementales,” in B. Badie and D. Vidal (eds.), Un monde d’inégalités, Paris, La Découverte, 2015.
  9. Martinez-Alier, Joan, The Environmentalism of the Poor: A Study of Ecological Conflicts and Valuation, Cheltenham, Edward Elgar Publishing, 2002.
  10. Milanović Branko, Global Inequality: A New Approach for the Age of Globalization, Cambridge (Mass.), Harvard University Press, 2016.
  11. Observatory of Inequalities.
  12. Oxfam, An Economy for the 99%, 2017.
  13. Pellow, David N. and Brulle, Robert J. (eds), Power, Justice, and the Environment: A Critical Appraisal of the Environmental Justice Movement, Cambridge (Mass.), The MIT Press, 2005.
  14. Piketty, Thomas, The Economics of Inequality (trans. Arthur Goldhammer), Cambridge (Mass.), Harvard University Press, 2015.
  15. Robbins, Paul, Political Ecology: A Critical Introduction, Hoboken (N. J.), Wiley, 2012.
  16. Schlosberg, David, Defining Environmental Justice, Oxford, Oxford University Press, 2007.
  17. Stiglitz, Joseph E., The Great Divide: Unequal Societies and What We Can Do About Them, New York, Norton, 2015.

Continue in the Atlas

IntroductionRepresenting the WorldContrasts and InequalitiesDevelopmentback to top