A glance at World’s Poverty and Inequality (2/3)

The previous post stressed how high global inequality is nowadays. An important question to ask is: How are these figures evolving over time? Are things going better or is the situation worsening? It is in fact impossible to answer categorically to this last question. Even though we hear a lot that “inequality is growing”, a major fact is going against this impression: the strong economic growth of a few heavily populated emerging countries (China, India, Brazil, etc.).

If we consider the past evolution of global relative inequality (using as an indicator the factor between the mean revenue of the 10% poorest agents of a population and the mean revenue of the 10% richest), the major fact was that it started increasing since the beginning of the industrial revolution, at the beginning of the XIXth century. The countries experiencing this revolution (Western countries at first) saw part of their population enhance considerably their revenues. This rise in global inequality experienced a 15 year pause after WWII (redistribution programs in rich countries, spread of communism among other countries) but restarted shortly after. This trend of global inequality increase was reversed 20 years ago. The growth of heavily populated emerging countries, mainly in Asia, raised the revenue of their poor population. We are therefore witnessing currently a significant global inequality decrease.

Nevertheless, this does not mean that claiming inequality is growing is false. Indeed, not all poor countries experience economic growth. If we look at inter-country inequality (inequality between the mean revenue of different countries), the difference in revenue continues to increase between the 10 countries with highest revenues and the 10 countries with lowest revenue. Those poor countries (mainly in Africa) experienced a mean economic growth of 0.3% during the 30 last years while this growth was of about 2% for the rich countries and even more for emerging countries (China 8%, India 4%,…). The contradiction of a higher inter-country inequality and lower global inequality is due to the very large population some emerging countries have. If all the poor countries followed the path of emerging countries, inter-country inequality would decrease. Whether or not this will happen depends on the reunion (or not) of the conditions favouring economic growth in poor countries.

Note that if this factor (relative revenues) decreased during the past 20 years, it does not mean that absolute revenue difference did so. The absolute difference between the poorest 10% and richest 10% increased by 6000€ during the same period.

Finally, if we look at the evolution through time of intra-country inequality (inequality a country experience in its own population), the following pattern emerges: After the start of the process of industrialisation, intra-inequality in Western countries started to rise. This trend was reversed after WWII (for the reasons given above) but after a stable period lasting until 1980, intra-country inequality started to rise again. Even though it has not yet attained the level it had before WWI, this inequality is accelerating. If this pattern would continue, intra-country inequality could at some point threaten civil peace.

Based on those observations it is not impossible to imagine a future where most inter-country inequality would disappear and intra-country inequality would be high. F. Bourguignon calls this evolution an “internalisation” of global inequality.

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