Economy

How Bad is Global Inequality, Really?

March 6, 2019

Most everyone who’s interested in global inequality has come across the famous elephant graph, originally developed by Branko Milanovic and Christoph Lakner using World Bank data. The graph charts the change in income that the world’s population have experienced over time, from the very poorest to the richest 1%.

We can update the elephant graph using the latest data from the World Inequality Database (WID), which covers the whole period from 1980 to 2016 using a method called “distributive national accounts”. Here’s what it looks like in real dollars (MER), developed in collaboration with Huzaifa Zoomkawala (click through for a series of interactive charts that Huzaifa has created):

elephant.png

The elephant graph has been used by some to argue that neoliberal globalization has caused inequality to decline since 1980. After all, it would appear that the biggest gains have gone to the poorest 60% of the world’s population, whose incomes have grown two or three times more than those of the richest 40%.

But this impression can be misleading. It’s important to recognize that the elephant graph shows relative gains, with respect to each group’s baseline in 1980. So the poorest 10-20th percentile gained 82% over this period. That sounds like a lot, on the face of it. But remember that they started from a very low base. For people earning $2.40 per day in 1980, their incomes grew to no more than $4.36 per day… over a period of 36 years. So, about 5 cents per year.

Slide Anything shortcode error: A valid ID has not been provided

That’s not much to celebrate, particularly when these gains don’t come anywhere close to lifting people out of poverty. Remember, the poorest 60% – the ones depicted as the “winners” in the elephant graph – continue to live under the poverty line of $7.40 per day (2011 PPP).

Meanwhile, the global rich may have seen their incomes increase by a smaller proportion, but because they started from a much higher base their absolute gains have been far greater.

What we need, then, is to render the elephant graph in absolute terms, to see who’s benefited most from the distribution of new income around the world. Here’s what it looks like:

elephant.png

Suddenly the story changes. It becomes clear that it’s the richest 1% who have gained the most – by far. The incomes of the world’s poor have barely budged by comparison.

It’s not an elephant graph anymore. It’s a boomerang. This seems a fitting image, given how income has an uncanny way of circling back to those who already have it. Or we could call it a scythe, which nicely captures how the rich are harvesting the world’s abundance for themselves.

Things get even more extreme once we start separating out top incomes, which is what the World Income Database allows us to do. Click here to see how the “elephant” shape disintegrates and the scythe becomes even sharper. Here’s a table showing how each group has fared from 1980 to 2016:

Screen Shot 2019-03-02 at 9.48.15 PM.png

The results are staggering, really. For the poorest 60% of humanity, the average person saw their annual income increase by only about $1,200… over 36 years.

Meanwhile, those in the 70-80th percentile, the “losers” according to the elephant graph, are revealed to have gained more than twice that amount. Those in the 80-90th percentile (also represented as losers in the elephant graph) gained four times more. And the richest 1% got one hundred times more.

As for the top incomes… well, they have grown by what can only be described as an obscene amount, with millionaires doubling or tripling their annual incomes, gaining some 14,000 times more than the average person in the poorest 60% of the world’s population.

All of this makes it clear who the real beneficiaries of globalization have been. And suddenly it seems a bit absurd to be touting as “progress” the pennies that have trickled down to the poorest when the overwhelming majority of new income since 1980 has been captured at the top.

Jason Hickel

Dr. Jason Hickel is an economic anthropologist, author, and a Fellow of the Royal Society of Arts.  He is Professor at the Institute for Environmental Science and Technology at the Autonomous University of Barcelona, Visiting Senior Fellow at the International Inequalities Institute at the London School of Economics, and Chair Professor of Global Justice and the Environment at the University of Oslo. He is Associate Editor of the journal World Development, and serves on the Climate and Macroeconomics Roundtable of the National Academy of Sciences, the Statistical Advisory Panel for the UN Human Development Report, the advisory board of the Green New Deal for Europe, the Harvard-Lancet Commission on Reparations and Redistributive Justice, and the Lancet Commission on Sustainable Health.

Jason's research focuses on global political economy, inequality, and ecological economics, which are the subjects of his two most recent books: The Divide: A Brief Guide to Global Inequality and its Solutions (Penguin, 2017), and Less is More: How Degrowth Will Save the World (Penguin, 2020), which was listed by the Financial Times and New Scientist as a book of the year.

Jason's ethnographic work focuses on colonialism, anti-colonial struggles and the labour movement in South Africa, which is the subject of his first book, Democracy as Death: The Moral Order of Anti-Liberal Politics in South Africa (University of California Press, 2015). He is co-editor of two additional ethnographic volumes: Ekhaya: The Politics of Home in KwaZulu-Natal (University of KwaZulu-Natal Press, 2014) and Hierarchy and Value: Comparative Perspectives on Moral Order (Berghahn, 2018).


Tags: economic inequality, poverty