Home > Uncategorized > How bad is global inequality, really?

How bad is global inequality, really?

from Jason Hickel

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.

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 Inequality 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.

  1. EDWARD K ROSS
    August 9, 2019 at 1:17 am

    Excellent article , from experience as a volunteer in the 1970s and observation since then it continues to amaze me that academics and politician’s continue with the B S such as tax cuts to the already wealthy will trickle down to the disadvantaged. For example on the WEA blogs and posts it was claimed that the American tax cuts only enabled the wealthy to increase shareholding of stock. Which definitely did not create jobs, or improve living conditions for the disadvantaged. My simple challenge to economists and others is to stop beating their breasts and start doing something constructive to rectify the situation. For example find ways to inform the public that in a democracy they have the right to have a genuine voice in the political economic system.

    BECAUSE as;
    “In the modern world it seems that the government may be corrupted, like those of te Greeks, by the misguided political activities of the people, but they may also be corrupted by the political activities of the people’s representatives and the conduct of public servants. This point brings us to the debates between the realist theory of democracy and its radical democratic opponents” Hindess 2000

    Thus in my simple mind as I have repeatedly stated, the answer is to educate students and people so that they are able to make an informed decision on the form of democracy they wish to experience. Ted

  2. Helen Sakho
    August 9, 2019 at 1:28 am

    The trickle up effect was perfectly predictable decades ago. The cycle of economic violence against the poor is global and no-one seems to care much. Add to this the collapse of almost all forms of democratic accountability everywhere, one simply cannot feel utter despair.
    As a disobedient student of Samuelson, I argued many decades ago that his “Positive Economics” should in real terms be called “Negative Economics”. They have added nothing positive to our understanding of the real world. And they still do not. Thanks for both comments above.

  3. Helen Sakho
    August 9, 2019 at 1:29 am

    …feel anything but utter despair…

  4. August 9, 2019 at 5:21 am

    It is totally deliberate that we the general public are in the dark about the true nature of politics and economics we live in today. Economists give neoliberalism [a better term is “Predatory Capitalism”] a fig leaf of respectability [self calling it a science and manipulating it so as to have its own Nobel Prize -scandalous that] The USA is the criminal in chief of this state of affaires.
    Fortunately the internet works to the extent that the truth gets out but not enough yet to make a difference for most of us. We who read this blog are among the exceptions, and followers of MMT are also getting the truth. But we are few and are a long way from anything like a majority.

  5. rongoldring
    August 10, 2019 at 7:37 am

    Plots can show anything. Both plots are “true”, but the elephant graph is manipulative.
    How much of each percentile’s income is left as surplus after the absolutely necessary expenditures are deducted? In view of the staggering household debts, this surplus is negative for the majority of percentiles.
    The elephant plot is an anecdote, belonging to the category of “plots you should be wary of – never use them for decision making”

  6. Scott Baker
    August 12, 2019 at 9:59 am

    It may be even worse for the poor than that. If the poor simply moved into the cash economy, while losing access to things like communal land and resources, and maybe even “community” itself, are they even any better off at all? What good is an 82% increase in cash income if you lose your land and have to live with a dozen others in a factory dorm and work 12 hours/day for bare subsistence?

  7. Ken Zimmerman
    August 13, 2019 at 12:41 pm

    Economic inequality is difficult to understand and deal with via public policy. For example, it’s related to much more than economics. Anthropological research has found that high levels of socioeconomic inequality are linked with worsened health outcomes across an entire society. Social scientists debate whether such societies are unhealthy because of diminished social cohesion, psychobiological pathways, or the material environment. Anthropologists question these mechanisms, emphasizing that finely focused ethnographic studies reveal that social cohesion is locally and historically produced; psychobiological pathways involve complex, longitudinal biosocial dynamics suggesting causation cannot be viewed in purely biological terms; and material factors in health care need to be firmly situated within a broad sociopolitical analysis. As a result, anthropologists argue that the interaction of socioeconomic inequality and the health of societal members cannot be viewed let alone understood within any framework based on methodological individualism, assumed universalism, and unidirectional causation. Rather, affliction must be understood as the embodiment of social hierarchy, a form of violence that for modern bodies is increasingly channeled into differential disease rates and can be measured in terms of variances in morbidity and mortality between social groups. Ethnographies on the territory of the neoliberal global health economy suggest that the violence of this inequality will continue to spiral as the exclusion of poorer societies from the global economy worsens their health. Creating an illness poverty trap that, with few exceptions, has been greeted by a culture of indifference that is the hallmark of situations of extreme violence and terror. Studies of biocommodities and biomarkets catalogue the processes by which those who are less well-off trade in their long-term health for short-term gain, to the benefit of the long-term health of better-off individuals. Paradoxically, new biomedical technologies have served to heighten the commodification of the body, driving this trade in biological futures as well as organs and body parts. A commodification of the human body well beyond anything ever created in over 5,000 years of slavery.

  8. Charlie
    August 14, 2019 at 1:49 am

    In high school some 60 years ago , mr. Inman lectured us on the dangers of percentages. O to 100%. Where the ends are both well defined. Other uses are subject to a variety of misinterpretation. That advice is particularly appropriate for statisics. And for this application, money and economics beware of misapplication.

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