Global Income Inequality in Numbers: in History and Now

This article presents an overview of calculations of global inequality, recently and over the long term, and outlines the main controversies and political and philosophical implications of the findings. It focuses in particular on the winners and losers of the most recent episode of globalization, from 1988 to 2008. It suggests that the period has witnessed the first decline in inequality between world citizens since the Industrial Revolution. However, the decline can be sustained only if countries’ mean incomes continue to converge (as they have been doing during the past ten years) and if internal (within-country) inequalities, which are already high, are kept in check. Mean-income convergence would also reduce the huge ‘citizenship premium’ that is enjoyed today by the citizens of rich countries. When we think of income inequality, our first reaction is to think of it within the borders of a country. This is quite understandable in a world where the nation state is very important in determining one’s income level and access to a number of benefits (from pensions to free health care), and where by far the dominant way in which political life is organized is at the level of a country. However, in the era of globalization another way to look at inequality between individuals is to go beyond the confines of a nation state and to look at inequality between all individuals in the world. Once we do so, many of the things about inequalities in general that we believe or think we know change; it is like going from a two-dimensional world to a three-dimensional one. As the world becomes more integrated, the global dimension of inequality is likely to become increasingly relevant. This is for at least two reasons: the muchincreased movement of factors of production across borders, and the greater influence of other people’s (foreigners’) standard of living and way of life on one’s perceived income position and aspirations. Greater movement of capital, goods, technology and ideas from one side of the globe to another implies greater connectivity with people who are not one’s compatriots, and greater dependence on other nations for the generation of one’s income. Movements of labor that illustrate this interdependence in a most obvious fashion are still less important than movements of capital, but they are increasing. The knowledge of how other people live and how much money they make influences strongly our perception of our own income and position in the income pyramid. An imaginary community of world citizens is thus built gradually. And once this is done, comparisons of actual incomes and welfare between different members of that imaginary community acquire importance. This is why global inequality will gain in importance, even if it is not as relevant or important for an average individual as inequality within his or her political community (nation state). Once we compare ourselves with people from other parts of the world, we are indeed interested in global income distribution. Global inequality begins to matter. 1. Three concepts of inequality and how they have evolved over the past 60 years When we talk about inequality that transcends national borders, often we have in mind not one but three different concepts – even when we are not fully aware of it. I am going to articulate these three concepts. The first concept of inequality (let’s call it inequality 1) is focused on inequality between nations of the world. It is an inequality statistic calculated across GDPs or mean incomes obtained from household surveys of all countries in the world, without population weighting. To show how this is done, consider the three individuals in the top row of Figure 1. The height of each person represents the GDP or mean income of his or her country. Somebody from a poor country would be represented as a short person, somebody from a middle-income country as a person of medium height, and somebody from a rich country as a very tall person. When we calculate this concept of inequality, we take all countries with their mean incomes – we have data for some 150 countries – © 2013 University of Durham and John Wiley & Sons, Ltd. Global Policy (2013) 4:2 doi: 10.1111/1758-5899.12032 Global Policy Volume 4 . Issue 2 . May 2013 198 SpeclSection A ricle