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Publication -> The Great Inequality

File Created On:
November, 2016

Published in the November edition of Monthly Review

It is by now well known that significant and growing economic inequality is a central feature of the U.S. economy, as previous articles in Monthly Reviewhave shown.1 However, the same is also the case for much of the rest of the world. Inequality arises in other countries for reasons similar to those in the United States, but each nation has its own history, along with widely divergent economic and political structures. Here we will look first at the most recent data on global inequality, and then at its causes and consequences.

We can compare inequality around the globe by looking at the Gini coefficient, a simple concept that allows us to track a single number whose rise or fall indicates an increase or decrease in inequality in one nation, or to compare relative levels of inequality in different countries. A Gini coefficient has a value of 0 if there is perfect equality of income or wealth. That is, if income or wealth is divided into fifths (quintiles), each one-fifth of the population (the poorest, second, middle, fourth, and richest quintiles) would receive exactly 20 percent of total income or wealth. If the coefficient has a value of 1, then one person, household, or family—depending on the type of income or wealth being compared—gets all of the income or wealth. The higher the number, the greater the inequality. Chart 1 shows this coefficient (for income) for most of the world’s rich nations, as well as for a few poor and rapidly growing economies outside of Europe and North America. Notice that the coefficient for the United States is exceeded only by that for Turkey, Mexico, Chile, Indonesia, Argentina, China, Latvia, Brazil, Colombia, and South Africa.

Chart 1 cannot tell us whether income inequality has been rising or falling. We know that it has increased dramatically in the United States in recent years, but what about the rest of the world? Our knowledge here is inexact, because there are many nations, especially very poor ones, where data collection is either sparse or nonexistent. Casual observations seem to show that there is hardly a place on the globe today where the very rich do not dominate social, political, and economic life, and where those without means have not been suffering a worsening litany of woes, from dire poverty and underemployment to wars, hunger, and disease. Even the business-oriented World Economic Forum identifies rising inequality as an urgent global issue, one that is “impacting social stability within countries and threatening security on a global scale.”2 Given the data examined below, this is hardly a surprising finding, although the reference to “global security” mainly expresses the fears of the elite, and has little to do with the conditions of those who keep falling further behind those at the top. In any event, it is probably a safe bet to say that, in those countries where decent data are not available, inequality has grown.

We do have good data for many of the countries listed in Chart 1. Charts 2 and 3 reveal that income inequality has indeed grown in most rich nations. Observe that the Scandinavian nations, long noted for their relatively low levels of inequality, show considerable increases since 1980, a period when neoliberalism took firm hold of the world’s economies.

Chart 1: Gini Coefficients for Selected Countries

 Gini Coefficients for Selected Countries

Source: Organization for Economic Cooperation and Development (OECD), Income Distribution Database.

Notes: Data are for the latest available year. Adapted from OECD, In It Together: Why Less Inequality Benefits All (Paris: OECD, 2015), 6. The bar for OECD is the average of OECD member countries. The OECD is an international organization established to foster trade and economic progress.

Chart 2. Increase in Income Share of Top 1% Since 1980

Chart 2. Increase in Income Share of Top 1% Since 1980

Chart 3. Share of National Income Going to Richest 1%

Chart 3. Share of National Income Going to Richest 1%

Source: Figures for Charts 2 and 3 were taken from Facundo Alvaredo et al., “World Wealth and Income Database,” World Inequality Lab, http://wid.world, accessed October 2016. The charts were inspired by Figure 1 in the Oxfam working paper, “Working for the Few,” January 2014.

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