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Incomes and Inequalities

Building on an earlier post by Kari which addressed inequality within India, I wanted to put up a few figures from a very engaging piece by Milancovic et al of the World Bank, which took a thorough look at the question of global inequality from a philosophical level as well as at the trends through the course of the last 30 years, and then over the last 150 years.  As a note, he does comment early on on the difficulty of determining income disparity on the granular level desired (individuals!), and notes that the places where we have the worst data are the poorest (Somalia, DRC, Afghanistan) – thus, the estimates of inequality are likely the lower bound of the true value, if anything.

One of the key historical points he makes is that global inequality previously was largely a matter of intra-country rather than inter-country disparities, as evidenced by the following figure:


Here, “class” refers to the amount of global income inequality due to the difference in income within a country (ie, between difference classes), while “location” refers to the amount of global income inequality that occurred due to disparities between countries.  His pithy comment is that we now have a post-Marx world – while in 1870 the majority of disparity was due to class differences (and thus solidarity between proletariat of different nations made sense), in 2010 global inequality stems from differences between countries.

This figure demonstrates that once more, here by breaking down each country into income groups by ventiles (1/20ths), then graphing their positions within the global economy in terms of income:

country disparities

We can readily ascertain that the poorest 1/20th of the US population is still better off, in absolute income, than much of India; that Brazil has a society with pronounced inequality; and that China on balance is doing better than India.  Focusing in on the comparison between the USA and India, a few comments that came to mind:

–          Income does not equal comfort; the top 1/20th of the Indian population has an objectively better life than the bottom 1/20th of the American population, in part because their income goes a lot further. Still, a basic level of income does provide some comfort, and thus the bottom 1/20th of the USA income distribution is objectively a lot better off than the bottom 1/20th of the Indian (and likely the bottom 1/2, I’d wager).

–          This graph does not capture the extremes, where the top 1% (let alone 0.1%) of India is doing very well, and the bottom 1% of the USA likely would drop further down (though not down to the bottom 30% of global income)

Milancovic pulls out two great thoughts on this distribution, one ethical and one predictive.  On an ethical level, he points out that these disparities in income are, for the majority of the population, entirely based on the country in which they are born.  Regardless of whether you believe that will and effort can ensure people improved income within a country (and thus that the poor are in part where they are because they deserve to be – I think other data weighs heavily against this on domestic and international levels, but that’s another post), the data here demonstrates that the majority of our location within the global economy is due solely to where we are born.  He appropriately asks whether this is the ideal situation.

Finally, noting that on an economic level the surest way to raise your income would be to shift locations, he closes with a prediction:

I conclude with something that resembles a slogan: either poor countries will become richer, or poor people will move to rich countries.  Actually, these two developments can be seen as equivalent.  Development is about people: either poor people have ways to become richer where they are now, or they can become rich by moving somewhere else.  Looked from above, there is no real difference between the two options.  From the point of view of real politics, there is a whole world of difference, though.

I’d close in turn with a final figure, one showing the percent of GDP provided by sundry countries towards development aid for health (note that is only a fraction of overall development aid, ~20% of the average).  As the IHME report I pulled this from notes, most rich countries remain well below their stated goals of providing 0.7% of GDP toward development aid…which must give one pause, given the state of global inequality.

development aid for health

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