Jun 14, 2023 - Economy

Global inequality at lowest level in nearly 150 years

Estimated Gini global income inequality index
Data: Branko Milanovic; Chart: Axios Visuals

This century has known a stunning decrease in global income inequality, bringing it down to levels not seen in well over a century. That's the conclusion that Branko Milanovic, one of the world's foremost inequality researchers, comes to in an important essay for Foreign Affairs.

Why it matters: The U.S. has only about 4% of the world's population. Increasing equality is good for the planet as a whole, but it foreshadows an end to U.S. hegemony.

By the numbers: Inequality is measured using the Gini coefficient, which runs on a scale from 0 (perfect equality) to 100 (where one person would have all of the world's income).

  • On that scale, inequality fell from 69 in 2000 to 60 in 2018 — and is almost certainly even lower today. That means the world is more equal now than at any point since about 1875.

Between the lines: The part of that number due to inequality within countries has ticked up slightly — it now stands at about 13, up from 7 in the 1990s. Conversely, the component due to inequality between countries plunged from a high of 63 in 1988 to just 47 in 2018.

  • That's a complete reversal of what happened during most of the Cold War, when inequality between countries was rising but inequality within countries fell dramatically.

Be smart: What we're seeing is not just China getting richer, although that is a large part of the story.

  • "In the 1970s, India's share of global GDP was less than three percent, whereas that of Germany, a major industrial power, was seven percent," notes Milanovic. "By 2021, those proportions had been swapped."

The big picture: People who are poor by U.S. and other rich countries' standards have been rich by global standards for as long as anyone can remember.

  • "[T]hey are now being overtaken, in terms of their incomes, by people in Asia," writes Milanovic.
  • In 2018, for every 100 Americans earning more than the median U.S. income, there were about 25 Chinese people earning that much. Within the next 20-30 years, the number of Chinese people earning more than the U.S. median will reach and then surpass the number of Americans.
  • In turn, that "would reflect a wider shift of economic, technological, and even cultural power in the world," says Milanovic.

Yes, but: While the rise of Asia in general and China in particular is inexorable, the decline of global inequality is not.

  • For the global Gini coefficient to continue to plunge, Africa would need to get substantially richer in coming decades — and "that remains unlikely," says Milanovic.

The bottom line: The countries with the richest citizens are generally the world's most powerful. That power is now more broadly distributed than at any point in over a century.

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