In a recent essay, Branko Milanovic, one of the world’s foremost researchers on inequality, comes to the positive conclusion that global inequality is at its lowest point in more than a century.
The report, titled “The Great Convergence—Global Equality and its Discontents” was published on Wednesday by Foreign Affairs, the Council on Foreign Relation’s authoritative magazine.
“The term ‘global inequality’ refers to the income disparity between all citizens of the world at a given time, adjusted for the differences in prices between countries,” the report states. The inequality is measured by the Gini coefficient, which runs on a scale from 0 (perfect equality) to 100 (one person receiving all the world’s income).
Using that scale, global inequality dropped sharply from 70 in 2000 to 60 in 2020. The findings mean that the world is more equal now than at any point since the end of the nineteenth century.
“We live in an age of inequality—or so we’re frequently told,” Milanovic states at the beginning of the report. “Especially in the wealthy economies of the West, the gap between the rich and the rest has widened year after year and become a chasm, spreading anxiety, stoking resentment, and roiling politics.”
“Globalization, the argument goes, may have enriched certain elites, but it hurt many other people, ravaging one-time industrial heartlands,” Milanovic writes.
“There is much that is true about such narratives—if you look only at each country on its own,” he explains. “Zoom out beyond the level of the nation-state to the entire globe, and the picture looks different.”
That said, the overall Gini coefficient takes both kinds of inequality into consideration—national and global. While inequality within countries has gone up, from 7 to 13 in the 1990s, inequality between countries has plunged from its peak of 63 in 1988 to just 47 in 2018.
China’s growing economy has been the main driving factor in the steep decline of global inequality in the last 20 years, although the country’s stagnating economy will not suffice to continue this trend at the current rate.
Much depends on how India evolves in the coming years, and the performance of African nations, although Milanovic was not optimistic about the latter, fearing that the continent may end up even more deeply divided as its individual countries ally themselves ever more closely with competing global powers like China or the United States.
Global Inequality Trends
The first era of global inequality began at the time of the Industrial Revolution, around 1820, when the GDP of the richest country (the United Kingdom at the time) was but five times greater than that of the poorest.
Country-to-country GDP differences increased until about 1950, a trend economic historians call the Great Divergence. Interestingly, inequality within countries was falling nearly everywhere during that time for a variety of often unrelated reasons.
The second half of the 20th century was called the time of the “Three Worlds”: the affluent First-World, comprising free capitalist nations, mostly in Europe and North America; the Second-World, the somewhat poorer and/or socialist countries, including the USSR; and poor Third-World nations, mainly in Africa and Asia.
Milanovic calls the recent trend “The Great Convergence,” although he tempers his optimism. The widening inequality observed in Western countries in particular, is a trend that he believes does not bode well: “The social polarization that would ensue would make Western societies resemble those of many Latin American countries, where gulfs in wealth and lifestyle are incredibly pronounced.”