The shifting geography of global inequality

Will within-nation inequalities continue to overshadow between-country policy challenges? Dr Rory Horner explains that if converging trends across individuals in the world persist, then the relative importance of within-nation inequalities to global inequalities will increase.

The last two decades have seen a remarkable shift in the pattern of global income inequalities. For the first time since the Industrial Revolution, a trend of economic convergence between individual world citizens has been identified. The global Gini, a measure of income inequality across all individuals in the world, fell from 69.7 in 1988 to 66.8 in 2008, and again to 62.5 in 2013. 

Highly populous China and India are recognised as major drivers of this decline, and countries in sub-Saharan Africa and Latin America have also played a role. In light of such trends, and in contrast to two centuries of what was referred to as “divergence, big time” between developed and developing countries, some economists have pointed, somewhat optimistically, to aspects of a “great convergence”. 

Unfortunately, reduced inequality between countries has coincided with growing inequalities within many countries (see Figure 1) in both the global north and south. In-country inequalities are now mostly higher than in 1990. The large emerging economies of China, India and Russia have in particular experienced significant increases in income inequality since moving to more market-based economic systems.

While many in both developed and developing countries are experiencing very little by way of economic progress, the very richest people in the world have seen their incomes and wealth grow significantly. The January 2017 Oxfam report found that just eight men collectively own a level of wealth equivalent to that of the bottom half of the global population, 3.6 billion people. 

It’s true that many in emerging market economies have experienced significant income growth from a low starting point. But, although the number of those living in extreme poverty (a very low bar) has reduced to less than 10% of the world’s population as people move to a status of “precarity”, consumption floor analysis suggests that the poorest of the poor have seen little benefit.

Will within-nation inequalities continue to overshadow between-country policy challenges? Within-nation inequalities tend to have upper bounds – including redistribution measures which curb increases in inequality. Even if degrees of inequality within nations stagnate, if converging trends across individuals in the world continue, the relative importance of within-nation inequalities to global inequalities will increase.

Such trends raise possibilities of what was referred to in a recent World Social Science Report as “a partial substitution of inequality within countries for the inequality between countries”. These trends are especially significant given that people tend to weight relative inequality (to those in closer proximity, such as within their own country) higher than absolute inequality (to the whole world, in this case). 

Given growing nationalism, we can expect that foreign sources (trade, migrants) will be more likely to be blamed for inequality in countries in the north . Moreover, powerful foreign actors can amplify the domestic causes of inequality in the south, thus dodging responsibility and the need to address inequalities at the international level. 

Despite suggestions of a global convergence, addressing global inequalities must continue to prioritise people in the global south who still face the biggest challenges. However, it also needs to take increasingly seriously those “left behind” in the global north, who may be better off than most in the south, but have experienced little gain for a long time.

Their marginalisation is not only extremely problematic in terms of social justice, and supporting peace and stability, but if it continues to give rise to strong nationalism, it could augment a variety of global inequalities.