Global Income Inequality

Abstract

Abstract This essay describes the evolution of global income inequality over the past two‐and‐a‐half centuries, and its likely evolution during the twenty‐first century. Global income inequality—the sum of inequality within and between nations—is massive today, the legacy of uneven growth in the world's regions since the advent of the Industrial Revolution. Because incomes shot up in the West while lagging behind in Asia and Africa over most of this period, between‐nation income inequality grew dramatically, and most global income inequality now lies between nations. Economic growth remains uneven across the world's regions, but the fastest growth is occurring in populous poor regions of the world, compressing between‐nation inequality. As a result, global income inequality is currently receding, according to most (but not all) investigations of the matter. The compression of global inequality is attributable to rapid economic growth in China and India: If the rate of economic growth in China and India were the same as in the rest of the world, global income inequality would not be declining. The slow rate of economic growth in sub‐Saharan Africa, on the other hand, is retarding the decline. A high level of global income inequality is problematic in large part because it results in abject poverty for masses of people. If average income in the world continues to rise, alleviating abject poverty in the twenty‐first century, for future generations the level of global income inequality might matter much less than the level of income inequality within local communities.