What You See Is … . Not All There Is: Global Income Inequality From a Quasi-Marxist Perspective

Abstract

ABSTRACT The standard interpretation of inequality uses a number, such as the Gini coefficient, to compare income inequality across countries. These numbers apply universal upper limits to the maximum feasible inequality (Gini = 100) in vastly diverse economies even though floors for socially acceptable living standards vary quite a bit in different societies. I develop a new measure of income inequality — the Nationally Representative Inequality Extraction Ratio (NR IER) — and apply it to 112 countries. The NR IER uses country-by-country social and economic parameters to measure the distance between the actual income distribution and the country-specific feasible limit (a counterfactual distribution). I ground the counterfactual distribution in a functional income concept, corresponding to Marx’s concept of exploitation. NR IERs are inversely related to per-capita income and exceed the feasible limits in the world’s poorest countries. However, I find little variation in extractive inequality between closed autocracies (e.g., China) — where corruption is expectedly extractive — and liberal democracies (e.g., USA). Controlling for different political regimes, the NR IER explains over 60 per cent of a person’s income anywhere in the world.