The good news.
The expansion of incomes around the median of the global income distribution was so overwhelming that it ensured global inequality’s decline — despite the real income growth of the top 1% and rising national inequalities in many countries. Real incomes more than doubled between 1988 and 2011 (though the extension to 2011 is not shown in this chart), a shift that involved large swaths of people (almost a third of the world population, most of them from Asia). And although our data for the past are quite tentative and in some cases not much better than guesses, it is still the first time since 1820 that global inequality is deemed to have gone down, from approximately 69 Gini points to around 64. (On the Gini scale, 100 would be complete inequality while 0 would be complete equality).Capitalism works!
But not equality for all. There are tradeoffs.
But the essential tradeoff may still remain: are increasing national inequalities the “price” we (the world) pay for decreasing global inequality and poverty? Is one “good” thing linked to another “bad” thing? This is a particularly pertinent question because peoples’ income comparators (the proverbial Joneses) are mostly people from their own country, rather than any random person in the world. Thus, the positive developments reflected in lower global inequality may not be something—however happy we may be that they are taking place—that matters much, politically speaking.…
… if people are more focused on national inequality, their concerns about what is happening at home will dominate the “objective” reduction of inequality across the globe.
This may be politically a more meaningful way to look at global inequality, and it leads to a somber conclusion. Even if globalization were to be associated with an absolute real income improvement for all, or almost all, and reduced global inequality, if it is also associated with rising national inequalities, the unhappiness stemming from the latter may dominate. Globalization may be “felt” to produce a more unequal world, even if it objectively does not. Then the very facts that are globally hopeful and reassuring may have domestic consequences that are the very opposite.Harvard Business Review