Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Inequality is Falling Globally! (And Similar Nonsense)

John Weeks 23rd July 2014 3 Comments

John Weeks, Inequality

John Weeks

I bet you think that the rich are getting richer and the poor poorer. A few well-known facts might lead you to this conclusion. For example, in the United States income after tax per household is now over 100% greater than forty years ago (1972), while average weekly earnings in the private sector are 14% lower (see chart below).

Average household income up, wage earning income down – how do you get that result? Rich households take all the increase in income, that’s how. We find similar outcomes in Europe — UK real wages falling after 2008, real wages in Germany frozen since the late 1990s, and even worse news from the euro crisis countries (Greece, Italy, Portugal and Spain, among others). Falling wages amidst rising incomes for the rich appears to have been a global phenomenon over the last several decades.

p1, Inequality

Source: Economic Report of the President 2013

As I write in my new book, Economics of the 1%, I never fail to be impressed by the proclivity of members of the mainstream economics profession to deny and distort reality in the interests of the rich. The New York Times provided a platform for this prominent feature of the profession in an article titled “Income Inequality is not Rising Globally – It’s Falling“. In this for-the-rich-to-feel-good contribution, we are told by someone identifying himself as a “Professor at George Mason University” (whose economics department makes the one at the University of Chicago look left-wing):

Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years.

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.

Telling us that “the problem has become more acute within most individual nations” is rather like describing an earthquake as a ground tremor. Except for a few countries in Latin America, I know of none whose income distribution has not become worse (the World Bank provides us with the relevant measures).

There are many techniques for turning fact into fiction and sense into nonsense. We find one of the least subtle in this dis-informing article in the NYT, mis-quoting and mis-representing a source. In this case the cited evidence for the alleged happy outcome of falling inequality is an article by an ex- and a current employee of the World Bank (the authors summarize it here).

Tweaking The Inequality Statistics

The authors tell us that in their empirical study, “we line up all individuals in the world, from the poorest to the richest…” To put it another way, they treat the world as one country. When they do this it is statistically possible that inequality could increase in every country, but decline when everyone from every country is thrown into the same statistical basket (inequality rising within countries is statistically outweighed by a reduction in differences in capita incomes across countries).

This perverse result is the statistical outcome that brings such delight to our George Mason Professor (and most members of my profession, I regret to report). China holds 20% of the world population (1.4 billion out of 7 billion). The Chinese economy has grown at an extraordinary rate over the last twenty years. An extraordinary increase in inequality has accompanied the notably brutal form of “trickle-down” fostered by the dictatorship that mis-governs China.

The graphic below tells the China growth story, rapidly rising national income (gross national product) and rampantly rising inequality. What that means “on the ground” is the concentration of income gains among very few Chinese households (and not a small portion linked to the “Communist” Party of this aggressively capitalist country). Yes, the number of Chinese households below the poverty line has fallen. Image how many more would have risen out of poverty if inequality in 2010 had been the same as in 2000 (hundreds of millions).


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

p2, Inequality

Source: http://www.kkr.com/company/insights/global-macro-trends-14, based on IMF statistics

The old cliché coined by Mark Twain, “lies, damn lies and statistics”, seems singularly “spot-on” in this case. The meagre improvement of those households at the bottom of the Chinese income distribution compared to the “making-out-like-bandits” 1% (and bandits many are) has narrowed the gap between the world’s poorest and richest. But the fact that the ratio of the income of the richest American and poorest Chinese peasant or factory worker is now less than in 1980, 1990 or 2000 is, to say the least, trivial to the point of meaningless.

The curse of inequality falls upon people at the national level. Inequality results in the degeneration of dictatorships into fascism, and democracies into oligarchies with politics derivative from wealth, not the consent of the governed. In the United States we find clear evidence of this degeneration in the notorious Citizens United decision of the Supreme Court, which formalized the principle of one dollar, one vote.

Growing inequality everywhere enhances the power of those opposed to social protection, equal access to health care and education, and eliminating discrimination. When you put these together — the economic power to control a political system, held by those opposed to public provision of social services — rising household income brings very limited benefit to the poor of the earth, in whatever country they may live.

The reduction of abject poverty in any country of the world represents good news. Achieving it as part of a process that increases inequality within the countries renders poverty reduction unsustainable and democracy a lost relic of a more egalitarian past.

John Weeks

John Weeks is co-ordinator of the London-based Progressive Economy Forum and professor emeritus of the School of Oriental and African Studies. He is author of The Debt Delusion: Living within Our Means and Other Fallacies (2019) and Economics of the 1%: How Mainstream Economics Services the Rich, Obscures Reality and Distorts Policy.

Home ・ Economy ・ Inequality is Falling Globally! (And Similar Nonsense)

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

Sakharov,nuclear,Khrushchev Unhappy birthday, Andrei SakharovNina L Khrushcheva
Gazprom,Putin,Nordstream,Putin,Schröder How the public loses out when politicians cash inKatharina Pistor
defence,europe,spending Ukraine and Europe’s defence spendingValerio Alfonso Bruno and Adriano Cozzolino
North Atlantic Treaty Organization,NATO,Ukraine The Ukraine war and NATO’s renewed credibilityPaul Rogers
transnational list,European constituency,European elections,European public sphere A European constituency for a European public sphereDomènec Ruiz Devesa

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube