Worlds Apart Center for Economic and Policy Research Fundación Sistema Washington, April Inequality between countries 2.Global inequality (a sketch)

1.Inequality between countries (Concept 1 inequality)

Three concepts of inequality defined Concept 1 inequality Concept 2 inequality Concept 3 (global) inequalty

Inequality, : The mother of all inequality disputes Global Inequality Concept 1 inequality Concept 2 inequality

Inequality between countries: Discontinuity in development trends around The watershed years (Bairoch) Tripling of oil prices Increase in real interest rates (from –1% to +5% in the USA and the world) Debt crisis Chinas responsibility system introduced Latin American begins its lost decade, E. Europe/USSR stagnate

The outcome: Middle income countries declined (Latin America, EEurope/former USSR) China and India pulled ahead Africas position deteriorated further Developed world pulled ahead World growth rate decreased by about 1 % (compared to the period)

Different way to look at world growth rates Unweighted (each country counts the same) Percentage negative2333 China India Population-weighted World (plutocratic ROG)2.61.6

Annual per capita growth rates MeanMedianPercentage negative Old OECD Middle income countries LLDC

Assessment World income growth slowed down by 1 percentage point per capita p.a. Poor and populous countries grew much faster and average (population-weighted) growth rate even increased Countries growth record became much more diverseand systematically so…Divergence

Growth over period as function of initial (1980) income

Growth rate by each decile of countries, and Deciles formed according to initial (1960 or 1978 income level)

Define four worlds: First World: The West and its offshoots Take the poorest country of the First World (e.g. Portugal) Second world (the contenders): all those less than 1/3 poorer than Portugal. Third world: all those 1/3 and 2/3 of the poorest rich country. Fourth world: more than 2/3 below Portugal.

Four Worlds 1960

Four Worlds 2003

Four worlds in 1960 and Number of countries % of population Number of countries % of population First Second Third Fourth

The key borders today First to fourth world: Greece vs. Macedonia and Albania; Spain vs. Morocco (25km); Singapore vs. Indonesia First to third world: US vs. Mexico; Germany vs. Poland; Austria vs. Hungary In 1960, the only key borders were Argentina and Uruguay (first) vs. Brazil, Paraguay and Bolivia (third world), and Australia (first) vs. Indonesia (fourth)

Approximate % of foreign workers in labor force Ratio in per capita GDIs (in PPP terms) Greece (Albanians) 7.54 to 1 Spain (Moroccans) to 1 United States (Mexicans) > to 1 Austria (former Yugoslavs) to 1 Malaysia (Indonesians) > to 1

Parts of Africa where 2000 GDI per capita is less than in 1963 (180m people ) Poorer than during J.F. Kennedy US GDI per capita in the meantime doubled

2. Inequality between world citizens today

What is a Gini of 64-66; how big is it? TopBottomRatio In $PPP: 5%33%0.2% %50%0.7%70-1 In US$: 5%45%0.15% %67.5%0.45% top countries31, top countries 28,

First order dominance (year 1998) expressed in terms of percentile of world income distribution Y98_c # of distribution groups France Kazak Brazil Sri Lanka India-R twoway (line Y98_c group if year==1998 & contcod=="BRA") (line Y98_c group if year==1998 & contcod=="IDN-R") (line Y98_c group if year==1998 & contcod=="FRA") (line Y98_c group if year==1998 & contcod=="LKA"), legend(off) xtitle(country ventile) ytitle(percentile of world income distribution)

Same income for the top, different incomes for all the others Hungary Ukraine Peru percentile of world income distribution country ventile

Poor and rich people and countries, 1998 People Countries PoorMiddle income RichTotal Poor Middle Rich Total

Conclusion: The age of inequality? Inequalities between countries have increased Population weighted inequality between countries went down thanks to fast growth in China and India (Caveat: acc. to Maddison it is almost stable + R/U differences in China and India have global implications) Inequality among people in the world is very high (Gini between 62 and 66) but its direction of change is not clear Within-country inequalities have increased in many countries including in the largest (US, UK, China, India, Russia)

Book Worlds Apart: Measuring International and Global Inequality Website: