Are global poverty and inequality getting worse? Dear Martin
22nd January 2002
You have written eloquently in the Financial Times about globalisation. You make three main points. (1) Poverty and inequality on a world scale have both fallen over the past two decades for the first time in more than 150 years. (2) These falls are due to greater global economic integration. (3) The anti-globalisation movement encourages countries to adopt policies that will in fact only intensify their poverty and inequality.
Let us take the first point about trends in poverty and inequality. If you are wrong here, the rest of your argument begins to wobble and, in fact, there are reasons to doubt what you say. On poverty, the World Bank is the main source of numbers. Bank researchers have found that the number of people in absolute poverty (with incomes less than about $1 per day) was roughly constant in 1987 and 1998, at around 1.2 billion. Since world population increased, the proportion of the world’s population in absolute poverty fell sharply from around 28 per cent to 24 per cent in only 11 years. This is good news.
But recent research on where the Bank got the 1.2 billion suggests that the method for calculating the numbers is questionable. The effect is probably to understate the true numbers in poverty. How much higher than 1.2 billion we do not yet know.
So what is happening to global inequality? It is widening rapidly, if we compare the average incomes for each country and treat each one as a unit (China = Uganda). Yet income inequality among countries has become more equal, since around 1980, if we compare the average incomes for each country and weight each one by its population. However, this result comes from fast growth in China and India. If they are excluded this measure of inequality shows no obvious trend since 1980.
In any case, this measure-using the average income of each country weighted by population-is interesting only as an approximation to what we are really interested in, which is the income distribution among all the world’s people or households, regardless of where they live. The problem is that we do not have good data for the incomes of all the world’s people. You say that global inequality amongst households has probably fallen. But the most comprehensive data on world incomes, based on household…