Bridging the gap: At a global level, income inequality continues to fall

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Bridging the gap

Despite current discourse around the widening chasm between the richest and poorest, income inequality at a global level has actually fallen to its lowest level for ~130 years, according to a leading researcher on the subject.

Branko Milanovic, a revered economist and author, attributes the growing financial equality to the rise of Asia in recent years, particularly China, and touts India as a potential future power in driving inequality down even further.

More equal

There are many ways to slice and dice income data. The preferred measure for many economists is the Gini Index, which ranks income inequality on a scale from 0-100. A reading of zero would mean everyone on Earth had an even share of the world’s income, 100 indicates the opposite — where a single person had all the world’s income. From a global perspective, it is this reduced inequality between countries that has been the driving force of the Gini Index falling to its lowest level in more than a century, even though inequality within individual countries may have widened.

The industrial revolution, or the Great Divergence as some economic historians have come to know it, saw global income inequality accelerate as Western nations pulled away from countries like China and India where per-capita income stagnated or fell. Estimates of the Gini Index rose from ~49 to 62 between 1820 and the early 20th century. Declines in the last 20 years, however, have been even steeper than the ascents of yesteryear, and continued economic growth in many lower and middle income countries suggests that the Gini Index has likely continued to fall.

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