The history of income inequality is not entirely what it seems.
The author examines the history of income inequality in 25 countries since 1820. From a global perspective, the source of its ascent has been the industrialization of the West.
How Is This Article Useful to Practitioners?
In a joint effort between the OECD and Utrecht University, researchers compiled a review of living conditions in 25 countries since 1820. Their conclusions point to progress in such areas as education and compensation. The story of income equality, however, is different.
Income inequality has not improved. The author cites unchanged or worsening conditions in Brazil, Mexico, China, and Germany, with France and Japan being the exceptions. The Gini coefficient, an income inequality measure, indicates that, on the whole, global income inequality has risen over the time period under consideration. This rise is attributed not to fluctuating disparities between rich and poor within nations but rather to “between-country inequality,” or the gap between rich and poor countries. Industrialization in the Western world appears to be the cause.
World income distribution is an odd shape. Rather than looking like a traditional bell, it assumes the form of twin peaks, or a Bactrian camel—the result of rapid Western industrialization. Globalization’s retreat from 1914 to 1970 led rich nations to narrow the gap between rich and poor internally; the reemergence of globalization in 1980 resulted in higher income inequality within countries but a decline in inequality between them.
In a time of ever-increasing technological advancement, this brief history of income inequality should be interesting to policymakers worldwide who endeavor to understand its causes and possible remedies.
Progress in fixing income inequality appears to be cyclical. The disparity between rich and poor has fluctuated much over time. The sources of inequality vary as well. What the future holds for those economies in which a winner-take-all scenario seems to be more the norm is of great concern to economists and policymakers. The inexorable march of progress is not likely to put this issue to rest quickly.