How the world is getting more equal – and unequal – at the same time

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As a matter of course, most conversations about the state of the world assume that inequality is getting worse. In individual countries, the socioeconomic gap between the haves and have-nots is invariably, if unevenly, widening.

Gloominess suffuses the global public – a Pew Research Center study this week found that a median of 70 percent of adults surveyed in 24 countries, ranging from the United States to Nigeria to South Korea, believed their country’s economic situation was “bad.” In most of the countries surveyed, the negative reactions have worsened since last year, deepened by anxieties over inflation and cost-of-living crises, even as the wealthiest people in many of these societies are only getting wealthier.

The richest 1 percent of people on Earth made almost two-thirds of the new wealth created since the coronavirus pandemic began, according to a report released earlier this year by international advocacy group Oxfam. It advised governments around the world “to halve the wealth and number of billionaires between now and 2030, both by increasing taxes on the top 1 percent and adopting other billionaire-busting policies. This would bring billionaire wealth and numbers back to where they were just a decade ago in 2012.”

Such direct measures, let alone an international consensus on waging this form of de facto class warfare, are nowhere in sight.

The inequities aren’t just about wages. International organizations have catalogued other forms of growing divides intensified by the pandemic, from differing access to coronavirus vaccines and digital technologies. Climate change has disproportionately impacted poor, vulnerable communities that played little role in generating the emissions that led to global warming. And, in an age of relative abundance, the United Nations warns the world is “hungrier than ever.”

“Food and energy companies more than doubled their profits in 2022, paying out $257 billion to wealthy shareholders, while over 800 million people went to bed hungry,” according to Oxfam.

But the world is also getting more equal, not less, by a major dimension. In an essay in Foreign Affairs, Serbian-American economist Branko Milanovic details how actual “global inequality,” as he defines it – that is, the income disparity between all citizens of the world, at a given time and adjusted for the differences in prices between countries – has dropped for the past two decades.

A significant contributor to this phenomenon has been China’s emergence as an economic titan and the entry of hundreds of millions of people in the developing world into a new global middle class.

Milanovic charts three “ages of inequality.”

The first spans the early 19th century to the midway point of the 20th century, as the Industrial Revolution powered the rise of the West and the unfurling of its various sprawling, exploitative empires around the world.

The second – characterized by the highest levels of global inequality and the widespread invocation of the “Third World” to describe many impoverished post-colonial states – runs through the decade that followed the end of the Cold War.

“The third era mirrors the first: it has seen the rise of incomes in one part of the world and their relative decline in another,” Milanovic explains. “In the first era, it was the industrialization of the West and the concurrent deindustrialization of India (then under the thumb of the British, who suppressed local industries); in the third, it was the industrialization of China and, to some extent, the deindustrialization of the West.”

While the first age led to what is understood as the “great divergence” of the West from the rest, the current moment may lead to a great “convergence,” Milanovic argues. “China is tantalizingly close to something that no one would have predicted when Mao died in 1976: that in 70 years, the then impoverished country would have as many rich citizens as does the United States.”

“The countries with the richest citizens are generally the world’s most powerful,” writes Axios’s Felix Salmon, in his riff on Milanovic’s essay. “That power is now more broadly distributed than at any point in over a century.”

The implications of this shift are complex and still difficult to gauge. It’s also far from certain that the current trendlines will continue in their current direction. In Milanovic’s analysis, China will no longer be a contributor in leveling the global playing field in the decades to come and a parallel boom in India and, significantly, Africa may not match the scale of China’s transformation.

For the West, this “convergence” will have jarring effects, as citizens who once considered themselves near the top of a global socioeconomic hierarchy see their status diminished, their purchasing power weakened and their lifestyles altered by new consumption patterns generated by the middle class of the developing world. “People in the lower-income groups of rich countries have historically ranked high in the global income distribution,” Milanovic writes. “But they are now being overtaken, in terms of their incomes, by people in Asia.”

Within Western nations, the sense of disparity between wealthy elites and the now-fragile middle class seems likely to grow. “The sense of widening inequality in Western countries may become acute as their populations increasingly belong, measured by income levels, to very different parts of a global income hierarchy,” Milanovic concludes, in a grim prognostication. “The social polarization that would ensue would make Western societies resemble those of many Latin American countries, where gulfs in wealth and lifestyle are incredibly pronounced.”

Lawmakers of various stripes in Western democracies seem aware of this iceberg on the horizon and are trying fitfully to shift course. The Biden administration’s attempts at investing in a new green industrial revolution is explicitly intended to reckon with divisions that are opening up within U.S. society, as economic historian Adam Tooze recently observed.

But its difficulties in pushing through the necessary legislation, and the major questions that surround its successful implementation, are also a sign of struggles to come. “Even if global inequality falls, that does not mean that the social and political turmoil in individual countries will diminish – if anything, the opposite is true,” Milanovic writes.