Measuring global inequality

Louis Proyect lnp3 at
Wed Jan 8 07:10:26 MST 2003

Mind the gap

The debate over global inequality heats up

By Laura Secor, Boston Globe Staff, 1/5/2003

WHEN TRADE BARRIERS BEGAN to fall in the late 1970s, politicians and
pundits boasted that economic globalization would usher in a capitalist
utopia: The circle of prosperity would widen, allowing poor countries at
last to catch up with rich ones. But ever since the Seattle World Trade
Organization summit of 1999, a growing anti-globalization movement has
contended just the opposite: The world's rich and poor are more unequal
than ever, and neoliberal free trade policies are to blame. Which is the
real story?

It sounds like a simple question - one an economist could briskly answer.
But if you want a brisk answer, don't ask an economist. Specialists
fiercely debate nearly every aspect of global inequality. Is it rising or
falling? How should inequality be measured? And what, if anything, do free
trade and globalization have to do with it? Writing in The New York Review
of Books last August, Harvard economist Benjamin Friedman cited a study
claiming that global inequality was falling. In Foreign Affairs last
February, World Bank economists David Dollar and Aart Kraay observed a
similar trend toward greater equality and tied it to the success of
globalization. Both articles met with a flurry of controversy in the
letters pages. How can economists assess the impact of globalization if
they can't even agree on the last three decades' basic trends?

The nub of the statistical dispute, which has become surprisingly fierce,
has less to do with numbers than definitions. There are at least three
plausible ways to define global inequality. The first way compares average
income or Gross National Product per capita across countries. By that
measure, economists agree that the gap between rich and poor countries has
been steadily widening since the late 1970s. Rich countries like the United
States have grown richer, while poor ones like Malawi have mostly stagnated
or become poorer.

But some economists contend that this observation isn't particularly
meaningful. It takes countries as its unit of analysis, rather than
people-and as a result, the 1.28 billion citizens of China count for no
more than do the 448,569 citizens of Luxembourg. When economists weight
each country's average income by population, they find that global
inequality is in fact decreasing.

Why? Because China and India, which between them house about 38 percent of
the world's population, have experienced dramatic economic growth. "Whether
global inequality will rise or fall depends by and large on what happens to
average incomes in the big poor countries like China and India," says Dani
Rodrik, an economist at the John F. Kennedy School of Government.

And yet this finding hardly settles the argument. While China's economic
growth may have reduced inequality worldwide, economists agree that
inequality within China has actually increased. "Clearly China is getting
richer compared to the rest of the world, and many people in China are
getting richer," says World Bank economist Branko Milanovic. "But within
China there are also widening disparities."


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