International inequality

International inequality

Overview
International inequality is inequality between countries (cf. Milanovic 2002). Economic differences
Economic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...

 between rich and poor countries are considerable. According to the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...

 Human Development Report 2004, the GDP per capita in countries with high, medium and low human development (a classification based on the UN Human Development Index) was 24,806, 4,269 and 1,184 PPP$, respectively (PPP$ = purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...

 measured in United States dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

s).


A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total.
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Encyclopedia
International inequality is inequality between countries (cf. Milanovic 2002). Economic differences
Economic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...

 between rich and poor countries are considerable. According to the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...

 Human Development Report 2004, the GDP per capita in countries with high, medium and low human development (a classification based on the UN Human Development Index) was 24,806, 4,269 and 1,184 PPP$, respectively (PPP$ = purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...

 measured in United States dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

s).

International wealth distribution



A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth. Extensive statistics, many indicating the growing world disparity, are included in the available report, press releases, Excel tables and Powerpoint slides.

The major component of the world's income inequality (the global Gini coefficient
Gini coefficient
The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" ....

) is comprised by two groups of countries (called the "twin peaks" by Quah
Danny Quah
Danny Quah is Professor of Economics and Co-Director LSE Global Governance at the London School of Economics and Political Science. He is currently Council Member on Malaysia's National Economic Advisory Council, Consultant for Bank of England, World Bank, and Monetary Authority of Singapore...

 [1997]).
  • The first group has 13% of the world's population and receives 45% of the world's PPP income. This group includes the United States, Japan, Germany, the United Kingdom, France and Australia, and comprises 500 million people with an annual income level over 11,500 PPP$.
  • The second group has 42% of the world's population and receives only 9% of the world PPP income. This group includes India, Indonesia and rural China, and comprises 2,100 million people with an income level under 1,000 PPP$. (See Milanovic 2001, p. 38).


Economic inequality very closely matches lognormal distribution as one traverses the strata of national and world societies from top-to-bottom.

During the 20th century there was considerable divergence between the economic wealth of developed and developing countries. Richer countries like the United States and many European countries converged together towards a GDP per capita much greater than developing countries such as India and Ethiopia.

The evolution of the income gap between poor and rich countries is related to convergence
Catch-up effect
The idea of convergence in economics is the hypothesis that poorer economies' per capita incomes will tend to grow at faster rates than richer economies. As a result, all economies should eventually converge in terms of per capita income...

. Convergence can be defined as "the tendency for poorer countries to grow faster than richer ones and, hence, for their levels of income to converge" http://www.worldbank.org/fandd/english/0696/articles/090696.htm. Convergence is a matter of current research and debate, but most studies have shown lack of evidence for absolute convergence based on comparisons among countries (with regard to this debate see for instance Cole and Newmayer (2003) or http://ucatlas.ucsc.edu/income/debate.html).

According to current research, global income inequality peaked approximately in 1970s when world income was distributed bimodally into "rich" and "poor" countries with little overlap. Since then inequality have been rapidly decreasing, and this trend seems to be accelerating. Income distribution is now unimodal, with most people living in middle-income countries.

Comparisons


Some of the economic disparities among nations can be better appreciated when rich and poor countries or societies are contrasted. For example, with regard to income inequality, according to some estimates by Branko Milanovic
Branko Milanovic
Branko Milanović is a Lead economist in the World Bank's research department in the unit dealing with poverty and inequality and a senior associate at the Carnegie Endowment for International Peace, in Washington, D.C.....

 from the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

:
  • "An American having the average income of the bottom US decile is better-off than 2/3 of world population." (Milanovic 2002, p. 50)
  • "The top 10 percent of the US population has an aggregate income equal to income of the poorest 43 percent of people in the world, or differently put, total income of the richest 25 million Americans is equal to total income of almost 2 billion people." (Milanovic 2002, p. 50)

With regard to wealth inequality (researchers defined wealth as the value of physical and financial assets minus debts), a 2006 report with data from 2000 concluded that:
  • "India dominates the bottom third of the global wealth distribution, contributing a little under a third (27 per cent to be precise) of this group. The middle third of the distribution is the domain of China which supplies more than a third of those in deciles 4-8. At the top end, North America, Europe and high-income Asia monopolise the top decile, each regional group accounting for around one third of the richest wealth holders" (Davies et al. 2006, p. 27)
  • "the top 10 per cent of adults own 85 per cent of global household wealth, so that the average member of this group has 8.5 times the global average holding. The corresponding figures for the top 5 per cent, top 2 per cent, and top 1 per cent are 71 per cent (14.2 times the average), 51 per cent (25 times the average) and 40 per cent (40 times the average), respectively. This compares with the bottom half of the distribution which collectively owns barely 1 per cent of global wealth. Thus the top 1 per cent own almost 40 times as much as the bottom 50 per cent. The contrast with the bottom decile of wealth holders is even starker. The average member of the top decile nearly 3000 times the mean wealth of the bottom decile, and the average member of the top percentile is more than 13,000 times richer." (Davies et al. 2006, p. 26)
  • "for the world as a whole the share of the top 10 per cent was 85 per cent in the year 2000 and the Gini equalled 0.892 using official exchange rates" (Davies et al. 2006, p. 32)
  • "only $2161 was needed in order to belong to the top half of the world wealth distribution, but to be a member of the top 10 per cent required at least $61,000 and membership of the top 1 per cent required more than $500,000 per adult." (Davies et al. 2006, p. 25)

James Davies, Professor of Economics at the University of Western Ontario, and one of the authors of the report, said: "Income inequality has been rising for the past 20 to 25 years and we think that is true for inequality in the distribution of wealth." "There is a group of problems in developing countries that make it difficult for people to build assets, which are important, since life is so precarious." http://www.timesonline.co.uk/article/0,,11069-2488836,00.html

Other disparities can be better appreciated when rich individuals (or corporations) are compared against poor individuals. According to some estimates, for instance:
  • "The richest 1 percent of people in the world receive as much as the bottom 57 percent, or in other words, less than 50 million richest people receive as much as 2.7 billion poor." (Milanovic 2002, p. 50)
  • The three richest people possess more financial
    Finance
    "Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

     assets than the poorest 10% of the world's population, combined http://cte.rockhurst.edu/FileUploads/mchugh.pdf.
  • As of May 2005, the three richest people in the world have assets that exceed the combined gross domestic product of the 47 countries with the least GDP, (calculation based on data from list of countries by GDP (PPP) and list of billionaires) (Annan, 1998)

However, the three richest individuals' wealth consists largely of stock in their own companies. The value of these assets was largely created by the economic conditions in their respective countries.
  • As of May 2005, the 125 richest people in the world have assets that exceed the combined gross domestic product of all the least developed countries
    Least Developed Countries
    Least developed country is the name given to a country which, according to the United Nations, exhibits the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world...

     (calculation based on data from list of countries by GDP (PPP) and list of billionaires).

Further facts


Wealth:
  • 1 % of the world population own 40 % of the global assets. The richest 2 % of the world population own more than 51 % of the global assets, the richest 10 % own 85 % of the global assets.
  • 50 % of the world population own less than 1 % of the global assets.
  • The whole global assets volume is about 125 trillion US$.
  • 1.125 Dollar-Billionaires own 4,4 trillion US$. They own 4 times more than the 50% poor people of the world.
  • over 80 % of the world population lives on less than 10 US$/day.; over 50 % of the world population lives on less than 2 US$/day; over 20 % of the world population lives on less than 1.25 US$/day


Income:
  • In 2005, 4.3 % of the world population (3.14 billion people) have an income of less than U.S. $2.5/day. 21.5 % of the world population (1.4 billion people) have an income of less than US$1.25/day.
  • In 1981, 60.4 % of the world population (2.73 billion people) had an income of less than US$ 2.5/day and 42.2 % of the world population (1.91 billion people) had an income of less than US$ 1.25 /day. But first of all these improvements were reached in China. In all other developing countries only the percents decreased (by the swelling world population) but the absolute numbers increased.
  • In 2008, 17 % of the people in the developing countries are on the verge of starvation.
  • The proportion of poor people (with less than US$ 3,470 per year) is 78 %. The proportion of rich people (with more than US$ 8,000/year) is 11 %.

Schools of thought on economic inequality


Main discussion: Perspectives regarding economic inequality.

There are various schools of thought regarding economic inequality. Marxism
Marxism
Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...

 favors an eventual society where distribution is based on an individual's needs rather than social class or other such factors. Meritocracy
Meritocracy
Meritocracy, in the first, most administrative sense, is a system of government or other administration wherein appointments and responsibilities are objectively assigned to individuals based upon their "merits", namely intelligence, credentials, and education, determined through evaluations or...

 favors an eventual society where an individual's success is a direct function of contribution reflecting an individual's skills and effort, and detrimental (this is a value judgement) inasmuch as it represent inherited or unjustified wealth or opportunities. Classical liberals and libertarians generally do not take a stance on wealth inequality, but believe in equality under the law regardless of whether it leads to unequal wealth distribution. Arguments based on social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...

 favor a more equal distribution making claims economic inequality weakens societies, although counter-arguments are made that inequality might benefit societies.

Attitudes Toward Income Inequality


United States citizens are no more intolerant of income inequality than citizens of other nations, but the gap between what they think that people "should" earn and what they do earn is smaller than the average of most industrialized nations, even though the actual gap is the largest in the US. The reason they appear to be more tolerant is that they mistakenly think that there is less inequality in what people actually earn. In other words, Americans are no less egalitarian in their attitudes about their ideal world, but they are less accurate about the real world.

See also

  • Classism
    Classism
    Classism is prejudice or discrimination on the basis of social class. It includes individual attitudes and behaviors, systems of policies and practices that are set up to benefit the upper classes at the expense of the lower classes...

  • Development economics
    Development economics
    Development Economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example,...

  • Development geography
    Development geography
    Development geography is the study of the earth's geography with reference to the standard of living and quality of life of its human inhabitants. In this context, development is a process of change that affects people's lives. It may involve an improvement in the quality of life as perceived by...

  • Economic development
    Economic development
    Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...

  • Economic inequality
    Economic inequality
    Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...

     (Male-female income disparity)
  • Income inequality metrics
    Income inequality metrics
    The concept of inequality is distinct from that of poverty and fairness. Income inequality metrics or income distribution metrics are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific...

  • Income disparity
    Income disparity
    The gender pay gap is the difference between male and female earnings expressed as a percentage of male earnings, according to the OECD. The European Commission defines it as the average difference between men’s and women’s hourly earnings...

  • International development
    International development
    International development or global development is a concept that lacks a universally accepted definition, but it is most used in a holistic and multi-disciplinary context of human development — the development of greater quality of life for humans...

  • Human Development Index
    Human Development Index
    The Human Development Index is a composite statistic used to rank countries by level of "human development" and separate "very high human development", "high human development", "medium human development", and "low human development" countries...

    , United Nations (with comparisons between nations)
  • Poverty
    Poverty
    Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

  • United Nations Millennium Development Goals
    Millennium Development Goals
    The Millennium Development Goals are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015...

  • Income inequality in the United States
    Income inequality in the United States
    Income inequality in the United States of America refers to the extent to which income is distributed in an uneven manner in the US. Data from the United States Department of Commerce, CBO, and Internal Revenue Service indicate that income inequality among households has been increasing...

  • Male-female income disparity in the USA
    Male-female income disparity in the USA
    Male–female income diference, also referred to as the "gender gap in earnings" in the United States, and as the "gender wage gap", the "gender earnings gap" and the "gender pay gap", refers usually to the ratio of female to male median yearly earnings among full-time, year-round workers.The...

  • Welfare trap
    Welfare trap
    The welfare trap theory asserts that taxation and welfare systems can jointly contribute to keep people on social insurance because the withdrawal of means tested benefits that comes with entering low-paid work causes there to be no significant increase in total income...

  • Distribution of wealth
    Distribution of wealth
    The distribution of wealth is a comparison of the wealth of various members or groups in a society. It differs from the distribution of income in that it looks at the distribution of ownership of the assets in a society, rather than the current income of members of that society.-Definition of...

  • Distributive justice
    Distributive justice
    Distributive justice concerns what some consider to be socially just allocation of goods in a society. A society in which incidental inequalities in outcome do not arise would be considered a society guided by the principles of distributive justice...

  • List of countries by income equality

See also, related

  • IQ and Global Inequality
    IQ and Global Inequality
    IQ and Global Inequality is a 2006 book by psychologist Richard Lynn and political scientist Tatu Vanhanen. IQ and Global Inequality is follow-up to their 2002 book IQ and the Wealth of Nations, an expansion of the argument that international differences in current economic development are due in...

     (book)
  • Global Justice
    Global justice
    Global justice is an issue in political philosophy arising from the concern that the world at large is unjust.-Context:The broader philosophical context of the global justice debate, in both its contemporary and historical forms, is the issue of impartiality...

  • Globalization
    Globalization
    Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

  • Positive liberty
    Positive liberty
    Positive liberty is defined as having the power and resources to fulfill one's own potential ; as opposed to negative liberty, which is freedom from external restraint...

  • Negative liberty
    Negative liberty
    Negative liberty is defined as freedom from interference by other people, and is set in contrast to positive liberty, which is defined as an individual's freedom from inhibitions of the social structure within the society such as classism, sexism or racism and is primarily concerned with the...

  • Marx
  • United Nations Millennium Development Goals
    Millennium Development Goals
    The Millennium Development Goals are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015...

  • Occupational inequality
    Occupational inequality
    Occupational inequality is the unequal treatment of people based on gender or race in the workplace. When researchers study trends in occupational inequality they usually focus on distribution or allocation pattern of groups across occupations, for example, the distribution of men compared to women...

  • Poverty
    Poverty
    Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

     and Cycle of poverty
    Cycle of poverty
    In economics, the cycle of poverty is the "set of factors or events by which poverty, once started, is likely to continue unless there is outside intervention."...

  • Population health
    Population health
    Population health has been defined as “the health outcomes of a group of individuals, including the distribution of such outcomes within the group.” It is an approach to health that aims to improve the health of an entire population. One major step in achieving this aim is to reduce health...

  • Population Health Forum
    Population Health Forum
    The Population Health Forum is a group based at University of Washington in Seattle, Washington, and composed of academics, citizens, students, and activists from around North America.- Purpose and activities :...

  • Achievement gap
    Achievement gap
    Achievement gap refers to the observed disparity on a number of educational measures between the performance of groups of students, especially groups defined by gender, race/ethnicity, and socioeconomic status. The achievement gap can be observed on a variety of measures, including standardized...

  • Digital gap
  • Generation gap
    Generation gap
    The generational gap is and was a term popularized in Western countries during the 1960s referring to differences between people of a younger generation and their elders, especially between children and parents....

  • Marriage gap
    Marriage gap
    The marriage gap describes observed economic and political disparities between those who are married and those who are single. The marriage gap can be compared to, and should not be confused with, the gender gap.-Politics and marriage:...

  • Opportunity gap
    Opportunity gap
    Opportunity gap can refer to:*in business, a Market opportunity a company or individual is not addressing*in politics, a euphemism for a lack of equal opportunity-See also:*Business opportunity*Market Intelligence*Marketing management*Marketing plan...

  • Working Class Education
    Working Class Education
    Working class education is the education of working-class people.-History:Prior to the 19th century, education for most members of society was elementary and only an elite received advanced education...

  • Split labor market theory
    Split labor market theory
    -Theory Overview:Split labor market theory, originally proposed by sociologist Edna Bonacich in the early 1970s, is an attempt to explain racial/ethnic tensions and labor market segmentation by race/ethnicity in terms of social structure and political power rather than individual-level prejudice...

  • Economic mobility
    Economic mobility
    Economic mobility is the ability of an individual or family to improve their economic status, in relation to income and social status, within his or her lifetime or between generations...

  • Gini coefficient
    Gini coefficient
    The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" ....

  • Wealth inequality in the United States
    Wealth inequality in the United States
    Wealth inequality in the United States, also known as the "wealth gap", refers to the unequal distribution of financial assets among residents of the United States. Wealth includes the values of homes, automobiles, businesses, savings, and investments. Those who acquire a great deal of financial...

  • Expenditure cascades
    Expenditure cascades
    Expenditure cascades are changes in purchasing and consumption behaviour which ripple through the levels of income in response to changes in income inequality.-Example:...


External links