Global economic inequality is one of the most debated topics in contemporary social sciences. While globalization is often blamed for increasing inequality within nations, a closer analysis reveals that, globally, the world has become more egalitarian compared to the past hundred years. This phenomenon has been driven by various factors, notably the economic rise of Asia, particularly China, which has significantly narrowed the economic gap between nations. However, the future of global inequality remains uncertain, shaped by internal national dynamics and external events such as geopolitical crises and pandemics.
Definition and Measurement of Global Inequality
Global inequality refers to the distribution of income among all the inhabitants of the planet, adjusted for differences in living costs across countries. It is generally measured using the Gini coefficient, an indicator that ranges from 0 (perfect equality) to 100 (maximum inequality). From the Industrial Revolution until the mid-20th century, global inequality rose significantly, as wealth became concentrated in the industrialized Western nations, reaching its peak during the Cold War. However, in recent decades, this trend has reversed, primarily due to China’s economic rise.
The First Era of Inequality (1820-1950)
During the early phase of industrialization, global inequality increased markedly. In 1820, the GDP of the richest country, Great Britain, was five times that of the poorest country, Nepal. This gap widened with the spread of the Industrial Revolution, which accelerated economic development in Europe and North America, leaving behind other regions, such as Africa and the Middle East. This period is known as "the Great Divergence," a time when income disparities between nations grew dramatically. Technological progress and colonial expansion further exacerbated this gap, as imperial powers exploited colonial resources to enhance their economic and military strength.
The Second Era of Inequality (1950-2000)
The second half of the 20th century was characterized by high levels of global inequality. During this period, developed countries represented a small portion of the global population but controlled the majority of global economic output. The United States, with just 6% of the world’s population, held 40% of global production. At the same time, within individual countries, inequalities decreased due to the expansion of education and the creation of welfare states. Notably, both the United States and China experienced a reduction in internal inequality. In the U.S., welfare programs and higher education played a central role in mitigating income disparities, while in China, the Cultural Revolution and the nationalization of private resources reduced class differences.
However, it was during this period that global inequality reached its highest peak, with the Gini index fluctuating between 67 and 70. This era was also marked by the so-called “three worlds” system: the capitalist bloc (Western Europe and North America), the socialist bloc (the Soviet Union and Eastern Europe), and the developing countries, primarily in Africa and Asia.
The Third Era of Inequality: Convergence and New Challenges (2000-Present)
Since the early 2000s, global inequality has rapidly declined. Over two decades, the global Gini index fell from 70 to 60. This reversal has been driven primarily by Asia’s economic rise, particularly China, which has experienced extraordinary growth. Starting from a very low-income level, China managed to grow at sustained rates, involving almost one-fifth of the world’s population in this development process. China's growth has reshaped global income distribution, benefiting especially the Asian middle classes, who have surpassed many low-income groups in Western countries in terms of income.
However, while global inequality has decreased, internal disparities within countries have increased, particularly in wealthy nations. This phenomenon has led to growing polarization between affluent and less affluent classes.
External Factors and Current Challenges
The future of global inequality largely depends on external factors and geopolitical dynamics. Three recent events have profoundly affected the global economy: the COVID-19 pandemic, the deterioration of relations between the United States and China, and Russia's invasion of Ukraine. The pandemic slowed economic growth in many countries, exacerbating existing inequalities. The tensions between the U.S. and China, which together account for over one-third of global GDP, have made economic prospects more uncertain. Russia’s invasion of Ukraine has driven up global food and energy prices, disproportionately affecting poorer countries.
These shocks have highlighted the vulnerability of interconnected global economies and underscored the importance of international cooperation in addressing inequalities.
Africa: The Next Frontier of Growth or an Unresolved Challenge?
Africa is poised to play a central role in the future of global inequality. With a rapidly growing population, the continent could become the next major area of economic development. However, Africa has so far struggled to replicate Asia’s economic success. While some African countries have experienced notable growth rates, these episodes have generally been limited to small nations with economies dependent on natural resource exports, such as oil or cocoa. Ethiopia is the only large country to have registered sustained economic growth, but recent internal conflicts have disrupted this progress.
For Africa to contribute to reducing global inequality, widespread and sustained economic growth will be necessary. However, the outlook is not entirely promising. International aid, which could stimulate development, is often insufficient and poorly managed, and while natural resources are abundant, they have frequently been a source of instability rather than growth.
Another key factor in the future of global inequality will be migration. Economic disparities drive millions of people to seek better opportunities abroad. Migration can offer enormous economic benefits: a Tunisian worker, for example, can triple their earnings by moving to France. However, rising migration could fuel xenophobic sentiments in destination countries, strengthening nativist and nationalist political parties.
Conclusion
Global inequality stands at a crossroads. The rise of Asia, particularly China, has led to a reduction in disparities between nations, but new challenges, such as the growing internal inequality in wealthy countries and geopolitical tensions, make the future of this trend uncertain. Africa’s role will be crucial in determining whether the world becomes more equitable or if inequalities begin to rise again. In any case, a more just and less unequal world remains a crucial goal, as suggested by the Scottish philosopher Adam Smith, who recognized as early as the 18th century that the gap in wealth and power between the West and the rest of the world had led to colonization and unjust wars. "The superiority of force on the part of the Europeans was so great that they were able to commit with impunity every sort of injustice in distant countries.”
Bank Account (Global Income Inequality by the Numbers: in History and Now, Branko Milanovic)
https://www.un.org/development/desa/dspd/wp-content/uploads/sites/22/2020/02/World-Social-Report2020-FullReport.pdf United Nations World Social Report 2020 (Inequality in a rapidly changing world)
https://academic.oup.com/isr/article/24/1/viab058/6460467 Oxford Academic (On the Impact of Inequality on Growth, Human Development, and Governance
Ines A Ferreira, Rachel M Gisselquist, Finn Tarp)
https://freedomhouse.org/countries/freedom-net/scores Freedom House
https://ourworldindata.org/the-history-of-global-economic-inequality Our world in data, The history of global economic inequality
The three eras of global inequality (Stone center on socio economic inequality)
Comments