Transcript Lecture Title - University of Bristol

World in Crisis
Global Imbalances:
Inequality in the World Today
Dr Malcolm Fairbrother
School of Geographical Sciences
World in Crisis
The richest person in the world…?
The richest person in the world…?
Carlos Slim Helú
Mexican businessman
The richest person in the world…?
Carlos Slim Helú
Mexican businessman
wealth: US$67.8bn
(£33.6bn)
Carlos Slim versus the UK?
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UK as a whole produces US$1,845.2 bn/year
Carlos Slim therefore possesses wealth
equivalent to about 3.7% of that
the UK produces US$30,821 per resident
(“per capita”) each year
it would take the average Briton 2,199,799
years to produce Slim’s current wealth
Carlos Slim versus Sierra Leone?
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the average Sierra Leonean produces about
US$561/year
it would take the average Sierra Leonean
120,855,615 years to produce Slim’s current
wealth
(remember: 2,199,799 years for the Briton)
The UK versus Sierra Leone
versus the World?
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Sierra Leonean economy produces:
 US$561/year per capita
the British economy produces:
 US$30,821/year per capita
the whole world’s economy?
 US$7,439/year per capita
 (about 6.5 billion people)
The UK versus Sierra Leone?
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how long would it take the average Sierra
Leonean to produce what the average Briton
produces in a single year (US$30,821)?
 54.9 years
but life expectancy at birth in Sierra Leone:
 41.4 years
(compare with UK: 78.9 years)
The Poor vs. the Billionaires?
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according to Forbes (2007):
 as of earlier this year, there were 946
billionaires in the world, with an
average net worth of US$3.6 billion
Inequality
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the degree to which cases differ from
the mean (especially in their share of
something desirable)
there is inequality insofar as some
people have more/less of something
than others (and, by definition, they
have more/less than the average)
Types of Inequality
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things that many people want, that
some people have more of than others?
wealth and income
health (including freedom from pain)
education
life (life expectancy, safety)
political rights and freedoms
social or cultural recognition or status
Types of Inequality
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differences among people that influence
their share of desirable things?
gender
ethnicity
nationality
citizenship
age
sexual orientation
Our Focus Today: Money
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income and wealth
 if you have it, you can probably get
other good things you want
(education, life, political freedom, etc.)
also useful because we have relatively
good data (information)
Inequality versus Poverty?
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some people say we should focus on
poverty, not inequality
 maybe we should care what happens
to the poor in absolute terms, not
relative to the rich
a somewhat philosophical and
psychological debate:
 do relative incomes and wealth affect
individuals’ well-being?
Q: Are the rich getting richer
and the poor getting poorer?
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In other words: Is economic inequality
increasing or decreasing?
A at three levels:
1. national/domestic: within countries
2. international: between countries
3. global: considering individuals as
members of a single globe
Readings and Further Help
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required readings:
 Gilbert 2007
 Sutcliffe 2004
recommended readings:
 Firebaugh 2003
 Birdsall et al 2005
my office hours:
 tomorrow, 9:00-1:00, office 2.17N
Measuring Inequality
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it’s not easy!
inaccurate national statistics, surveys,
historical estimates, cross-national
comparisons
but accurate enough to draw some
key conclusions
Measuring Inequality
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can just compare scores for a few
cases (e.g., individuals, countries)
but that gets complicated when we
have many cases and/or want to
compare one distribution to another
so we use some key indexes of
inequality…
Measuring Inequality:
Gini Coefficient/Index
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Gini Coefficient varies from 0 to 1
 0: perfect equality
 1: one member has everything
Gini Index is the Gini Coefficient
multiplied by 100 (range of 0 to 100)
Measuring Inequality:
Ratios of Percentiles
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can compare the income or wealth of
the 90th percentile to the 10th
or the 80th percentile to the 20th
both comparisons provide a ratio that
tells us something about the amount of
something distributed at the top versus
at the bottom
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Measuring Inequality:
Comparing Incomes of
Nations
individuals, families,
and households
have incomes
what about nations?
 usually use GDP (Gross Domestic
Product) or something like it
 not perfect, but does tell us
something useful about a country
 GDP/capita measures productivity
A Brief History of Economic
Inequality: 1800-1950
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until the Industrial Revolution:
most of the world’s people were poor (even
in Europe, which had the highest
GDP/capita)
starvation a constant threat for most
most inequality was within nations, not
between them
A Brief History of Economic
Inequality: 1800-1950
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then, as a result of the Industrial Revolution:
tremendous economic growth (increasing
GDP/capita) in countries with industry
within-nation inequality expanded
but between-nation inequality expanded far
more
starting in early 1900s, within-nation
inequality began declining in rich countries
Economic Inequality: 1950-now
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sometime between 1950 and 1980:
 between-nation inequality began declining
 within-nation inequality began expanding
however, between-nation inequality depends
on how you treat two key countries: China
and India
in other words: Do you “weight” by
population?
Global Inequality:
Are the rich getting richer and
the poor getting poorer?
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we know:
 inequality between nations is declining
(assuming you recognize China’s and
India’s populations)
 inequality within nations is increasing
Q: so which effect is stronger??
Global Inequality:
Are the rich getting richer and
the poor getting poorer?
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A: declining between-nation inequality
outweighs increasing within-nation inequality
therefore… global inequality is now declining
 but only because of India and (even more
so) China
Global Inequality:
Are the rich getting richer and
the poor getting poorer?
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qualifiers:
absolute gaps in income and wealth are
growing (even if ratios are shrinking)
some (poor) countries are not growing, and
thus falling farther and farther behind the
ones that are
 sub-Saharan Africa
Key Conclusions
1. economic inequality is increasing in most
(maybe all) countries
2. but economic inequality is decreasing at the
global level because it’s decreasing between
countries
3. these trends are relatively recent
Is World Inequality a Crisis?
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as we’ve seen, global inequality is not
growing
but many poor countries are falling farther
and farther behind
also, global media are increasing poor
people’s awareness of their relative poverty
(whether they’re among the poorest or not)