Transcript Lecture Title

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
Bill Gates
Warren Buffett
The richest person in the world…?
Carlos Slim Helú
Bill Gates
Warren Buffett
(each has approx. US$60 billion, or £39 billion)
US$60 billion versus the UK?

UK as a whole produces US$1,845.2 bn/year


Slim/Gates/Buffett 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/Gates/Buffett’s
current wealth
US$60 billion vs. Sierra Leone?

the average Sierra Leonean produces about
US$561/year

it would take the average Sierra Leonean
120,855,615 years to produce
Slim/Gates/Buffett’s current wealth

(remember: 2,199,799 years for the Briton)
The UK versus Sierra Leone
versus the World?

Sierra Leonean economy produces:
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
the British economy produces:
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
US$561/year per capita
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?

how long would it take the average Sierra
Leonean to produce what the average Briton
produces in a single year (US$30,821)?


but life expectancy at birth in Sierra Leone:


54.9 years
41.4 years
(compare with UK: 78.9 years)
A Crisis of Inequality??

Is inequality a problem?
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Is inequality growing?

If it’s growing, why?

If it’s growing, what might be the
consequences?
Shares of Total World Wealth by Decile (2000, PPP)
(Source: Davies et al 2006)
1.1%
1.6%
2.4%
3.7%
0.6%
0.3%
0.1%
6.2%
12.9%
71.1%
First
Second
Third
Fourth
Fifth
Sixth
Seventh
Eighth
Ninth
Tenth
Inequality

a situation in which units vary in their
possession or control of something
 in
other words, where there is
nonzero dispersion around the mean
(average)
Comparing Distributions
A
A
Comparing Distributions
B
C
Distributions versus What Kinds
of People Are Located Where
B
C
Types of Inequality I

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
Types of Inequality II

characteristics of people that may
influence where they are located in a
distribution of desirable things?
 gender
 ethnicity
 nationality
 citizenship
 age
Our Focus Today: Money



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)
we will set aside the characteristics of
individuals
Inequality versus Poverty?


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?


In other words: Is economic inequality
increasing or decreasing?
Issue at three levels:
1. national/domestic: within countries
2. international: between countries
3. global: considering individuals as
members of a single globe
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



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



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
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
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A
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GDP/capita (2003, I$)
(Source: Penn World Table 6.2)
40000
35000
30000
25000
20000
15000
10000
5000
0
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

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

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?
GDP/capita, 12001AD
25000
Western Europe
Western Offshoots
Latin America
Asia (excl Japan)
Africa
World
20000
15000
10000
5000
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20
73
19
50
19
13
19
70
18
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18
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16
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15
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1
0
10
International 1990 USD
30000
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:
Not Increasing… (We Think)

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 (and in the rest of the world
inequality is increasing)

and uncertainty about the data remains
Global Inequality:
Remaining Problems

but, absolute gaps in income and wealth are
growing (even if ratios are shrinking)

many (poor) countries are not growing, and
thus falling farther and farther behind the
ones that are

sub-Saharan Africa (largely because of
HIV/AIDS, malaria, cholera, tuberculosis…
plus conflict and political crises)

billions remain in poverty (most in Asia)
Consequences of Inequality

existing research suggests that
inequality leads to:
 less
political democracy
 less
economic development
 worse
 more
human health
corruption
Key Conclusions
1. research has shown that inequality
has a range of negative consequences
2. economic inequality has recently been
increasing within most countries
3. but economic inequality is decreasing
at the global level because it’s
decreasing between countries
(weighted by population)
4. these trends are a change from earlier
in the 20th century
Changes in the Future?
Readings and Further Help
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required readings:
 Gilbert 2007
recommended readings:
 Sutcliffe 2004
 Firebaugh 2003
 Birdsall et al 2005
my open door time for WiC:
 January 19, 14.00-16.00, 2.17N