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…?

Carlos Slim Hel ú Mexican businessman

The richest person in the world…? Carlos Slim Hel ú Mexican businessman wealth:US$67.8bn (£33.6bn)

Carlos Slim versus the UK? UK as a whole produces US$1,845.2 bn/year UK as a whole produces US$1,845.2 bn/year Carlos Slim therefore possesses wealth equivalent to about 3.7% of that Carlos Slim therefore possesses wealth equivalent to about 3.7% of that the UK produces US$30,821 per resident (per capita) each year the UK produces US$30,821 per resident (per capita) each year it would take the average Briton 2,199,799 years to produce Slims current wealth it would take the average Briton 2,199,799 years to produce Slims current wealth

Carlos Slim versus Sierra Leone? the average Sierra Leonean produces about US$561/year the average Sierra Leonean produces about US$561/year it would take the average Sierra Leonean 120,855,615 years to produce Slims current wealth it would take the average Sierra Leonean 120,855,615 years to produce Slims current wealth (remember: 2,199,799 years for the Briton) (remember: 2,199,799 years for the Briton)

The UK versus Sierra Leone versus the World? Sierra Leonean economy produces: Sierra Leonean economy produces: US$561/year per capita US$561/year per capita the British economy produces: the British economy produces: US$30,821/year per capita US$30,821/year per capita the whole worlds economy? the whole worlds economy? US$7,439/year per capita US$7,439/year per capita (about 6.5 billion people) (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)? 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 54.9 years but life expectancy at birth in Sierra Leone: but life expectancy at birth in Sierra Leone: 41.4 years 41.4 years (compare with UK: 78.9 years) (compare with UK: 78.9 years)

The Poor vs. the Billionaires? according to Forbes (2007): 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 as of earlier this year, there were 946 billionaires in the world, with an average net worth of US$3.6 billion

Inequality the degree to which cases differ from the mean (especially in their share of something desirable) 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) 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 things that many people want, that some people have more of than others? things that many people want, that some people have more of than others? wealth and income wealth and income health (including freedom from pain) health (including freedom from pain) education education life (life expectancy, safety) life (life expectancy, safety) political rights and freedoms political rights and freedoms social or cultural recognition or status social or cultural recognition or status

Types of Inequality differences among people that influence their share of desirable things? differences among people that influence their share of desirable things? gender gender ethnicity ethnicity nationality nationality citizenship citizenship age age sexual orientation sexual orientation

Our Focus Today: Money income and wealth income and wealth if you have it, you can probably get other good things you want (education, life, political freedom, etc.) 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) also useful because we have relatively good data (information)

Inequality versus Poverty? some people say we should focus on poverty, not inequality 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 maybe we should care what happens to the poor in absolute terms, not relative to the rich a somewhat philosophical and psychological debate: a somewhat philosophical and psychological debate: do relative incomes and wealth affect individuals well-being? 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? In other words: Is economic inequality increasing or decreasing? A at three levels: 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 required readings: required readings: Gilbert 2007 Gilbert 2007 Sutcliffe 2004 Sutcliffe 2004 recommended readings: recommended readings: Firebaugh 2003 Firebaugh 2003 Birdsall et al 2005 Birdsall et al 2005 my office hours: my office hours: tomorrow, 9:00-1:00, office 2.17N tomorrow, 9:00-1:00, office 2.17N

Measuring Inequality its not easy! its not easy! inaccurate national statistics, surveys, historical estimates, cross-national comparisons inaccurate national statistics, surveys, historical estimates, cross-national comparisons but accurate enough to draw some key conclusions but accurate enough to draw some key conclusions

Measuring Inequality can just compare scores for a few cases (e.g., individuals, countries) 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 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… so we use some key indexes of inequality…

Measuring Inequality: Gini Coefficient/Index Gini Coefficient varies from 0 to 1 Gini Coefficient varies from 0 to 1 0: perfect equality 0: perfect equality 1: one member has everything 1: one member has everything Gini Index is the Gini Coefficient multiplied by 100 (range of 0 to 100) 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 can compare the income or wealth of the 90th percentile to the 10th or the 80th percentile to the 20th 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 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 individuals, families, and households have incomes what about nations? what about nations? usually use GDP (Gross Domestic Product) or something like it usually use GDP (Gross Domestic Product) or something like it not perfect, but does tell us something useful about a country not perfect, but does tell us something useful about a country GDP/capita measures productivity GDP/capita measures productivity

A Brief History of Economic Inequality: until the Industrial Revolution: until the Industrial Revolution: most of the worlds people were poor (even in Europe, which had the highest GDP/capita) most of the worlds people were poor (even in Europe, which had the highest GDP/capita) starvation a constant threat for most starvation a constant threat for most most inequality was within nations, not between them most inequality was within nations, not between them

A Brief History of Economic Inequality: then, as a result of the Industrial Revolution: then, as a result of the Industrial Revolution: tremendous economic growth (increasing GDP/capita) in countries with industry tremendous economic growth (increasing GDP/capita) in countries with industry within-nation inequality expanded within-nation inequality expanded but between-nation inequality expanded far more but between-nation inequality expanded far more starting in early 1900s, within-nation inequality began declining in rich countries starting in early 1900s, within-nation inequality began declining in rich countries

Economic Inequality: 1950-now sometime between 1950 and 1980: sometime between 1950 and 1980: between-nation inequality began declining between-nation inequality began declining within-nation inequality began expanding within-nation inequality began expanding however, between-nation inequality depends on how you treat two key countries: China and India however, between-nation inequality depends on how you treat two key countries: China and India in other words: Do you weight by population? in other words: Do you weight by population?

Global Inequality: Are the rich getting richer and the poor getting poorer? we know: we know: inequality between nations is declining (assuming you recognize Chinas and Indias populations) inequality between nations is declining (assuming you recognize Chinas and Indias populations) inequality within nations is increasing inequality within nations is increasing Q: so which effect is stronger?? Q: so which effect is stronger??

Global Inequality: Are the rich getting richer and the poor getting poorer? A: declining between-nation inequality outweighs increasing within-nation inequality A: declining between-nation inequality outweighs increasing within-nation inequality therefore… global inequality is now declining therefore… global inequality is now declining but only because of India and (even more so) China but only because of India and (even more so) China

Global Inequality: Are the rich getting richer and the poor getting poorer? qualifiers: qualifiers: absolute gaps in income and wealth are growing (even if ratios are shrinking) 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 some (poor) countries are not growing, and thus falling farther and farther behind the ones that are sub-Saharan Africa 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 its decreasing between countries 3.these trends are relatively recent

Is World Inequality a Crisis? as weve seen, global inequality is not growing as weve seen, global inequality is not growing but many poor countries are falling farther and farther behind but many poor countries are falling farther and farther behind also, global media are increasing poor peoples awareness of their relative poverty (whether theyre among the poorest or not) also, global media are increasing poor peoples awareness of their relative poverty (whether theyre among the poorest or not)