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 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 UK as a whole produces US$1,845.2 bn/year Slim/Gates/Buffett therefore possesses wealth equivalent to about 3.7% of that 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 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 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 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 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) (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 world’s economy? the whole world’s 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)

A Crisis of Inequality?? Is inequality a problem? Is inequality a problem? Is inequality growing? Is inequality growing? If it’s growing, why? If it’s growing, why? If it’s growing, what might be the consequences? If it’s growing, what might be the consequences?

Inequality a situation in which units vary in their possession or control of something 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) in other words, where there is nonzero dispersion around the mean (average)

Comparing Distributions A A

C B

Distributions versus What Kinds of People Are Located Where C B

Types of Inequality I 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

Types of Inequality II characteristics of people that may influence where they are located in a distribution of desirable things? characteristics of people that may influence where they are located in a distribution of desirable things? gender gender ethnicity ethnicity nationality nationality citizenship citizenship age age

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) we will set aside the characteristics of individuals we will set aside the characteristics of individuals

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? Issue at three levels: 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 it’s not easy! it’s 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 world’s people were poor (even in Europe, which had the highest GDP/capita) most of the world’s 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 China’s and India’s populations) inequality between nations is declining (assuming you recognize China’s and India’s 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: Not Increasing… (We Think) 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 (and in the rest of the world inequality is increasing) 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 and uncertainty about the data remains

Global Inequality: Remaining Problems but, absolute gaps in income and wealth are growing (even if ratios are shrinking) 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 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) sub-Saharan Africa (largely because of HIV/AIDS, malaria, cholera, tuberculosis… plus conflict and political crises) billions remain in poverty (most in Asia) billions remain in poverty (most in Asia)

Consequences of Inequality existing research suggests that inequality leads to: existing research suggests that inequality leads to: less political democracy less political democracy less economic development less economic development worse human health worse human health more corruption more 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 20 th century

Changes in the Future?

Readings and Further Help required readings: required readings: Gilbert 2007 Gilbert 2007 recommended readings: recommended readings: Sutcliffe 2004 Sutcliffe 2004 Firebaugh 2003 Firebaugh 2003 Birdsall et al 2005 Birdsall et al 2005 my open door time for WiC: my open door time for WiC: January 19, , 2.17N January 19, , 2.17N