Saturday, September 3, 2016

Unequally poor (2007)

Book Review from the February 2007 issue of the Socialist Standard

Branko Milanovic - Worlds Apart: Measuring International and Global Inequality, (Princeton University Press £22.95)

How unequal is the world, and is inequality getting worse? Has globalisation increased or reduced inequality? These are some of the questions that Milanovic deals with here, but he starts by discussing how inequality should be measured. Three different ways of doing so can be distinguished. The first is unweighted international inequality: examine the per capita income or GDP of a country, irrespective of its population.

The second is population-weighted international inequality: do the same, but take account of the fact that different countries have different-sized populations. The third is world income distribution: measure the incomes of all individuals in the world. This last is the most informative, but it requires a great deal of information for every country, much of which is simply not available. So it is the first as well as the third concept of inequality that Milanovic makes use of.

Even then, though, there are varying ways of quantifying inequality - but the contrasts between Gini co-efficients and Theil entropy indices can probably be ignored for present purposes. Between 1982 and 2000, unweighted international inequality increased, i.e. countries diverged in their economic  performance, with poor countries doing on average less well than the rich. One interesting way of looking at events is to classify countries in terms of wealth (i.e. GDP per capita) and compare how they fared between 1960 and 2000.

Milanovic divides countries into four groups in 1960: 41 rich countries (all at least as rich as the poorest country in Western Europe), 22 'contenders' (no more than a third below this poorest Western European country, and so within striking distance of joining the rich), 39 in the Third World (between one-third and two thirds as well off as this same poorest Western European country), and 25 in the Fourth World (GDP per capita less than one third of the poorest country in Western Europe).

By 1978, only three contenders had made it into the rich group, while eight rich countries had fallen into the class of contenders and three into the Third World. Of the Third World group, just two had become contenders and 14 had joined the Third World. None of the Fourth World countries had moved into a higher group.

Between 1978 and 2000, a further eleven contenders had fallen into the Third World and two into the Fourth World. Milanovic gives a lot more figures, but it is plain that there was far more downward than upward mobility. Algeria, for instance, counted as a rich country in 1960, a contender in 1978, and a member of the Third World by 2000. Bulgaria was a contender in 1960, in the Third World in 1978 and the Fourth in 2000.

In 2000 all African countries bar five were in the Fourth World: Milanovic refers to 'the unremitting downward mobility of the entire continent', a picture more or less repeated in Latin America. But of course this says little about the incomes of actual people, since even poor countries can contain rich individuals.

This is where the third concept of inequality, world income distribution, comes in. In terms of purchasing power parity, the top 10 percent of the global population receives about half of world income. Between 1988 and 1993, the poorest 85 percent of the world saw their real incomes decline; things were not quite so bad between 1993 and 1998, except for the very poorest 10 percent.

Milanovic's book contains a lot more information that we can't summarise here. While all the statistics, tables and charts mean that it's often hard going, it certainly gives a vivid picture of the unequal condition of the world today, and the fact that things are not in the process of changing.
Paul Bennett

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