Nations are growing more equal with each other while splitting apart inside
Globalisation has produced a paradox. Gaps between countries peaked in the 1970s, when the world split into rich and poor nations, and have narrowed since, so most people now live in middle-income countries. Yet within most nations, especially wealthy ones, inequality has climbed sharply over the last 30 years.
Economic inequality bundles three measures: how income is shared, how wealth is held and how spending is distributed. Consumption matters because it is where people actually feel the difference. The standard yardstick is the Gini coefficient, running from 0, where everyone has the same, to 1, where one person has everything. On income, a reading above 50 per cent counts as high, as in Brazil or South Africa, while Denmark, Sweden and Germany sit below 30 per cent. Yet income and wealth tell different stories: Denmark, Norway and the Netherlands combine low income inequality with wealth Gini figures of 70 to 90 per cent.
The long-run drift has been toward more inequality, interrupted by the two World Wars and the postwar build-out of welfare states. In 1820 the richest fifth of humanity earned about three times as much as the poorest fifth; by 1991 the ratio was 86 to one. The between-country gap has eased since, and a 2020 study found the poorest half's share of global earnings doubled across the 2000s and 2010s, driven by growth in developing economies. A UN report, however, found inequality inside countries rose for 70 per cent of the world's people between 1990 and 2015.
The OECD's 2011 study of rich countries found the gap between the top and bottom tenths of earners had widened from seven to one to nine to one over 25 years, the highest in half a century. It pointed to several causes. The mismatch between demand for skills and their supply appeared to matter most. Household structure changed too: single-headed households rose from 15 to 20 per cent. Assortative mating, meaning people pairing up with similar earners, also grew, with 40 per cent of dual-earner couples in the same or adjacent earnings bands, up from 33 per cent.
Wealth is more lopsided than income. The 2022 World Inequality Report, led by economists including Thomas Piketty, found the poorest half of humanity owned 2 per cent of global wealth and the top tenth 76 per cent, levels comparable to the height of Western imperialism. Research links high inequality to political instability and slower growth, with unequal land and human capital doing more damage than unequal income.
Source: Economic inequality
