![Sample our Global Development journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5929/TOC-Subject-Sample-2021-Global-Development.jpg"})
Abstract
The dominant narrative of global income inequality is one of convergence. Recent high-profile publications by Branko Milanovic and the World Bank claim that the global Gini coefficient has declined since 1988, and that inter-country inequality has declined since 1960. But the convergence narrative relies on a misleading presentation of the data. It obscures the fact that convergence is driven mostly by China; it fails to acknowledge rising absolute inequality; and it ignores divergence between geopolitical regions. This paper suggests alternative measures that bring geopolitics back in by looking at the gap between the core and periphery of the world system. From this perspective, global inequality has tripled since 1960.
Notes
1. Piketty, Capital in the Twenty-First Century.
2. Fuentes-Nieva and Galasso, “Working for the Few.”
3. Hardoon, Ayele, and Fuentes-Nieva, “Economy for the 1%.”
4. Milanovic, Global Inequality, 166.
5. Lane, “Sanders–Pope Francis ‘Moral Economy’.”
6. Boaz, “Capitalism and the Reduction in Inequality.” The emphasis is in the original.
7. World Bank, Taking on Inequality, 75.
8. World Bank, Taking on Inequality, 76.
9. World Bank, Taking on Inequality, 81.
10. Rowley, “Global Inequality on the Wane.”
11. Joshi and O’Dell, “Global Governance and Development Ideology”; Paloni and Zanardi, IMF, World Bank and Policy Reform.
12. Mosse, “Relational Approach to Durable Poverty.”
13. Wallerstein, Modern World-System.
14. Anand and Segal, “Global Distribution of Income.”
15. World Bank, Taking on Inequality, 81.
16. Wade, Economic Theory and the Role of Government.
17. Wade, “Our Misleading Measure of Income.”
18. Anand and Segal, “Global Distribution of Income.” Anand and Segal also document movements in mean log deviation (MLD) and the Theil Index, with and without China, and in global and relative terms.
19. World Bank, Taking on Inequality, 81.
20. World Bank, Taking on Inequality, 76.
21. Cimadamore, Koehler, and Pogge, “Poverty and the Millennium Development Goals,” 6.
22. Pritchett, “Divergence, Big Time,” 3.
23. Pritchett, “Divergence, Big Time.”
24. UNDP, Human Development Report 1999, 38.
25. Arrighi, Silver and Brewer, "Industrial Convergence, Globalization,” 13. The measure that Arrighi, Silver and Brewer use is the GNP per capita of developing regions as a percentage of GNP per capita of First World countries as a group.
26. See Prashad, Poorer Nations; Prashad, Darker Nations; Chang, Bad Samaritans.
27. Ndikuma and Boyce, “Congo’s Odious Debt.”
28. Easterly, “Lost Decades.”
29. World Development Indicators, constant 2010 US$.
30. White, “Adjustment in Africa”; Riddel, “Things Fall Apart Again”; Stein and Nissanke, “Structural Adjustment and the African Crisis.”
31. Chang, Bad Samaritans, 28.
32. World Development Indicators, constant 2010 US$.
33. Pollin, Contours of Descent.
34. Piketty, Capital in the Twenty-First Century.
35. For example, Gerschenkron, “Economic Backwardness in Historical Perspective”; Solow, “AContribution to the Theory of Economic Growth.”
36. Anand and Segal, “Global Distribution of Income.”
37. Credit Suisse, Global Wealth Databook.
38. Author’s calculations; data from Credit Suisse, Global Wealth Databook, 5.
39. Cope and Kerswell, “Labor, Imperialism, and Globalization.” Cope and Kerswell build on Samir Amin’s method of calculating unequal exchange; Amin, Unequal Development, 144. This amount of $1.46 trillion represents the difference between the South’s existing earnings through trade with the North and what the South would be earning if the labour that went into producing goods for trade between North and South was paid equal wages for equal productivity. For other ways of estimating unequal exchange, see Kohler, “Unequal Exchange”; Kohler and Tausch, Global Keynesianism. Using a method based on exchange rate deviation, Kohler calculates that in 1995 the South was registering annual losses due to unequal exchange at $1.752 trillion.
40. Harvey, “Prebisch–Singer Hypothesis”; Arezki et al., Testing the Prebisch–Singer Hypothesis.
41. South Centre, Financing Development.
42. Griffiths, State of Finance for Developing Countries.
43. Kar and Freitas, Illicit Financial Flows; Baker, Capitalism’s Achilles Heel. Kar and Freitas of Global Financial Integrity show that $1.138 trillion was drained from developing countries in 2010, 80% of which (or $910 billion) happened through trade misinvoicing. These figures do not capture abusive transfer pricing, as it is difficult to measure, but Raymond Baker estimates that it roughly equals trade misinvoicing, ie an additional $910 billion for a total of about $2 trillion. Note that these figures only capture misinvoicing and abusive transfer pricing for goods, not services. Adding services to the mix would bump the figures up by approximately 25%. The measurement of illicit financial flows is hotly debated, but for now the official position of the Organization for Economic Cooperation and Development (OECD) is that ‘there is general consensus that illicit financial flows likely exceed aid flows and investment in volume’; OECD, Illicit Financial Flows. See also Shaxson, Treasure Islands.
44. UNCTAD, Trade and Development Report 1999. See also Sogge, Give and Take, 35. The figure of $700 billion is a projection of losses for 2005.