40 Years of Data Suggests 3 Myths About Globalization
Three beliefs about globalization have propagated since the early 1980s. First, that globalization leads to a reduction in global inequality. Second, that high income growth among the richest will lift the incomes of the poorest. Third, that there is no alternative to rising inequality without turning our backs on trade and technology. The recently released World Inequality Report, the first research study to comprehensively examine wealth and income inequality trends across rich and emerging countries over approximately 40 years, dispels these notions.
Globalization has led to a rise in global income inequality, not a reduction
Inequality between individuals across the world is the result of two competing forces: inequality between countries and inequality within countries. For example, strong growth in China and India contributed to significant global income growth, and therefore, decreased inequality between countries. However, inequality within these countries rose sharply. The top 1% income share rose from 7% to 22% in India, and 6% to 14% in China between 1980 and 2016.
Until recently, it has been impossible to know which of these two forces dominates globally, because of lack of data on inequality trends within countries, which many governments do not release publicly or uniformly. The World Inequality Report 2018 addresses this issue, relying on systematic, comparable, and transparent inequality statistics from high-income and emerging countries.
The conclusion is striking. Between 1980 and 2016, inequality between the world’s citizens increased, despite strong growth in emerging markets. Indeed, the share of global income accrued by the richest 1%, grew from 16% in 1980 to 20% by 2016. Meanwhile the income share of the poorest 50% hovered around 9%. The top 1% – individuals earning more than $13,500 per month – globally captured twice as much income growth as the bottom 50% of the world population over this period.
Income doesn’t trickle down
The second belief contests that high growth at the top is necessary to achieve some growth at the bottom of the distribution, in other words that rising inequality is necessary to elevate standards of living among the poorest. However, this idea is at odds with the data. When we compare Europe with the U.S., or China with India, it is clear that countries that experienced a higher rise in inequality were not better at lifting the incomes of their poorest citizens. Indeed, the U.S. is the extreme counterargument to the myth of trickle down: while incomes grew by more than 600% for the top 0.001% of Americans since 1980, the bottom half of the population was actually shut off from economic growth, with a close to zero rise in their yearly income. In Europe, growth among the top 0.001% was five times lower than in the U.S., but the poorest half of the population fared much better, experiencing a 26% growth in their average incomes. Despite having a consistently higher growth rate since 1980, the rise of inequality in China was much more moderate than in India. As a result, China was able to lift the incomes of the poorest half of the population at a rate that was four times faster than in India, enabling greater poverty reduction.
The trickle-down myth may have been debunked, but its ideas are still rooted in a number of current policies. For example, the idea that high income growth for rich individuals is a precondition to create jobs and growth at the bottom continues to be used to justify tax reductions for the richest, as seen in recent tax reform in the U.S. and France. A closer look at the data demands we rethink the rationale and legitimacy of such policies.
Policy – not trade or technology – is most responsible for inequality
政策 – 而非贸易或技术 – 是不平等的元凶
It is often said that rising inequality is inevitable — that it is a natural consequence of trade openness and digitalization that governments are powerless to counter. But the numbers presented above clearly demonstrate the diversity of inequality trajectories experienced by broadly comparable regions over the past decades. The U.S. and Europe, for instance, had similar population size and average income in 1980 — as well as analogous inequality levels. Both regions have also faced similar exposure to international markets and new technologies since, but their inequality trajectories have radically diverged. In the U.S., the bottom 50% income share decreased from 20% to 10% today, whereas in Europe it decreased from 24% to 22%.
我们经常说不平等的增加是不可避免的 – 那是政府无力去阻止贸易开放和数字化的结果。但是以上数据表明，在过去的十多年状况类似的国家间，不平等状况的发展却呈现出了差异性。例如美国与欧洲，在1980年拥有类似的人口规模和人均收入，同时也处于相似的不平等水平，但是它们的不平等发展轨迹却差异显著。在美国，收入后50%的人群的收入占比从20%降到今天的10%。而欧洲则从24%降到现在的22%。
Rather than openness to trade or digitalization, it is policy choices and institutional changes that explain divergences in inequality. After the neoliberal policy shift of the early 1980s, Europe resisted the impulse to turn its market economy into a market society more than the US — evidenced by differences on key policy areas concerning inequality. The progressivity of the tax code — how much more the rich pay as a percentage — was seriously undermined in the U.S., but much less so in continental Europe. The U.S. had the highest minimum wage of the world in the 1960s, but it has since decreased by 30%, whereas in France, the minimum wage has risen 300%. Access to higher education is costly and highly unequal in the U.S., whereas it is free in several European countries. Indeed, when Bavarian policymakers tried to introduce small university fees in the late 2000s, a referendum invalidated the decision. Health systems also provide universal access to good-quality healthcare in most European countries, while millions of Americans do not have access to healthcare plans.
与其归因于贸易开放程度或数字化，不如说是政策选择和制度变化更能解释不平等发展轨迹的背离现象。在20世纪80年代新自由主义发生改变之后，与美国相比，欧洲减缓了其将市场经济向市场社会转变的步伐 – 这点从影响到不平等的主要政策的差异性可以得到佐证。累进税制 – 富人按照百分比缴纳税款 – 在美国被严重的破坏， 这种情况在欧洲大陆却并不显著。在20世纪60年代，美国拥有全球最高的最低工资标准，但目前这一标准降低了30%，与之相对的法国，却上涨了300%。 在美国享受高等教育花费高昂且严重不平等，但在欧洲的许多国家是免费的。事实上，在2000年代末当，巴伐利亚的政策制定者尝试对大学教育收取少量费用时，一次全民公投否决了这份提案。在欧洲的许多国家，医疗体系保证了公众都能享受到高质量的医疗服务，于此同时，数百万的美国人不能享受到医疗保障计划。
Re-examining these pervasive beliefs around globalization and its impacts on global inequality is more important now than ever before. Using new data from the World Inequality Report is the first step in rectifying these myths and generating a new public discourse that has the potential to effect long-lasting, systemic change.
Lucas Chancel was the general coordinator of the World Inequality Report 2018. Codirector of the World Inequality Lab at the Paris School of Economics, he teaches at Sciences Po.