The Truth About Corbyn’s Claims On Global Economic Inequality
Jeremy Corbyn addressed United Nations officials at Geneva’s Palais de Nations on Friday.
It was a wide-ranging speech, covering topics ranging from human rights, to military interventions, to climate change.
But one of the Labour leader’s central themes was global economic inequality.
“The growing concentration of unaccountable wealth and power in the hands of a tiny corporate elite, a system many call neoliberalism,…has sharply increased inequality, marginalisation, insecurity and anger across the world,” the Labour leader said.
He also deplored “growing insecurity and grotesque levels of inequality within and between nations”.
But are these claims justified? Is global economic inequality really getting worse?
Are the rich getting richer?
The answer is not simple. It depends what one is measuring and how one measures it.
First, let’s consider income inequalities. And let’s examine the change in the level of inequality between every person on the planet in recent decades.
Research by the economist Branko Milanovic shows that we have become less unequal by this metric.
Milanovic estimates that between 1988 and 2008 the world actually saw the first decline in global income inequality since the Industrial Revolution of the 19th century.
This is mainly because hundreds of millions of people in India and China have seen their incomes grow rapidly as their nations have industrialised.
It is due to industrialisation in these giant nations that global extreme poverty (defined as the number of people with incomes existing on below $1.9 a day) has fallen from more than 40 per cent of the world’s population in 1980 to around 10 per cent today.
But what about income inequalities between countries?
There we get a different picture. Another economist, John Kay, says that when one lines up the countries of the world according to their average national income per head one finds that the shape of the distribution is a “U” shape.
There are a number of rich countries at one end, a few in between, and a large cluster of poor states at the other end.
Moreover, Kay says that this picture has not significantly changed since the turn of the Millennium, even with the rapid industrial development of India and China.
And the rich are getting richer within countries aren’t they?
In some countries such as the US and the UK this is true.
The World Top Incomes database, established by the late Tony Atkinson and maintained by other researchers, shows that the share of total incomes flowing to the top 1 per cent in the US and the UK has been growing steadily since the 1980s and now stands at a share not seen since the 1920s.
But the share of income going to those at the very top in Europe and Japan has been pretty flat over that same period, reflecting different social “norms” around high pay in those countries.
What about wealth though?
The same definitional issues apply as with income. Are we talking about the differences in the average level of wealth between countries? Or is it the difference in the level of wealth between all the people on the planet?
Evidence from a regular report by Credit Suisse suggests that inequality on both measures is probably rising.
It’s important to remember that wealth gains in recent decades of a small band of oligarchs in India, China and Russia relative to the rest of their countrymen and women have been astounding.
However, the quality of this cross-country comparison data is inevitably patchy given it has to be compiled and imputed from a vast range of diverse surveys and national accounts of variable reliability.
The trend of wealth inequality within countries is also disputed. For instance, the UK’s official survey shows a rather flat trend in wealth inequality in recent years, but researchers say such surveys are fatally flawed because they have don’t do a very good job of capturing the vast riches of those at the very top.
The economist Gabriel Zucman also points to strong evidence that a large degree of wealth is held secretly offshore. If this wealth was properly captured in official national data snapshots it might well show a trend of rising wealth inequality within many developed world countries.
Which way are things heading?
As regards global income inequality, Branko Milanovic estimates that the declines of recent decade will only be sustained if countries’ mean average incomes continue to converge and if high inequalities within countries are kept in check.
On the first part there are grounds for some optimism if the likes of China and India continue their catch-up GDP growth. On the second, the picture looks bleaker.
And when it comes to the likelihood of seeing any natural reduction in national and international wealth inequalities (i.e in the absence of any radical shifts in property and inheritance taxation, or in shutting down tax havens) the outlook does seem pretty grim.