Abstract
Income inequality in many countries, both developed and developing, has been on the rise since the 1980s after moderating for a good part of the twentieth century, especially after World War II. Wealth concentration has also become more skewed. Underlying these trends are falling labour shares of national income. While rising economic inequality threatens the legitimacy of the status quo, some rationalize this as necessary to raise the investment and growth rates, or for middle-class growth. Policy has mattered. Growing inequality has been exacerbated by stronger property rights and favourable policies. For example, privatization has seen the massive transfer of public wealth to private hands. Trade and financial liberalization and globalization as well as neoliberal economic policies have also contributed to these trends. Tax and public expenditure reforms have worsened redistribution by fiscal policies. Meanwhile, huge increases in executive remuneration together with modest if not negative real wage growth have worsened ‘wage inequality’. Unconventional monetary policies and fiscal austerity after the 2008–2009 global financial crisis have aggravated trends.
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Notes
According to the US Census Bureau and the World Wealth Report 2010; https://www.capgemini.com/resources/world-wealth-report-2010.
According to Internal Revenue Service figures; https://www.psychologytoday.com/blog/wired-success/201508/why-income-inequality-threatens-democracy.
The latest Eurostat estimate; http://ec.europa.eu/eurostat/statistics-explained/index.php/People_at_risk_of_poverty_or_social_exclusion.
The Gini index measures the extent to which the distribution of income (or, in some cases, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution. The Gini index measures the area between the Lorenz curve and the hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. A Gini index of zero represents perfect equality and 100, perfect inequality (see OECD Glossary of Statistical Terms).
However, various surveys have put China’s household income Gini coefficient higher; one put it at 0.61 in 2010, greatly exceeding the US’s 0.45! (Xie and Zhou. 2014).
According to Hurun, a Shanghai firm that ranks the richest 1% in the world yearly. http://www.bbc.com/news/world-asia-china-35657107.
Forbes. (2017). The World’s Billionaires. For all details of Oxfam calculations, please see its Methodology Note: https://policy-practice.oxfam.org.uk/publications/reward-work-not-wealth-toend-the-inequality-crisis-we-must-build-an-economy-fo-620396.
Interview with CNBC, 21 January 2013. http://www.cnbc.com/id/100394650.
Interview with the Guardian, 4 April 2014; https://www.theguardian.com/environment/2014/apr/03/climate-change-battle-food-head-world-bank.
The Guardian. ‘World's witnessing a new Gilded Age as billionaires’ wealth swells to $6tn’. https://www.theguardian.com/business/2017/oct/26/worlds-witnessing-a-new-gilded-age-as-billionaires-wealth-swells-to-6tn.
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Chowdhury, A., Jomo, K.S. Inequality and Its Discontents. Development 61, 21–29 (2018). https://doi.org/10.1057/s41301-018-0179-0
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DOI: https://doi.org/10.1057/s41301-018-0179-0