Growing inequality in US and China, but worse for middle and lower classes in the US, and how we assess the growth of poverty worldwide

John A. Powell and the Haas Institute are suggesting Targeted Universalism as a different way—a powerful way—to make the transformational changes we need. Changes we need to improve life chances, promote inclusion, and enhance and sustain equitable policies and programs. To better understand a targeted universalism framework, please enjoy this brief animated video, which explains the difference between targeted universalism and more traditional policy approaches. A primer will be published on this page in the coming weeks.

This is one response to growing inequality and misery by those suffering at the bottom.  A few excerpts:

From a piece on “no retirement” in The Guardian, March 2017

Social care. Unemployment assistance. Health. Local councils and libraries. Municipal parks. Anything relating to what used to be called “the public good” is attacked at the roots. Austerity redefines these things as fiscal liabilities or deficits rather than shared investments in common decency. It was only a matter of time before pensions too were put on the chopping block.

This is ideological. It’s not that there isn’t enough money to fund proper healthcare or pensions. There is. Remember the vast bank bailouts? Quantitative easing? It’s just that the cash is being directed elsewhere. Most notably to the private sector in the form of massive corporate subsidies, while public utilities are slowly being starved to the point of decrepitude and collapse.

And let’s not forget the tax revenues that aren’t being collected when economic policy is geared towards socialism for the rich and the strictest market discipline for everyone else. In 2015 Google paid €47m tax in Ireland on €22bn sales revenue. That’s a 0.21% tax rate. It means the average wage earner unfairly bears the burden of society. No wonder a happy retirement is starting to look like an untenable indulgence. If you can’t save enough to fund it on that zero-hours pub job or Uber “gig”, then hard luck.

There’s clearly a lot of intergenerational resentment towards retirees at the moment. The perception is that they’ve pulled the ladder up on the millennials who are struggling in low-paid jobs, will never own a house and are laden with awful student debts – and even reports that they’re better off than workers. The disgruntlement is understandable. But it also plays into the hands of those trying to end retirement, a divide and conquer tactic that has been remarkably effective in allowing some draconian policies to flourish.

What we really need is an intergenerational alliance to be forged around the issue. Any attempt to protect the right to retire (with a pension) will also have to address the dire developments in the employment sector that are seriously disadvantaging younger people and now creeping into jobs held by 40-somethings too.

Can this cross-generational solidarity be built? It’s hard to say. But one thing is certain. We are witnessing a major regression in the treatment of the elderly, something reminiscent of Victorian times or worse, where old age was no excuse for abstaining from an unforgiving world of work. Welcome to the new dark ages.

From, Rationalization and Riches, March 2017

Maldistributions of income and wealth, epidemiologists inform us, are even limiting how long we live. And what about violence? Some 40 studies link inequality and homicides, the ultimate in violent acts. The wider a society’s inequality, the higher the murder rate.

Yes, inequality does rate as a problem, a reality that you don’t have to be a social scientist to recognize. Every great religious tradition in the world frowns on maldistributions of wealth. We put ourselves and our societies at risk, our greatest thinkers have always recognized, if we let these maldistributions fester.  Activists today are exploring encouraging pathways to a New Economy that sustains both our planet and greater equality. The work of veteran activist scholar Gar Alperovitz stands as just one heartening example.

Rise in income inequality in the US and China, but the bottom half in China have been doing much better, while wages for the poor and middle class have stagnated in the US

In one respect, both China and the U.S. are similar: Both have witnessed an extreme rise in income inequality since the 1970s, according to a new paper from economists including Thomas Piketty of the Paris School of Economics and Emmanuel Saez and Gabriel Zucman of University of California-Berkeley.

The top 1 percent of earners in America now take home about 20 percent of the country’s pretax national income, compared with less than 12 percent in 1978, according to the research the economists published at the National Bureau of Economic Research. Over the same time in China, the top 1 percent doubled their share of income, rising from about 6 percent to 12 percent.

While that suggests that China and the U.S. are experiencing growth of inequality in tandem, there’s one major difference, which suggests the problem may be more dire on American soil. That regards how the bottom 50 percent of income earners are taking part in — or in the case of the U.S., losing out on — the country’s economic growth.

America has experienced “a complete collapse of the bottom 50 percent income share in the U.S. between 1978 to 2015,” the authors wrote. “In contrast, and in spite of a similar qualitative trend, the bottom 50 percent share remains higher than the top 1 percent share in 2015 in China.”

About 117 million American adults are living on income that has stagnated at about $16,200 per year before taxes and transfer payments, Piketty, Saez and Zucman found in research published last year.

Meanwhile, economic growth in China has been so strong that — despite widening inequality — the incomes of the bottom 50 percent have also “grown markedly,” the economists wrote. Their analysis found that the poorest half of Chinese workers saw their average income grow more than 400 percent from 1978 to 20015. For their American counterparts, income decreased 1 percent.

“This is likely to make rising inequality much more acceptable” in China, they noted. “In contrast, in the U.S.. there was no growth left at all for the bottom 50 percent (-1 percent).”

And the real deal on international poverty figures – is it going up or going down?

Media reporting that heralds the success of global poverty reduction strategies making claims such as “the number of people living in extreme poverty ($1.90 per person per day) has tumbled by half in two decades” is still very much routine. However, articles like Nicholas Kristof’s recent piece in the New York Times, entitled The Best News You Don’t Know that suggests that “historians may conclude that the most important thing going on in the world in the early 21st century was a stunning decline in human suffering’ accepts doctored UN numbers at face value, misguidedly casting them as if they were news.

Much as we all naturally want to believe Mr Kristoff’s rendering of reality, it masks some far deeper, more depressing truths.

We can and should recognise that there has, indeed, been some remarkable progress on some fronts, but the idea that this warrants an overall “the world is getting better” diagnosis is, we’re sorry to say, untruthful, as it is based on a very partial reading of some fundamentally unsound data. In truth, the number of people living in poverty (as measured by the $5 a day mark, which UNCTAD defines as the absolute minimum for living a healthy life) has increased by 10% since the 1980s, and hunger by 9%. This, during a period in which global GDP increased an astonishing 271%.

Right now, according to the World Bank’s database, 4.1 billion people – more than half of humanity – are living in a state of poverty. So whose pockets are really being lined with all this aggregate economic growth?

This narrative also masks the fact that this growth has been dependent on economic activity that is destroying the environment wholesale, laying bear-traps for people living in poverty long into the future. The worst aspect of this narrative is not, ultimately, it’s empirical dishonesty, but what it hides. It gets people believing that everything is getting better, therefore we just need more of the same to end poverty. More of the same being the neoliberal ‘capital growth at all costs’ system that got us here, into the anthropocene, with its unfolding 6th mass extinction event, it’s massively centralising patterns of wealth and power distribution, and it’s deep, structural poverty and inequality.

No thanks.

Far better to fess up to the whole truth, as that is far more likely to focus attention where it’s needed to actually overcome poverty: the fundamental operating principles of the economic system, starting with, ‘material growth everywhere, all the time, at all costs’.

Unfortunately, generating a political and social imperative to do that is just the sort of thing Mr Kristof’s faux ‘everything’s great and getting greater’ narrative works against.

Find out more about how poverty is created on our website

It’s familiar news by now. According to Oxfam, the richest 1% now have more wealth than the rest of the world’s population combined. Global inequality is worse than at any time since the 19th century.

For most people, this is all they know about global inequality. But Oxfam’s wealth figures don’t quite tell the whole story. What about income inequality? And – more importantly – what about inequalities between countries? If we expand our view beyond the usual metrics, we can learn a lot more about how unequal our world has become.

The first key point is that Oxfam’s numbers present a very conservative picture. Given that the rich hide so much of their wealth in tax havens and secrecy jurisdictions – as the Panama Papers have reconfirmed – it is impossible to know how much they really have. Recent estimates suggest that up to $32tn is stored away in tax havens – around one sixth of the world’s total private wealth. If we were to add that to Oxfam’s estimate of how much the rich have, global inequality would look much, much worse.

But that’s wealth. Many analysts object that we shouldn’t be measuring wealth inequality, but rather income inequality. This has been a major criticism of Oxfam’s numbers. And when you look at income inequality, things don’t seem quite so bad. At least not according to the dominant narrative. Branko Milanovic, one of the world’s leading experts on the subject, argues that while inequality is getting worse within countries, on a global scale it is actually getting better.

We normally measure income inequality with the Gini index. A score of 0 represents total equality and a score of 1 represents total inequality, where one person has everything and everyone else has nothing. According to Milanovic, the global Gini index has decreased slightly, from 0.72 in 1988 to 0.71 in 2008. This fact has often been used to calm us down. Don’t worry, it assures us: things are gradually getting better.

But the Gini index is a misleading measure. It only captures relative changes, so if the incomes of the rich and the poor increase by the same rate, then the Gini index remains the same, even though absolute inequality is increasing. In other words, if a poor person earns $10,000 and a rich person earns $100,000, and then both of them double their incomes, the Gini index remains the same, even though the income gap will have grown from $90,000 to $180,000.

Economist Robert Wade argues that the Gini index is a highly conservative measurement, as it obscures the true extent of inequality. We should be using the absolute Gini index, he says. So what happens if we do that? We see that inequality has exploded over the past few decades, from 0.57 in 1988 to 0.72 in 2005.

But hold on, you might say. Income inequality among individuals might be getting worse, but surely the gap between poor countries and rich countries is narrowing. This is a common opinion; I hear it all the time from students at the London School of Economics, where I teach. After all, “convergence theory” holds that, because poor countries grow at a faster rate than rich countries, over time the gap between the two will automatically diminish.

Unfortunately, it’s not true. In fact, history shows exactly the opposite. Inequality between countries has been increasing by orders of magnitude over the past two hundred years, and shows no signs of slowing.

There are a few ways we can look at this. Probably the most common way to think about global inequality is to measure the gap between the richest and poorest countries in real income per capita. Using data from the Maddison Project, we see that in 1960, at the end of colonialism, people living in the world’s richest country were 33 times richer than people living in the poorest country. That’s quite a substantial gap. But then by 2000, after neoliberal globalisation had run its course, they were a shocking 134 times richer. And that’s not counting extreme outliers, like small oil-rich kingdoms in the Middle East or tiny offshore tax havens. This isn’t convergence. To quote Lant Pritchett, it’s divergence, big time.

Of course, this metric may overstate inequality by focusing on countries at either extreme. We can correct for this by looking at regional differences. The best way to do this is to measure the gap, in real terms, between the GDP per capita of the world’s dominant power (the United States) and that of various regions of the global South. Using World Bank figures, we see that since 1960 the gap for Latin America has grown by 206%, the gap for sub-Saharan Africa has grown by 207%, and the gap for South Asia has grown by 196%.

In other words, the global inequality gap has roughly tripled in size.

Over the past few decades inequality has become so bad that, in 2000, Americans were nine times richer than Latin Americans, 72 times richer than sub-Saharan Africans, and a mind-popping 80 times richer than south Asians. These numbers give us a sense for how unfairly the global economy distributes our planet’s wealth.

It doesn’t matter how you slice it; global inequality is getting worse. Much worse. Convergence theory turned out to be wildly incorrect. Inequality doesn’t disappear automatically; it all depends on the balance of political power in the global economy. As long as a few rich countries have the power to set the rules to their own advantage, inequality will continue to worsen. The debt system, structural adjustment, free trade agreements, tax evasion, and power asymmetries in the World Bank, the IMF, and the WTO are all major reasons that inequality is getting worse instead of better.

It’s time we face up to the imbalances that distort our global economy. There’s nothing natural about extreme inequality. It is man-made. It has to do with power. And we need to have the courage to say so.

23 March 2016.


The collective net worth of the richest 1% of humankind recently broke above 50% of all the planet’s private wealth. Rich people care greatly about being rich, both absolutely and in comparison with others. They understand that relative wealth brings political influence – which can be used to amass even more wealth. They succeed at using their wealth and political influence to capture an ever-growing share of global wealth and income.

At the other end of the spectrum are the world’s poor. The collective net worth of humanity’s poorer half is only 0.6% of the planet’s private wealth – as much as is owned by the 62 richest billionaires. You saw this right: the 62 richest people now have as much wealth as the 3,700,000,000 poorest human beings.

It’s not that the rich hate the poor. They may even wish the poor were better off. But the rich care more about their own share of wealth and income. And as their share increases, the other shares must shrink – especially that of the poorest. During 1988-2008, the average income among the richest 1% increased by 66%, while the global average income increased by only 24.34%.

This is actually okay, the rich tell us: while the poor may be losing in relative terms, they are gaining in absolute terms thanks to global economic growth. The Millennium Development Goals have spread word of this progress, and their recent successors, the Sustainable Development Goals, continue to reinforce the message: the poor are becoming better off. Wherever anyone may draw the international poverty line, the proportion of humanity living below it is shrinking.

This information is less comforting once we attend to what those in the poorer half can actually afford with their tiny incomes of $4–$20 per person per week. Most of them suffer at least one severe deprivation such as lack of adequate nutrition, safe drinking water, adequate housing, electricity, adequate sanitation, literacy, schooling or access to essential medicines. Each year, some 18 million people die prematurely from poverty-related causes, such as malnutrition, diarrhea, childbirth complications, childhood diseases, pneumonia, tuberculosis, malaria, HIV/AIDS – conditions that hardly cause any premature deaths in affluent countries.

This global disaster engages human rights, for instance Article 25 of the Universal Declaration: “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.” Where rights are at stake, immediate action is required. Those who continue to uphold the existing, highly skewed international economic and financial order delay the realization of human rights by many decades, thereby becoming responsible for hundreds of millions of poverty-related deaths in the meantime. If a more poverty-avoiding global order is possible, we must implement it as fast as we possibly can.

Rewriting the rules of the global economy

We can rapidly realize the human rights of the world’s poor through global institutional reforms if these reforms reduce inequality – if they reverse the relentless rise in the share in global wealth and income going to the richest 1%. Think about it. It would take 2.4% of global private wealth to multiply the net worth of the poorer half by 5, namely from 0.6% to 3%. If this shift came entirely at the expense of the richest 1%, their share would decline from 50.4% to 48% of global private wealth. Would they not still have enough?

What sort of institutional reforms would rapidly improve the situation of the world’s poor? After decades of forcing free trade upon the world, the affluent states should finally be required to abolish their protectionist barriers that impede exports from poor countries: subsidies, tariffs and “anti-dumping” duties. At the very least they should have to compensate poor countries for the economic losses these barriers cause them.

Similarly, those who produce disproportionally large amounts of greenhouse gas emissions should be required to compensate the world’s poor, who emit very little and are much more vulnerable to the effects of climate change. The needed funds should be raised by putting a price on emissions, with the additional benefit of slowing the increase of greenhouse gases in our atmosphere.

Rich corporations and individuals should finally be made to pay their fair share of taxes. There is an elaborate infrastructure of tax havens, secrecy jurisdictions, letterbox companies and sham trusts, with clever lawyers, bankers, accountants and lobbyists, all working hard to hide wealth and profits and to create and exploit loopholes. This shady network drains poor countries of capital and slashes their governments’ tax revenues. It also facilitates arms and drug trading, human trafficking, money laundering and terrorism. Reforms are underway, but they are driven by the interests of the affluent states, do not yet consider the poorer populations whose losses are much larger.

We should recognize the world’s poor as entitled to a share of our planet’s natural resource wealth. There is no good reason why a small minority of humanity should be accepted as owning these resources and as entitled to charge everyone else for access. It is especially pernicious to treat unelected rulers – dictators and juntas – as entitled to sell the natural resources of “their” country or to use them as collateral for loans that the population will then be required to repay. Such loans and resource purchases unjustly impoverish the country and strengthen its illegitimate rulers, thereby perpetuating the tyranny.

Poor people should not be excluded from medicines, seeds, and other important innovations by high patent-protected markups. It makes sense to reward innovators so as to incentivize the innovations we need. But we must find a way of doing so that does not exclude the poor. The Health Impact Fund is one feasible such way.

It is a modest but most stringent requirement that we rise together to change the rules of our global order so that they no longer violate the human rights of half the human population. Together we can do this and build a much more beautiful world.

Professor Thomas Pogge is the Director of the Global Justice Program and Leitner Professor of Philosophy and International Affairs at Yale University. He is also the founder of the Health Impact Fund and a board member of The Rules, a network of activists, writers, researchers, artists, coders and others focused on addressing the root causes of inequality and climate change