Inequality is growing between and within nations
Trade unions seeking greater income equality are sometimes challenged by people who maintain that the greatest inequality in the world is between nations, not within them. If we really cared about the poor, such critics say, we would be spending more time on promoting international development. These critics are, of course, different from the ones who say that we should be spending less time on tackling poverty abroad and more time assisting ‘our’ people at home. Maybe the fact that we draw fire from both sides means we’re broadly right to do both?
Well, the latest global data goes a bit further than that. Recent reworkings of data that appeared to show inequality between nations falling over the decade 1998-2008 even as it increased within nations in fact reveal that inequality is growing pretty much everywhere. So union campaigns for reduced inequality anywhere seem to be a reasonable response to growing inequality everywhere. And we need to tackle inequality at home and abroad.
What made the difference was changing assumptions about ‘missing money’ (money that shows up in national economic data, but not in household income surveys). Previously, it was assumed this missing money was a statistical blip, and it was ‘shared out’ across the economies concerned, in proportion to households’ known income shares. In fact, it appears that the ‘missing money’ probably all belongs to the rich, who have a greater tendency to be able to disguise or hide their income and don’t like answering survey questions anyway! (For an example, see this story about rich Greeks who denied having taxable backdoor swimming pools on their tax returns, only to have them revealed by Google Earth…)
ODI policy expert Andrew Norton explains this very well (in case I haven’t!) but the real credit goes to World Bank economist Branko Milanovic and Cristoph Lakner. Andrew’s post draws attention to the increased social conflict that growing inequality can have, but I think it’s best summed up by Nigerian economist Sam Aluko who is credited with this telling aphorism:
“The poor cannot sleep, because they are hungry, and the rich cannot sleep, because the poor are awake.”