Income Inequality Has Regressed to 1820 Levels

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PoorAndRichInThailandBy Ben Richmond

[Poor and Rich in Thailand (2010). Photo Dickelbers,/Wikicommons.]

[F]rom the American Occupy movement to the surprise best-seller by the economist Thomas Piketty, income inequality is all the rage—perhaps because it’s raging. According to a newly released study, the last few decades have seen a rise of the biggest income gaps within nations since the Industrial Revolution.

The OECD just released a study titled “How Was Life? Global Well-Being Since 1820,” which looks at well-being through the lens of historical data “on real wages, per capita GDP, educational attainment, life expectancy, height… personal security, political institutions, environmental quality, and income and gender inequality,” for “25 countries, eight global regions and for the world.”

There’s certainly good news in here: life expectancy has gone from 30 to 70; worldwide literacy rates have risen; we’ve even gotten taller.

But it’s impossible to ignore how unevenly distributed these accomplishments have been, across the globe. The press release notes that, “With the exception of sub-Saharan Africa, countries have generally become more equal to each other in terms of well-being than in terms of per capita GDP—particularly in recent decades.”

Globalization has the curious effect of making nations more equal relative to each other but making the residents of the nations less equal

But while overall well-being is on the rise, there’s one metric that was once improving and has now regressed pretty hard.

“It is hard not to notice the sharp increase in income inequality experienced by the vast majority of countries from the 1980s,” the study states. In the spirit of remembering exceptions, it’s worth noting that South Africa has actually become more equal since then, but that’s largely explained by South Africa in the 1970s having the highest inequality in the entire study.

“In the period between the two world wars, income inequality in most countries in Western and Eastern Europe as well as the Western Offshoot countries rose and then dropped again, considerably so after the Second World War.”

The study found that during the 20th century, the gap between relative incomes of countries grew wider, but within countries income became more equal, until around the ’70s. Following the collapse of the Soviet Union income inequality climbed in Eastern Europe. Income inequality in China rose too.

Globalization, the study finds, has the curious effect of making nations more equal relative to each other, but making the residents of the nations less equal relative to each other.

Referring to the table above, the report explains, “Although global income inequality rises throughout the period, the third column (within-country inequality) clearly shows the “egalitarian revolution” in the mid-20th century, which translated into significant declines in this measure. However, this trend strongly reversed in the last decade, as within-country inequality levels returned to values recorded in 1820.”

To the Piketty reader, none of this is a surprise. You can disagree about what drives inequality—or disagree that a widening income gap is a problem—but it’s hard to ignore the dramatic shift.

Originally published at Motherboard.

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