Economic Inequality Statistics

My research on economic inequality consistently turns up three key points:

  1. since the 80’s, there has been an ever-widening gap in incomes and capital ownership between the rich and poor,
  2. the gap has been growing at an accelerating rate, especially since the year 2000, and
  3. this phenomenon is worldwide.

So what?

As I’ve mentioned before, many U.S. economists and policy-makers greet those findings either with indifference or as a clarion call to defend endangered capitalism, while their international counterparts find them alarming. We’re talking about them here because it turns out that economic inequality has a lot to do with happiness and meaning at work. (Stay with me — we’ll get there, we’re just taking the scenic route.)

We all know that it’s easy to mold statistics to fit opinions — here’s a neurologist’s take on Why People Can’t Agree on Basic Facts. Any stats we look at here will have been pre-sorted, pre-analyzed, and pre-interpreted. My goal today is to provide a sampling of statistics from a variety of global sources — starting with a quote about how the new global super-rich are a bunch of economic data curve busters, which makes finding honest data even harder.

plutocrats“The skew toward the very top is so pronounced that you can’t understand overall economic growth figures without taking it into account. As in a school whose improved test scores are due largely to the stellar performance of a few students, the surging fortunes at the very top can mask stagnation lower down the income distribution.

“Consider America’s economic recovery in 2009-2010. Overall incomes in that period grew by 2.3 percent — tepid growth, to be sure, but a lot stronger than you might have guessed from the general gloom of the period. Look more closely at the data, though… and it turns out that average Americans were right to doubt the economic comeback. That’s because for 99 percent of Americans, incomes increased by 0.2 percent. Meanwhile, the incomes of the top I percent jumped by 11.6 percent.”

Plutocrats:  The Rise of the New Global Super Rich and the Fall of Everyone Else (2012), by Canadian journalist and politician Chrystia Freeland.

kwak“Across the developed world, vast fortunes are again ascendant. In the United States, the top 1 percent take home a larger share of total income than at any time except the late 1920’s. The total wealth of the world’s billionaires has quadrupled in the past two decades (even when the definition of “billionaire” is adjusted for inflation).

“In the 1950’s, a typical CEO of a large company took home as much money as twenty average employees; today he makes as much as two hundred workers.”

Economism (2017), by UConn law professor James Kwak.

the wealth of humans“In 2014, the inflation-adjusted income of the typical American household was just 7 per cent higher than it was in 1979. By contrast, the income of a household in the 95th percentile of the income distribution grew 45 per cent over that period.”

The Wealth of Humans:  Work, Power, and Status in the Twenty-First Century (2016), by Ryan Avent,  a thoroughly Anglicized American who works as a senior editor and economic columnist for The Economist.

the fourth industrial“[C]ompare Detroit in 1990… with Silicon Valley in 2014. In 1990, the three biggest companies in Detroit had a combined market capitalization of $36 billion, revenues of $250 billion, and 1.2 million employees. In 2014, the three biggest companies in Silicon Valley had a considerably higher market capitalization ($1.09 trillion), generated roughly the same revenues ($247 billion), but with about 10 times fewer employees (137,000).”

The Fourth Industrial Revolution (2016), by German engineer and economist Klaus Schwab, Founder and Chairman of the World Economic Forum.

Prior to the 2017 World Economic Forum annual meeting of world leaders, U.K.-based Oxfam International issued a report that offers a fascinating slant on Schwab’s comments. According to the report:

“Eight men now control as much wealth as the world’s poorest 3.6 billion people… The men — Bill Gates, Warren Buffett, Carlos Slim, Jeff Bezos, Mark Zuckerberg, Amancio Ortega, Larry Ellison and Michael Bloomberg — are collectively worth $426 billion.”

As reported by CNN.

“By contrast, half the planet’s population, some 3.6 billion people, have a combined wealth of $409 billion.”

As reported by The Mirror Online (the U.K.’s “intelligent tabloid”).

Not only are the Elite Eight collectively worth more than the lower half of the world’s entire population, each individual member of the group is worth more than the combined market capitalization of Detroit’s three largest companies 27 years ago. The Mirror also noted this about the study:

“The report found that between 1988 and 2011 the incomes of the poorest 10% increased by just $65, while the incomes of the richest 1% grew by $11,800 – 182 times as much.”

A couple years ago, Credit Suisse’s Global Wealth Report 2015 reported that half of the world’s assets were controlled by the top 1% of the global population, while the lower half owned less than 1%.

There’s plenty more where all of that came from. In fact, there’s such an abundance of global data and opinion on the topic that, if nothing else, it’s probably safe to conclude that economic inequality either really is a problem or, even if it’s not, a whole lot of people around the world sure seem to think it is.

We’ll continue our economic inquiries next time.

Why We Can’t Talk About Economic Inequality

see no evil

“It is not just the super-rich who don’t like to talk about rising income inequality. It can be an ideologically uncomfortable conversation for many of the rest of us, too. That’s because even — or perhaps particularly — in the view of its most ardent supporters, global capitalism wasn’t supposed to work quite this way.”

plutocratsThat’s from Plutocrats:  The Rise of the new Global Super Rich and the Fall of Everyone Else, Chrystia Freeland (2012). The book reads like an extended academic version of People Magazine meets CNN meets The New York Times, and could only have been written by someone who logged years on the insider track and took lots of notes.

Turns out that’s precisely who Chrystia Freeland is. She’s a Canadian writer, journalist, and politician. She worked in a variety of editorial positions at the Financial Times, The Globe and Mail, and Thomson Reuters, was elected to the Canadian Parliament in 2013 (the year after the book came out), and was appointed Canada’s Minister of Foreign Affairs earlier this year. She’s a Harvard grad, a Rhodes Scholar, and was named one of Toronto’s 50 most influential people by Toronto Life Magazine in 2015.

The book takes names and tells stories, and is awash in dates and times and statistics. Reading it all the way through can be a bit of a slog, and I wonder how many people actually do — I confess, I skimmed a lot. I quote it here because it does a great job of capturing the lessons of my last two posts:  1) most of us haven’t updated our understanding of economics since Econ 101, and 2) we don’t like talking about economic inequality. Beginning with the quote above, the book provides a useful overview of how those two things are related. (These quotes are particularly re: income inequality, but apply to capital inequality as well.)

“Until the past few decades, the received wisdom among economists was that income inequality would be fairly low in the preindustrial era–overall wealth and productivity fairly small, so there wasn’t that much for the elite to capture– then spike during industrialization, as the industrialists and industrial workers outstripped farmers (think of China today). Finally, in fully industrialized or postindustrial societies, income inequality would again decrease as education became more widespread and the state played a bigger, more redistributive role.”

(This theory was articulated by Nobel Prize winning economist Simon Kuzmets, and can be plotted in what has become known as the Kuzmets curve. According to Wikipedia, Kuzmets won the award in 1971 “for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development.”)

Continuing with Plutocrats:

“Until the 1970’s, the United States… was also an embodiment of the Kuzmets curve. The great postwar expansion was also the period of what economists have dubbed the Great Compression, when inequality shrank, and most Americans came to think of themselves as the middle class.

“But in the late 1970’s, things started to change. The income of the middle class started to stagnate and those at the top began to pull away from everyone else. The shift was most pronounced in the United States, but by the twenty-first century, surging income inequality had become a worldwide phenomenon, visible in most of the developed Western economies, as well as in the rising emerging markets.

“The switch from the America of the Great Compression to the America of the 1 percent is still so recent that our intuitive beliefs about how capitalism works haven’t caught up with the reality. In fact, surging income inequality is such a strong violation of our expectations that most of us don’t realize it is happening.”

We’ll look at some inequality stats next time.