Our thinking

Honey, who shrunk global inequality?

23 August, 2024

Here’s something you may not have heard much about…

While inequality within countries like the US and UK has been rising, global inequality has fallen over the last few decades. Thanks to the rapid economic growth of nations like China and India, the gap between rich and poor on a global scale is narrowing.

Back in 1980, China and India made up nearly 40% of the world’s population but only 5% of global income. Today, their share of global income has soared to 25%, helping lift over a billion people out of poverty. This transformation has been dramatic, and inarguably one of the largest global welfare improvements in history, as detailed in a recent report from Bruegel.

The opposite is true for most countries in the developed world. While the rich have grown richer, the poor have grown poorer, meaning inequality at home is rising. Illustrated by the US, where GDP per capita has more than doubled but median household income has stagnated at around 30% over the last four decades. However, the sheer scale of the improvements in more developing nations means that narrowing between-country inequality is outweighing a widening within-country inequality – therefore, global inequality is shrinking.

The future may still be uneven, but the progress we’ve seen should leave us cautiously optimistic that gaps can be closed. Global strides toward equality are happening, and that’s something worth celebrating.

By Budd Nicholson