The Inequality That Matters

Global inequality is declining:

Linked to the current mood, commentators often depict an embattled and shrinking middle class, with sharply rising financial inequality. However, globally, this is simply not true. One of the most startlingly positive phenomena for many generations continues to unfold around the world. We are in the middle of an explosion of the world's middle class.

As two of my colleagues, Dominic Wilson and Raluca Dragusanu, showed in a paper Goldman Sachs published last week (The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality), about 70m people a year globally are entering this wealth group, as defined by those on incomes of between $6,000 and $30,000 (€3,800-€19,000, £3,900-£15,000), in purchasing power parity terms.

The phenomenon may continue for the next 20 years, with this global middle accelerating to 90m a year by 2030. If this happens, an astonishing 2bn people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing.

Andrew Leonard of Salon's excellent How the World Works says Americans don't care because "localism always prevails."

Working class voters in Ohio, for example, are unlikely to care that the world is getting richer, when in their own country, the concentration of wealth is progressively skewed towards the top end of the spectrum. For global inequality trends to make any kind of psychological difference to the psyche of those "in the west" a sense of a shared global identity is required. But we don't have that. We are riven by nationalist, cultural, and racial identity politics. We do not see ourselves as one world.

Sure, localism often trumps globalism, but who gets to define the boundaries of "local"? Coalitional solidarities are malleable. My great grandparents thought of themselves as Neapolitan, and had they stayed in Italy, they would have come to see themselves as Italian. Their great great grandchildren might well have called themselves European. Christian minorities in Northern Burma don't willingly identify with any particular nation state, but they do identify with a global religious network. The hypothetical Ohio voter probably has no way to relate to the Indian middle class right now, and he isn't going to vote differently because Goldman Sachs says standards of living are rising in China. But there is nothing necessary or permanent about that.