The Globalization of Inequality

Former World Bank senior v-p Bourguignon has news for the 99%. Internationally, income inequality is declining, not increasing, due to the economic rise of previously underdeveloped countries. Nevertheless, the gap between rich and poor remains a dangerously destabilizing political force. Bourguignon addresses the issue calmly and sensibly. He explains the methods economists use to measure income inequality and provides charts showing how it varies throughout the world. This dispassionate view neither demonizes the rich nor sanctifies the poor. Because there is an abundant global supply of labor, returns to labor (wages) are low. Because capital is scarcer than labor, returns to capital are high. As wealthy people are more likely to have income from capital and poorer people are more likely to depend on wages, the rich are, in fact, growing richer while the poor grow poorer. Bourguignon does not lack for solutions, including equal access to jobs and education, redistribution of wealth in developing countries through taxation and income transfers, and regulation of the flow of capital to international tax havens. This timely and excellent primer on income inequality both within and among nations deserves to be read by both occupiers and occupants of Wall Street. (May)