Inequality: What’s Goin’ On?

Income inequality, especially in the United States, has been a hot topic. It seemed to peak with the publication this year of Thomas Pinkatty’s Capital in the Twenty-First Century. The upshot? Income inequality has gotten worse.

But it’s not that simple. If you look at the big picture, inequality has decreased.

Hans Rosling, a prominent Swedish statistician and TED Talk regular, paints a different picture in this Tweet*:

Hans Rosling Inequality

In the past 4o years world income distribution has transitioned from a bimodal distribution (two humps) to a normal distribution (a “bell curve”). In the 1973 histogram the high peak to the left represents the disproportionately high rates of world poverty.  The peak to the right means that a disproportionately large amount of wealth was held by the wealthiest. Note the gap–the trough–between rich and poor. That’s a statistical representation of inequality.

In the past 40 years the distribution has migrated toward the center, which represents the meteoric “rise of the rest,” especially China and India, and the unprecedented expansion of the world middle class.

Income inequality in the United States is a problem. I’m for unpopular measures, like taxing inheritance much more because, with some exceptions such as family businesses, inheritance is a massive transition of unearned wealth from the privileged to the privileged. Let’s spend that money on education. Our government’s priorities are dominated by untouchables like Medicare and Social Security–investment in those who no longer earn money–instead of education and poverty reduction, which are real investments that pay off in years to come. I’m an optimist about most things, but I’m not optimistic that there will be a “future focus” shift where we choose invest in tomorrow’s workers and the poor instead of the retired.

*This link takes you to the study from which Rosling bases his ideas: https://ideas.repec.org/p/ucg/wpaper/0001.html

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