The global distribution of
income is undergoing a remarkable shift. The gap between rich and poor
countries is narrowing fast, but within many countries the gap between
rich and poor people is widening.
Inequality has risen in more
than three-quarters of all advanced economies over the past 30 years,
most dramatically in America. It has also soared in the most vibrant
emerging economies, including China, India and Indonesia. The majority
of the world's population now lives in countries where wealth gaps are
growing.
The biggest exception is Latin
America, where formerly huge income disparities are narrowing almost
everywhere. These shifts have brought inequality to the top of the
political agenda around the globe. America's presidential election is
being fought over redistribution, the future of the middle class and the
growing income concentration in the top 1%. China's leadership
transition takes place against a backdrop of popular displeasure at the
widening chasm between the country's economic elite and the rest.
France's new president, François Hollande, has pledged to hit the rich with high taxes.
Economists too increasingly fret
about income gaps. Research from establishment organisations, such as
the IMF and OECD, find that inequality hurts economic growth and
financial stability. Growing income disparities have been blamed for
causing the financial crisis and slowing the recovery; for reducing
social mobility; even for damaging people's health. The traditional view
that boosting economic growth is more important than how it is
distributed is losing ground.
This special report will put the
equality debate into perspective. It will explain how best to measure
inequality, lay out the scale of the income shifts and put them into
historical context. It will point to potential causes, from education
(or lack of it) to globalization and rent-seeking by elites. And it will
take a critical look at the consequences.
Drawing on detailed reporting
from around the globe, it will argue that inequality comes in good and
bad forms. The causes and consequences of income disparities differ by
region and country. Broadly, emerging Asia finds itself where the
developed world was a century ago, in an era of rapid growth with
minimal social protection. As the continent's middle class grows, it
will demand a bigger welfare state, so income gaps will narrow. Latin
America has already shown that it is possible to combine greater
equality with more growth and fiscal prudence. Europe, with its high
taxes and overburdened welfare states, must remake its social contract
without allowing inequality to get out of hand. America, where income
concentration is beginning to undermine the country's social fabric,
needs the most radical change.
All told, there is a case,
across the globe, for a "new progressivism" that focuses less on
redistribution through the tax system than on boosting competition,
dislodging entrenched elites and creating a sustainable safety net. This
special report will map out how that might be achieved.
The Economist's annual
IMF/World Economy report has established a strong following globally
with business leaders, investors, regulators, policymakers and bankers
as well as all those who turn to The Economist for insight and ideas.
source: The Economists
