Are we worrying too much about global inequality or not enough?

Credit: mSeattle

The publication of French economist Thomas Piketty’s nearly 700 page book on the state of global wealth marked a peak moment for the growing discussion on inequality. Piketty warns that inequality has been getting worse and it poses a major threat to global progress.  The book and its ideas garnered a significant amount of discussion and settled little in the debate over how worried we should be about inequality.

Inequality in countries like the US keeps increasing. The wealthiest Americans have gotten richer over the past half century while the middle class has stayed the same. The story is similar for other countries. Meanwhile, global inequality has declined. The United States will soon relinquish its hold as the world’s leading economy, to China.

Countries in the global South are catching up to the West, and it is not just the big guys (ie. Brazil, China and India) that are making big gains. If all goes well, some countries will graduate to middle income status in the coming decades. As the world overall is getting better, things are not necessarily improving within countries.

So what is it? Is inequality this big problem that will sink the nations of the world? Or is it something that is getting better as countries continue to improve?

Tyler Cowen thinks the latter is the case. The George Mason University economist recently argued in the New York Times that the fact that global inequality is shrinking is reason to be optimistic.

If our domestic politics can’t handle changes in income distribution, maybe the problem isn’t that capitalism is fundamentally flawed but rather that our political institutions are inflexible. Our politics need not collapse under the pressure of a world that, over all, is becoming wealthier and fairer.

Yes, the rich are getting richer within countries, but that is less concerning given the rise of the rest, argues Cowen. He re-frames the conversation by speaking directly to the very people who believe in the importance of equality, egalitarians. The very people who are worried about inequality in the US should see the opportunities for making the world better through wealth creation.

[G]lobally minded egalitarians should be more optimistic about recent history, realizing that capitalism and economic growth are continuing their historical roles as the greatest and most effective equalizers the world has ever known.

Not everyone is convinced by Cowen’s argument. The Economist‘s Ryan Avent wrote a response a few days later explaining why Cowen has it right on global inequality, but arrives at the wrong conclusions when it comes to the importance of inequality within countries.

Mr Cowen seems to want voters to recognise that whether or not they personally are made better off by globalisation it is a good thing to support, because it enables the enrichment of poor areas of the globe. But few voters are content to have their economies run as charities.

Avent suggests that redistribution is not as problematic as Cowen assumes. He sees it as a way to provide “insurance against economic dislocation and therefore softens resistance to globalisation.”

He goes on to say that it is foolhardy to ignore the challenges faced within countries and not to think that people will want change. The Occupy Wall Street movement was calling out the things that benefit wealthy Americans, it was not concerned with global inequality.

So what to do? The debate over inequality continues with both sides making points as to why it should be a concern and why it should not. Who do you find more convincing? Cowen or Avent?

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About Author

Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]humanosphere.org.

  • James Crawford

    Decreasing global inequality and increasing global incomes is a huge triumph for capitalism. Inequality is a political issue, not an economic one as because people care about in-country inequality but capital does not. People are getting left behind in rich countries because they want to be paid middle income wages for doing menial tasks that people in poor countries will do for much less. Embrace capitalism and you will prosper. Fight it and you will let millions pass you by.

  • Jonathan Scanlon

    The debate is interesting, but it may not matter so much. The debate is helping to raise awareness, but what matters is what people are doing about inequality. American fast food workers aren’t going to stop their campaign because of something that Cowen or Avent writes. They are witnesses to inequality every day and they are taking action. I agree with James that this is a political issue. When people that are on the wrong end of inequality stand up and take back some political power things will start to change.