4.1: Introduction to Inequality

Learning Objectives

By the end of this section, you will be able to:

• Define and understand global inequality
• Understand the three levels of global poverty

Introduction

When scholars discuss inequality, they often focus on economic inequality. Of course, other inequalities exist and many international institutions rightfully focus on them. These include gender inequality, political inequality, as well as educational inequality and health inequality. While these types of inequality are important, this chapter will primarily focus on economic measures of inequality, followed by a discussion of the political drivers of this inequality. Economic inequality is defined as the unequal distribution of income and opportunities among various groups within society. More specifically, economic inequality is measured by using the distribution of income and the distribution of wealth. Income is the measurement of one's earnings from a job, self-employment/business, savings, investments, social programs (e.g., social security), and many other sources. On the other hand, wealth is the value of accumulated assets of an individual or a family over a certain time period.  

The challenges related to global inequality are not novel, and one does not necessitate being a political scientist or economist to recognize them. According to the United Nations, approximately 71 percent of the world's population resides in countries where inequality has surged in recent years. For example, the 2022 World Inequality Report highlights the dire state of global disparities, particularly in economic indicators, with no signs of improvement. Instead, the discrepancies among various groups resemble those witnessed in the early Twentieth Century during the peak of Western Imperialism. Furthermore, the COVID-19 global pandemic exacerbated these inequalities, disproportionately affecting individuals in lower socio-economic strata.

One of the most often used measures of global economic inequality is that of poverty. Poverty is defined as a condition characterized by a lack of material possessions or basic human needs, such as food, shelter, clothing, and access to education and healthcare. The World Bank (2023) categorizes global inequality through the use of three levels. These three levels include extreme or absolute poverty, moderate poverty, and relative poverty. Extreme poverty is defined as individuals living on less than $2.15 a day. In 2019, 648 million people were living under this condition, or about double the population of the United States. Extreme poverty means that households are unable to fulfill fundamental requirements for survival. They endure chronic hunger, lack access to healthcare, safe drinking water, and sanitation facilities, cannot afford education for their children, and may lack even rudimentary shelter—a roof to shield their home from rain—and basic clothing, such as shoes. Extreme poverty can be aptly described as "the poverty that kills." Additionally, about 26 percent of the world, or a little over 2 billion people, live in moderate poverty, which is defined as living between $2.15 and $5.50 per day.

Unlike the other two that focus on a defined global norm, relative poverty is defined by a household income level below a given proportion of the national average. This means that relative poverty is predicated on the economic situation of each given county. For example, in the U.S., the federal poverty line for a family of four in 2024 is $31,200. This number is quite a bit higher than the measure of poverty used by the World Bank. When assessing relative poverty, the cost of living in each country is considered. 

Levels of Poverty (World Bank)

Level of Poverty	Definition	Global Numbers
Extreme Poverty	Individuals living on less than $2.15 a day	648 million
Moderate Poverty	Individuals living between $2.15 and $5.50 per day	Little over 2 billion
Relative Poverty	Characterized by a household income falling below a certain proportion of the national average	Varies by country
Figure 6.1.1: Table showing the three levels of poverty along with their definitions. (CC BY-NC-ND 2.0; self-made)

 

Is Global Inequality Increasing or Decreasing?

Global inequality is defined as the disproportionate distribution of resources, opportunities, and power that shape well-being among people across the globe (Oxfam America, 2022). Put differently, global inequality is one way of understanding the different lived experiences of individuals regardless of their location. Without having an in-depth knowledge about the socio-political and economic conditions of countries, one may still be able to identify the nominal differences between the United States and Ghana or Japan and El Salvador in respect to economic inequality. The academic research that examines global inequality, such as the GINI Index, the Human Development Index, and the Global Happiness Index, are described in 6.2: What Does Global Inequality Look Like?

When analyzing global patterns of economic inequality, Ritzer and Dean (2021) argue it can be approached from three distinct frameworks: examining inequality within individual countries, comparing inequality across nations worldwide, and assessing disparities between affluent and impoverished individuals globally. One notable trend is that economic inequality within most countries is increasing. However, this does not mean that global inequality is omnipresent, as the overall issue is more nuanced than such a simple comment can truly capture. For example, though inequalities between wealthy and impoverished individuals worldwide has dramatically increased, inequality across nations is shrinking due to the expanding global middle class. These differences in global inequality help provide some context in why some might say that globalization succeeding, whereas others might say it has been harmful or detrimental to their society.

What explains this overall decline in global inequality across countries? One explanation is that many countries are seeing a convergence in terms of average incomes. For example, the middle class in China has grown from 3.1 percent of the population in 2000 to 50.8 percent of the population in 2018 (Center for Strategic and International Studies, 2021). To put this in a numbers perspective, China's middle class went from approximately 39.1 million to 707 million people. Again, even with this growth, it is crucial to emphasize that global inequality remains markedly high. For instance, in 2022, the richest 10 percent of the global population, earned 52 percent of the entire global income, whereas, the poorest half of the global population made only 8 percent of the world's income.

The rise in within-country inequality and the decline in inequality across nations may at first glance look paradoxical. One could assume that inequality should rise or fall equally across the globe. However, it is crucial to understand that as countries, such as China, South Korea and Singapore industrialized, national income and income per capita for their citizens upsurged. Through industrialization, previously emerging economies fostered the growth of their middle class. Notably, in 2024, the top 20 fastest-growing economies were situated in the Global South, where they outpaced the growth rates of the Global North. The most notable fastest growing country on the list provided by the Carnegie Endowment for International Peace is India. As India accelerates its industrialization, if just a fraction of its massive population of 1.4 billion people moves into the middle class, global inequality will transform even more.

Nevertheless, our assessments of global inequality undergo a shift when we examine the disparities between affluent and impoverished individuals worldwide. Since 1980, global inequality among individuals is on the rise. Despite significant economic growth over the past four decades, the wealthiest 1 percent have disproportionately garnered these benefits, outpacing the gains of the bottom 50 percent at a ratio of two to one. The top 1 percent has expanded their share of global income from 16 percent in 1980 to 20 percent in 2020, while the bottom 50 percent has consistently hovered around 9 percent of the world's income. In the past, many of these wealthy lived in the Global North. Recently, a greater proportion of these top earners hail from nations in the Global South. Although income is being more widely distributed globally, an increasing portion gravitates towards individuals who are already affluent. In essence, the affluent are amassing greater wealth, while the impoverished remain relatively stagnant in their economic standing.

Figure 6.1.2: This curve illustrates how the bottom 50 percent of the world experience significant economic growth. Whereas the lower and middle classes in wealthier countries have seen decreased economic growth. However, the top 1 percent of the global population has captured the lion’s share of the economic growth in the past forty years. (The Elephant Curve of Global Inequality, 1980-2020 by World Inequality Report 2022 is licensed under CC BY 4.0)