Income inequality is falling, globally

The poor are getting less poor

From Matt Ridley. Excerpts:

"in Britain wealth inequality probably did inch up between 1980 and 2010, but not by as much as Piketty had claimed, though it depends on which data sets you trust.

Well, knock me down with a feather. You mean to say that during three decades when the government encouraged asset bubbles in house prices; gave tax breaks to pensions; lightly taxed wealthy non-doms; poured money into farm subsidies; and severely restricted the supply of land for housing, pushing up the premium earned by planning permission for development, the wealthy owners of capital saw their relative wealth increase slightly? Well, I’ll be damned."

"good part of any increase in wealth concentration since 1980 has been driven by government policy, which has systematically redirected earning opportunities to the rich rather than the poor."

"we pay double or treble the going rate for land-hungry projects such as wind, wood and solar energy, all of which results in rewards going to the owners of property."

"even Piketty’s figures show that British wealth inequality is only back to where it was in the mid-1960s, when the top 10 per cent of people held about 70 per cent of the wealth. The figure dipped to about 60 per cent in 1980, having peaked at 90 per cent in 1910."

"the widespread assumption that income inequality has also been shooting upwards is plain wrong: in this country, in terms of disposable income, the gap between the well paid and the poorly paid has been going down. Top salaries have certainly rocketed, but so has the turnover of people getting them — as has the turnover of people in the lowest income bracket. And once you take into account tax and benefits, the Office for National Statistics confirms that the Gini coefficient (an income distribution index) of inequality in this country is actually lower now than it was 25 years ago (though it’s higher than it was 35 years ago in the confiscatory tax regime of the 1970s)."

"the recent ONS bulletin entitled The Effects of Taxes and Benefits on Household Income, 2011/12 finds that the highest-earning 20 per cent of British households earned 14 times as much as the lowest earning 20 per cent before tax and benefits — but just four times as much after tax and benefits. These measures cut the average income of the top 20 per cent from £78,300 to £57,300, while they raise the average income of the bottom 20 per cent from £5,400 to £15,800. "

"every economist I speak to agrees that global income inequality is falling, even before you take into account tax and benefits."

"For a quarter of a century people in poor countries have been getting rich faster than people in rich countries have been getting richer."

"Mozambique’s economy is 60 per cent larger than it was in 2007; Italy’s is 6 per cent smaller."

"that nowhere in the world, with the possible exception of North Korea and Somalia, are the poor getting poorer. The percentage of the world’s population living on $2 a day (corrected for inflation) has halved since 1990 — a truly unprecedented change (see here). Any increase in wealth inequality or pre-tax income inequality in Britain or America is caused by the rich getting disproportionately richer, not by the poor getting poorer."