Globalization and Growing Global Equality

The facts say otherwise.

Indeed, recent decades have seen people around the world experience dramatic improvements in well‐​being across a broad range of indicators. Despite setbacks amid the disruptions of the COVID-19 pandemic, the long‐​term trends are positive across a host of key metrics, including average income, life expectancy, rates of educational attainment, and internet access. Data from respected scholars, academic institutions, and international organizations provide evidence of remarkable long‐​term improvements in living standards, especially over the past two centuries. Progress in the past few decades has been particularly pronounced in less developed countries.

Progress does not, of course, materialize at random and without a cause. Many economists attribute the extraordinary increase in human development, at least in part, to the revolution in international connectivity that has defined modern globalization. Indeed, the role of trade, and associated specialization, in creating economic growth and prosperity cannot be overemphasized. By liberalizing economic cooperation and exchange across borders, the expansion of global markets has helped produce the innovations and prosperity underlying many gains, as recorded on websites such as Our World in Data, Gapminder, and Human​Progress​.org.

But have those gains been widely shared? Have the benefits of globalization‐​driven economic growth reached people in different countries “equally”? Put simply, is the world becoming more equal?

As this essay will detail, the answer to these questions is an unequivocal “yes.”

Policy professionals, commentators, journalists, and the public have shown increasing interest in global inequality, the direction in which it is headed, and potential policy responses. According to Harvard University psychologist Steven Pinker, the share of New York Times articles mentioning “inequality” increased tenfold between 2009 and 2016 (Pinker, p. 97). In addition, Google’s Ngram Viewer shows a clear rise in the frequency with which the word “inequality” appears in English‐​language print sources within Google’s text corpora, starting around 1955 and continuing through 2019, the most recent year for which data are available (see Figure 1).

Headlines in major publications spotlighting the topic of worldwide inequality abound; some representative examples are “It’s an Unequal World. It Doesn’t Have to Be”; “Global Interpersonal Inequality through the Crisis Period”; “How Can We Bridge the Widening Global Inequality Gap?”; “Climate Change Has Already Increased Global Inequality. It Will Only Get Worse”; “The Deep Roots of Global Inequality”; “‘Perfect Storm’ of Crises Is Widening Global Inequality, Says UN Chief”; and “Global Inequality Is Rising Again.” These and other pieces in major publications feature diverse political perspectives on inequality but share a focus on global inequality as a timely topic of discussion.

The growing focus on inequality is surely connected to the spreading belief that inequality—among individuals in a single country or among people in different countries—itself is increasing. During his inauguration speech in 2020, U.S. President Joe Biden mentioned “growing inequity,” and U.S. Vice President Kamala Harris claimed at the 2021 Paris Peace Forum that the world has seen “a dramatic rise in inequality” and that leaders “must rise to meet this moment.”

The belief in rising inequality is not limited to U.S. political figures. Josep Borrell, the vice president of the European Commission, the European Union’s governing body, said in 2023 that the world is “more unequal” than it was 75 years ago. In a similar vein, in 2022, Guyana’s president, Mohamed Irfaan Ali, claimed that global inequality had “tripled” and that developing economies were the hardest hit.

Beliefs about inequality matter because they can have real‐​world consequences. Many researchers and commentators have expressed concern that inequality may cause harms such as slower economic growth, less social mobility, widespread unhappiness, societal stratification, and exacerbated social tensions. Others have questioned those concerns, noting, for example, a lack of evidence of widespread inequality‐​induced unhappiness. Counterintuitively, research by sociologists Mariah D. R. Evans and Jonathan Kelley suggests that in developing countries, increased economic inequality as people rise out of poverty is often viewed as a heartening sign of the achievability of upward mobility and thus often coincides with greater happiness.

Regardless of whether—and to what extent—fears about inequality’s potential harms are justified, such concerns, combined with the belief that worldwide inequality is on the rise, have inspired several policy proposals. Some of the more extreme proposals would entail unprecedented levels of mandated wealth redistribution.

A 2023 Oxfam report titled Survival of the Richest, addressing purported “rising global inequality,” calls for a 5 percent tax on the world’s multimillionaires. Oxfam has also proposed government action “taking on monopoly power” and “boosting workers’ rights,” as well as major tax increases on income and wealth to fight what Nabil Ahmed, Oxfam America’s director of economic justice, calls the world’s “explosion of inequality.” “Taxing the richest will start to claw back their power and reduce not only economic inequality but racial, gender and colonial inequalities, too,” opined Oxfam International’s executive director Gabriela Bucher at the World Economic Forum’s 2023 meeting in Davos.

More than 200 millionaires, including entertainment‐​empire heiress Abigail Disney and actor Mark Ruffalo, similarly called on 2023’s Davos attendees to “tackle extreme wealth” and “tax the ultra‐​rich” to promote the “common good” and counter “widening wealth inequality.”

The 2018 World Inequality Report, produced by French economist Thomas Piketty among others, claimed that “at the global level, inequality has risen sharply since 1980” and proposed various policies to remedy this supposed rise. The suggested policy responses include higher taxes for the rich, implementation or increases in inheritance taxes (sometimes called “death taxes,” although that term can also refer to estate taxes), and establishment of a global registry of financial asset ownership, eliminating financial privacy.

All policies come with tradeoffs. Thus, many of the costly, far‐​reaching, and even unprecedented policies put forward to address the ostensible surge in global inequality will likely have countless unintended effects if enacted. Many of the proposed policies risk increasing bureaucracy, impeding economic growth, slowing poverty’s global decline, decreasing the rate of innovation and technological progress, and infringing on privacy, among other deleterious effects. Moreover, a cool‐​headed assessment of gaps in global well‐​being shows that such policies would be based on a misapprehension. The popular narrative of rising inequality is mistaken. Rather than exacerbating inequality among the world’s people, globalization has helped decrease gaps in well‐​being.

While not as widely known as it should be, the fact that international income inequality has decreased since at least the mid‐​2000s has not gone unnoticed. Branko Milanović, an inequality expert and former lead economist in the World Bank’s research department, contends that population‐​weighted global intercountry income inequality has plummeted since 1980. (See Figure 2). Milanović’s recent research has updated his popular but often misinterpreted “elephant chart”—which famously seemed to show the global poor, people in developing countries, and the wealthy reaping the benefits of globalization while the middle class in rich countries lost out. His newer research suggests that the poor and middle class have made gains faster than the rich, revealing what the Financial Times economics editor Chris Giles calls a “link between trade integration and falling global inequality.” In fact, even Piketty’s much‐​criticized calculations showed a decline in global income inequality over the long term.

Domestic income inequality has similarly decreased. Economist John F. Early has found that income inequality in the United States has been falling for the past 70 years—yet official U.S. statistics often do not fully account for the effects of important factors (such as transfer payments, income taxes, and inflation) and thus overstate the level of inequality by a factor of four, further distorting public perceptions.

And while public opinion often blames domestic income inequality on globalization, even scholars who believe contra Early that U.S. income inequality is increasing often question that simplistic causal narrative. Harvard University economist Elhanan Helpman contends that globalization cannot account for more than a small portion of U.S. income inequality.

Zooming out to a global view once again, wealth inequality has also fallen: The share of global wealth held by the top 10 percent decreased from 88.7 percent in 2000 to 81.8 percent in 2020, according to Credit Suisse. Accordingly, the share of global wealth held by the bottom 90 percent has grown from 11.3 percent in 2000 to 18.2 percent in 2020.

Global gains in equality become even stronger when one considers how the distribution of well‐​being has changed across a broader array of indicators. I explore these trends in a recent research paper, “Global Inequality in Well‐​Being Has Decreased across Many Dimensions,” coauthored with George Mason University economist Vincent Geloso. Our paper introduces the Inequality of Human Progress Index (IHPI) as a new way of measuring relative gaps in global development. The index was inspired by, and builds on, economist Leandro Prados de la Escosura’s pioneering augmented human development index for assessing global inequality but captures a wider array of indicators. In fact, the IHPI surveys worldwide inequality across more dimensions than any prior index of international development.

By analyzing inequality in a multidimensional way, the IHPI captures a fuller picture of international disparities and, in fact, takes the experience of inequality more seriously than do assessments based on income inequality alone.

As momentous as the global decline in income inequality is, measuring inequality beyond income differences is a more direct, comprehensive, and most important, accurate way to measure differences in well‐​being. As my coauthor and I point out:

Moreover, as global development has raised incomes internationally and enlarged the share of humanity that can be classified as middle class or above, this enrichment has opened many paths to happiness beyond income maximization. In a subsistence society, income is a decent proxy for well‐​being because, in situations of dire poverty, income is often the difference between survival and starvation. However, in rich countries today, many people choose careers that do not maximize income potential but offer other benefits, such as the flexibility to spend more time with family and friends, a sense of purpose related to the mission of one’s employing organization, one’s prestige, or one’s feeling of creative or intellectual fulfillment. Therefore, as Geloso and I note, “economic development foils the relevance of income as a proxy for well‐​being.” As global gross domestic product (GDP) grows and more people rise from subsistence‐​level poverty, it is less and less accurate to claim that income fully speaks to living standards, and it is increasingly urgent to emphasize a richer conception of living standards.

The IHPI thus considers material well‐​being, or income, and seven additional metrics: lifespan, infant mortality, adequate nutrition, environmental safety, access to opportunity (as approximated by education), access to information, and political freedom. Across all but two of these dimensions, the world has become more equal since 1990.

To understand the global distribution of well‐​being, my coauthor and I first needed to construct a measure of well‐​being. The result is the Human Progress Index (HPI). Like the United Nations (UN) Human Development Index (HDI), the HPI measures different aspects of human development on an easily understood scale, from 0 to 1, where higher values reflect greater well‐​being than lower values. As with the HDI, all index components in the HPI are given equal weight. The primary difference between the two indexes is that the HPI’s view of well‐​being is more comprehensive. For a full discussion of the development of this alternative to the HDI, see the Cato Institute policy analysis “Global Inequality in Well‐​Being Has Decreased across Many Dimensions: Introducing the Inequality of Human Progress Index” by Chelsea Follett and Vincent Geloso.

Generally, the HDI employs three components: life expectancy at birth (adjusted or unadjusted for disabilities), schooling (generally in mean years of schooling), and income. The HPI considers those components and adds political freedom, adequate nutrition, infant mortality, environmental quality, and internet access. All chosen indicators can be tracked continuously since 1990 across 142 countries.

Specifically, the HPI components are life expectancy at birth, in years (as measured by the World Bank); the infant mortality rate per 1,000 live births (as measured by the World Bank); food supply per person per day (as measured by the UN Food and Agriculture Organization); outdoor air pollution death rates (as measured by Our World in Data); mean years of schooling (based on data from Barro and Lee); internet users per 100 people (as measured by the UN and Our World in Data); GDP per person (as measured by the Maddison Project Database, 2020 edition); and democracy versus autocracy over time, on a scale of 0 to 40 (as measured by a rescaled version of the Polity5 database).

The HPI confirms that over the past few decades, global human development has been significant. Figure 3 displays index measures with several different specifications: unweighted; weighted for global population; unweighted and excluding the internet access component; and weighted for population and excluding the internet access component. Including or excluding the internet component greatly changes the extent of progress that the index shows, given internet access’s rarity in 1990 and its prevalence today. Excluding the internet access component, the improvement in HPI is between 35.9 percent (population weighted) and 41.8 percent (not weighted for population). With internet access included, the improvements in the HPI are between 415 and 509 percent. Put simply, this means that there has been an almost unfathomable improvement in equality of access to information, and in overall equality. While some may contend that including internet access skews the results, the life‐​changing nature of the internet is worth capturing when measuring human progress.

Importantly, all variants of the HPI suggest larger improvements in human well‐​being than do either the UN’s Human Development Reports, which report HDI, or the estimates from Prados de la Escosura’s augmented index. But have those gains been widely shared, or have they accrued to a small elite as many globalization skeptics contend?

Calculating inequality within the HPI resulted in the IHPI. Because of a lack of detailed distribution data for many countries on key metrics, my coauthor and I examined global interpersonal inequality rather than within‐​country inequality.

To gauge the extent of inequality between people around the world, we applied two different measures of inequality to the HPI. Once again, we considered, for each measure, both an unweighted variant that treats each country equally (to capture intercountry inequality) and a variant weighted for each country’s population (to approximate global interpersonal inequality). For each variant, we considered variations including internet access and excluding internet access, due to the large effect of that index component.

The two distinct measures that we have chosen are the mean log deviation (MLD) and the Gini coefficient. Both are ways to assess inequality among the values in a distribution, and both represent a situation of perfect equality as a value of zero (i.e., in a world where everyone has the same income, both the MLD and the Gini coefficient of income inequality are zero). The Gini coefficient represents maximal inequality as a value of one, whereas the MLD takes on larger positive values as incomes become more unequal. The measures are very similar and are commonly used by social scientists. The trends in inequality that we found were very similar for both measures.

Under a variety of specifications, the data unambiguously show a decline in global inequality. Irrespective of population weighting or the type of measure used (i.e., the Gini coefficient or the MLD), the data reveal an initial increase in inequality in the 1990s (driven by the rapid but unequal increase in internet access), followed by a significant overall global decline in inequality. When we excluded the internet access component, the index showed a continuous decline in inequality since 1990. These trends were almost exactly the same whether inequality was measured using the MLD, as in Figure 5, or the Gini coefficient, as in Figure 4.

An examination of the individual components of the index also reveals considerable progress toward worldwide equality in living standards, as shown in Figure 6 and Figure 7. Global equality has continuously improved since 1990 for life expectancy, internet access, and education. Equality in enjoyment of political liberty has improved almost continuously since 1990, with a small decrease in equality in recent years. That recent slight reversal does not negate the long‐​term trend of increasingly widespread access to political liberty. Globally, incomes became more unequal until the mid‐​2000s, but income inequality has declined since then. For adequate nutrition, the trend line has been somewhat rocky, with a turn toward greater inequality in the early to mid‐​2000s. Nonetheless, the long‐​term trend has been one of considerable growth in nutritional equality, as access to an adequate diet becomes more common around the world.

There are, of course, exceptions to every rule. Thus, two indicators within the index display trends toward more inequality. As Geloso and I explain:

As explained more fully in Johan Norberg’s essay, developed countries’ substantial improvements in environmental quality indicate that developing countries will very likely experience similar gains as they get richer.

Just as importantly, overall inequality is down. In fact, when compared with inequality trends in the HDI and Prados de la Escosura’s augmented index, the IHPI shows a greater degree of improvement toward global equality. This result suggests that the older indexes not only underestimate average global improvements in human well‐​being but also tend to underestimate how widespread progress has been and the share of the gains that have gone to the poorest people in the world. In other words, global equality has grown faster than many appreciate.

In summary, the explosion of interest in the topic of inequality and the widespread belief that inequality is increasing have led to a plethora of policy proposals, some quite extreme, promoted by influential individuals and organizations. But the perceived problem these policies attempt to address is trending downward. Globalization and free exchange, although unpopular among those who think they benefit only the rich, are in fact responsible for plummeting poverty and shrinking inequality across the world. Again and again, history presents examples of societies liberalizing economically and escaping poverty. As I have previously written:

As the lives of people in distant countries become ever more linked through commerce, the benefits from globalization touch the lives of the poorest the most, because they have the most to gain. The economic growth and opportunities presented by international commerce have allowed countless individuals to break free from subsistence poverty, improve their lives, and move into the growing global middle class through mutually beneficial exchange.

There is an unfortunate, pervasive tendency to underestimate improvements in global well‐​being. For example, when polled, a majority of Americans and others living in advanced economies said that the share of the world population living in poverty was increasing, despite the dramatic, long‐​term, and well‐​documented trend of declining global poverty. Since the polling occurred before the pandemic, one cannot attribute this response to the slight recent uptick in poverty due to pandemic‐​related disruptions. Not only are public perceptions often inaccurate when it comes to whether living standards are improving, but there is also a widespread tendency to underestimate how widely shared these global improvements are. The construction of the IHPI pushes back against such misperceptions and clarifies the impressive extent of the rise in global equality.

Because the IHPI comprises a larger number of dimensions than the HDI and uses an innovative methodology to properly capture improvements, it provides a richer measure of well-being—or human progress—than the HDI or, in fact, any prior development index. The IHPI shows that improvements have been both greater than is commonly appreciated and more dispersed—not accruing only to a small elite. Moreover, the IHPI’s assessment of inequality in terms of human progress is a more meaningful gauge of well‐​being than are assessments based on inequality of income alone. The IHPI’s greater number of dimensions directly measure many aspects of a good life that money may help to purchase. Furthermore, unlike examinations that focus on income alone, the IHPI is able to capture the many additional paths that individuals in rich societies can take to satisfaction, beyond single‐​minded income maximization. As a result, the IHPI takes the experience of inequality more seriously than do those who measure income inequality alone and provides a more meaningful understanding of the global distribution of well‐​being and progress.

It seems that globalization and market liberalization over the past few decades have both raised absolute living standards and reduced overall inequality. The IHPI adds to a growing body of knowledge that makes clear that the world is not only better off than many people realize but that the world is also becoming far more equal.