What major countries are leading global inequality?

She says Winston Churchill (and this quote is correct) that “the inherent vice of capitalism is the unequal distribution of wealth; and that the inherent virtue of socialism is the distribution of suffering” (quoted from ‘The Wicked Wit of Winston Churchill’, p. 26). What I understand that great British writers and politicians mean is that it is not only enough to analyze equality or inequality, but also rent per capita. In this way, a very poor society like Jamaica at the time could be more egalitarian than British society, and another society as very poor as India in the 1940s could be both unequal and poor. However, migration flow They did not go from the unequal countries (UK, India) to the most egalitarian (Jamaica) but which results in greater per capita prosperity (UK) even though the inequality is greater.

If we look at the 21st century, we can draw similar parallels. Cuba stopped reporting inequality statistics in 1990. Let’s assume for a moment that the country maintains today “thanks to” a much lower level of communism inequality than the United States. Are Americans swimming towards Cuba or is the current the other way around? The answer, again, lies in rent per capita, about $60,000 in the US, compared to about $9,000 in Cuba.

Opinion
Inequality will get worse

Ignacio de la Torre

Measurement of inequality presents different methodologies. One of the most famous is Gini, which analyzes inequality from 0 to 1 (or from 0% to 100%), where 0 represents total equality and 1 represents total inequality. That inequality can be measured by income (a 1 means that households earn all of a country’s income, the rest of the households earn nothing, 0 means that all households earn the same), for riches (In this case income doesn’t matter, you look at who owns the assets of a country, the number 1 indicates that a household owns all the assets of a country and so on…) or by other factors like consumption.

In general, inequality indicators are greater in wealth than income, but because much is inherited, economists tend to focus their analysis on distribution income inequality. The methodology tends to always focus on after-tax income and social transfers, to reflect the redistribution impact that the tax system can represent. For example, France has a much higher pre-tax rate of inequality than after-tax, as the country collects about 50% of its GDP in taxes which is recycled through its social system.

Well, if we analyze the world’s four major economiesor, the US, with a GDP of 21 trillion dollars (on a world GDP of 85 trillion in 2020), China with one of 15, the eurozone 13, and Japan, with about 5, and we apply the Gini coefficient of after-tax income and transfers to get as follows: United States of America 0.39, China 0.4, Japan 0.33, eurozone 0.30 (data from Standardized World Income Inequality Database and Eurostats):

Because of that, China leads in income inequality between the major economies.

This result may be surprising, because, intuitively, one would say that, following Churchill’s maxim, a country that has followed a communist regime since 1949 should get a lower Gini coefficient they are from a capitalist country par excellence like the United States. There is always the consolation of GDP per capita, but if we analyze it, we find that the US presents the aforementioned 60,000 dollars, the eurozone and Japan, around 40,000 each, and China, around 10,000 (it is true that the data could soften slightly if parity purchases are always subjectively counted).

As we have stated in many articles, fourth industrial revolution has produced wage dispersion This explains part of the increase in inequality, especially in the US, but this greater inequality must be attributed to greater or lesser generation of affluence in terms of per capita income.

Photo: Xi Jinping, President of China, during the 110th anniversary of the Xinhai Revolution.  (Reuters)

If we do dynamic analysis, not static, one could say that communist politics should at least go in the “right” direction to bring about more equality. Well, if we look at another way of analyzing inequality, in this case ‘riches‘, comparing the percentage of wealth in the hands of the richest 10% of a country with the percentage in the hands of the poorest 50%, both in the US and in China the richest 10% own two thirds of the country’s total wealth. , and the ‘poorest’ 50% own 1.5% of wealth in the US and 6% in China. In 2000 the data were 1.8% and 14%. In other words: the wealth inequality It’s gotten worse in China over the last 20 years. If we see wealth per capita, China serves about 86,000 dollars, the United States, about 272,0001.

Fourth quarter of this year Chinese Communist Party will celebrate its XX Congress. their leader, Xi Jinping, had emphasized last year the concept of ‘shared prosperity’, claiming that his country should not lead to inequality in the United States. The facts, however, point to a very different reality, and a troubling question is whether ‘shared prosperity’ will increase equality at the expense of diminishing prosperity. when the real estate bubble burst and the concept of “one country, two systems” was reversed, which has paradoxically generated so much wealth (and inequality) since the time of Deng Xiaoping.

By Churchill is wrong.

1The data in this paragraph is obtained from Mc Kinsey, ‘The Rise of the Global Balance Sheet’, 2021.

She says Winston Churchill (and this quote is correct) that “the inherent vice of capitalism is the unequal distribution of wealth; and that the inherent virtue of socialism is the distribution of suffering” (quoted from ‘The Wicked Wit of Winston Churchill’, p. 26). What I understand that great British writers and politicians mean is that it is not only enough to analyze equality or inequality, but also rent per capita. In this way, a very poor society like Jamaica at the time could be more egalitarian than British society, and another society as very poor as India in the 1940s could be both unequal and poor. However, migration flow They did not go from the unequal countries (UK, India) to the most egalitarian (Jamaica) but which results in greater per capita prosperity (UK) even though the inequality is greater.

Matt Thompson

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