Location, not class, is now the key driver of global inequality. Some countries have gained great wealth, while others have not seen their average incomes rise in around 500 years. This is one of the findings of an article published in Global Policy, a journal of the London School of Economics and Political Science (LSE), today (4 May 2012).
Inequality between world citizens used to be determined in equal measures by class and location . New research, however, reveals that people’s fortunes are being dictated primarily by where they live. As a result, economic migration has become the key way for poor individuals from poor countries to improve their economic standing, and governments will not be able to alleviate the pressure of migration on their societies until global inequality is reduced.
In ‘Global Inequality: from class to location, from proletarians to migrants’, Branko Milanovic of the University of Maryland, examines the differences in income between countries and concludes that a key priority for policy makers should be aid and support for poorer countries.
Using the World Income Distribution database, the author examines how incomes are broken down globally. The calculations reveal huge disparities of income based on location: the poorest Americans are shown to be still better off than 60 per cent of the world population; while the poorest Brazilians and Indians are among the poorest on the planet, being in the third or fourth global percentile.
A comparison of the poorest groups of Americans with the richest 5 per cent of Indians reveals that the second poorest section of American population is approximately the same level of income (1 percentile lower) than the richest 5 percent of Indians. A comparison between Denmark and several poor African countries is shown to reveal that Denmark’s poorest are still shown 82 per cent better off than the rest of the world population. This is a level that cannot even be reached by the richest in many poor African countries, where those at the richest level (?) hardly exceeds 60th or 70th global percentile.
“Not only is the overall inequality between world citizens greater in the early 21st century than it was more than a century and a half ago, but its composition has entirely changed; from being an inequality determined in equal measures by class and location, it has become preponderantly an inequality determined by location only” finds the report. “Analysis of incomes across countries for different members of the population reveals a wide gap between the poor in rich societies and the poor in less wealthy countries. This fact is of great political and economic significance. Individuals can now make large gains from migrating to wealthier countries. Furthermore, the there is less solidarity between the poor of the world.
“The spectre of communism disappeared because poor people in what are today rich and upper middle income countries have experienced substantial and sustained increases in their real levels of incomes” writes Milanovic. “The problem of migration will disappear, or become manageable, only when differences in mean incomes between countries becomes smaller. It is therefore in the best interests of rich countries to work to deliver a better living standard for the poor people of the world by increased aid, in order to reduce the pressure of migration on their society.
“Development will take time, however.” The report cautions, and while relocation is not prohibitive and the difference in mean incomes between countries remains so divided, migration will be a great 21st century mechanism of ‘adjustment’. Although, driven by self-interest, its ultimate reduction would be a reduction in global poverty and inequality” Milanovic concludes.
Global Policy is published today by the London School of Economics and Political Science (LSE). The issue also includes articles on ‘Assessing the evolving threat of terrorism’ by Khusrav Gaibulloev of the Kazakhstan Institute of Management, Economics and Strategic Research, Todd Sandler and Charlinda Santiford of the University of Texas at Dallas; and ’The Role of Export Credit Agencies in Global Trade’ by Andreas Klasen, Pricewaterhouse Coopers.
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 At the time of Marx and Engels were developing The Communist Manifesto, the economic position of workers across the world was roughly similar. The bulk of workers who lived at less than their countries’ average income could not have incomes that difference by more than 2 to 1. Today the gap in mean incomes often differs by a factor of 10 to 1.