Income Gap Widens

Article excerpt

The gap in income among the people of the world has been widening. In 1960, according to United Nations statisticians, the richest 20 percent of the world's people received 30 times more income than the poorest 20 percent. By 1991, they were getting 61 times more. While the poorest one-fifth in 1960 received a meager 2.3 percent of world income, by 1991 that revenue share had fallen to 1.4 percent. The income share of the richest fifth, meanwhile, rose from 70 percent to 85 percent.

These disparities prevail both among countries and within them, and the large gap between individuals worldwide reflects the combination of both of those splits. Almost four-fifths of all people live in the developing world, where incomes are only a fraction of those in industrial countries. In turn, within countries in both categories, gaps in income between citizens can be even wider.

The widest income gap reported within a country is in Botswana, where during the 1980s the richest 20 percent of society received over 47 times more income than the poorest 20 percent (see table). Brazil was second, with a ratio of 32 to 1. In Guatemala and Panama, the ratio stood at 30 to 1.

The rapidly growing economies of East Asia have had income patterns similar to those of Western Europe and North America, with the richest one-fifth often earning 5 to 10 times more than the poorest fifth. In South Asia, India, Bangladesh, and Pakistan have had relatively even distributions of income, with the richest 20 percent getting only four to five times more than the poorest quintile. Some countries that have had military conflicts apparently based in part on inequities among citizens, nevertheless have relatively even income distributions.

The split between countries and people can be seen in the marketplace. The value of luxury goods sales worldwide - high-fashion clothing and top-of-the-line autos, for example - exceeds the gross national products of two-thirds of the world's countries. The world's average income, roughly $4,000 a year, is well below the U.S. poverty line.

The poorest fifth of the world accounted for 0.9 percent of world trade, 1.1 percent of global domestic investment, 0.9 percent of global domestic savings, and just 0.2 percent of global commercial credit at the beginning of the 1990s. Each of those shares declined between 1960 and 1990.

These disparities are reflected in the consumption of many resources. At the start of this decade, industrial countries, home to roughly a fifth of the world's population, accounted for about 86 percent of the consumption of aluminum and chemicals, 81 percent of the paper, 80 percent of the iron and steel, and three-quarters of the timber and energy. Since then, economic growth in developing countries has probably reduced these percentages. China's economy, for example, is more than 50 percent larger now than it was in 1990, and developing countries have passed industrial ones in fertilizer consumption.

Uneven income distribution is shaping some of the most important trends in the world today. It raises crime rates, for example. And it drives migration. People have long responded to economic disparities by following a path from poor regions to richer ones, as tens of millions of workers chase higher wages and better opportunities. Some 1.6 million Asians and Middle Easterners were working in Kuwait and Saudi Arabia before they fled war in 1991, and at least 2.5 million Mexicans live in the United States.

The same is true within countries: rising disparities of income are adding to the growth of cities through rural-to-urban migration. …