In the world of inequality experts, it is called “the elephant curve”. Her father has just announced her death because the story she was telling has started a new chapter. It is about a historical upheaval, the drama of the middle class and these ever richer ultrarich.
Rarely has an economist’s graph summed up an important and complex phenomenon so well in a single image. Since its appearance in a World Bank working paper in 2013, it has often been touted as the best illustration of the effects of globalization on the distribution of wealth around the world.
It is not very complicated to understand. On the bottom line, we find the entire world population by percentile rank, going from the poorest on the left (10% of the poorest, 20% of the poorest, etc.) to the richest on the right (those are more rich than 80% of the population, than 90% of the population… up to the famous 1% of the richest), whatever their country. The values on the vertical line indicated the average annual increase in income for each of these segments of the human population during this period of triumphant globalization from 1988 to 2008, which included the collapse of the European Union Soviet Union and China’s entry into the World Trade Organization.
We see appearing there – with a little imagination – the silhouette of an elephant. The drooping tail of the animal shows that the poorest, especially on the African continent, have not really improved their lot. Its back and especially its head correspond to the staggering economic rise of several Asian populations, starting with those some 300 million poor Chinese who have been catapulted into the middle class, thanks to an average real increase in income of 5% per year. . As for its long trunk, it draws a long curve which descends first until a virtual stagnation of the real incomes of the 80% to 90% of the richest people on the planet, that is to say the middle class. in developed countries. But the trunk then straightens abruptly, the tip pointing skyward due to the enrichment of the richest, particularly the famous 1%.
Here is. All is said, we thought at the time. This elephant clearly shows who has benefited from globalization and its offshoring, although the authors of the graph, the economists Christoph Lakner and Branko Milanović, were careful not to draw a direct causal link and noted that other factors were undoubtedly at work. also take into account, including technological changes as well as current economic and social policies.
Left ? Not really.
This fall, one of them, New York University (CUNY) professor Branko Milanović, redid his graph, but for the period from 2008 to 2018, and the elephant was gone! Instead, we end up with a very high curve at the start and then only descends, marking a plateau halfway. It is to believe that, after the terrible financial crisis of 2008-2009, the poorest began to be the big winners of the world economy, that a majority of the populations of developing countries continued to benefit income increases of at least 6% per year, that the standard of living of the middle class in the rich countries has improved at least a little and that the ultra-rich have almost stood still. But the reality is more complicated than that, says Branko Milanović.
The poorest have actually seen an acceleration in their income. But what must also be understood is that by climbing the rankings of the income scale and continuing to enjoy average increases of more than 10% per year, the Chinese have not only inflated the averages , but also relegated to the lower percentile ranks other populations, notably from India, Pakistan and Bangladesh, who had better incomes than when 200 million rural Chinese were still among the most poor. As for the richest 1%, their incomes did not decrease, they only increased at a much slower rate after the financial crisis.
In this grand game of musical chairs, the poorest 10% of Italians tumbled from the richest 30% camp to the middle of the pack from 1988 to 2018, while one in five urban Chinese are now among the top 20% richest on the planet. “It’s probably the biggest reshuffling of individual incomes since the industrial revolution,” says Branko Milanović.
Much richer than others, the middle class in developed countries has retained its place at the top of the world income rankings, he notes. As for the 5% of the richest in the world, they have largely remained the same, with 87% coming from Western Europe, North America, Oceania or Japan in 2008, compared to 78% in 2018 .
Growing inequalities
A sign of the times, as China and the other countries of East Asia have now largely passed over to the side of the richest half of the world, the standard of living should now rise faster in the Indian subcontinent. and in Africa than elsewhere to reduce global inequalities, observes the economist.
Unfortunately, the COVID-19 pandemic, the explosion in the cost of living and climate change have so far had exactly the opposite effect, Oxfam will recall next Monday in its annual portrait of wealth inequality in the world. . The next animal that Branko Milanović will draw could be sad.