By Dr. Susana Nudelsman
Global map of high inequality countries, 2022 (Source: Wikimedia Commons)
Global inequality is composed of two components: between-country inequality and within-country inequality. The between-country component assesses disparities in per capita gross domestic product between countries, either as an unweighted measure where each country counts equally, or as a weighted measure in which each country is weighted by its population, the latter being the methodology applied by most empirical studies. The within-country component adds up to the calculation of the disparities within countries (Neckerman and Torche, 2007).
Today, global inequality is greater than it was 200 years ago, but at the same time, it has stopped increasing for the first time since the Industrial Revolution. This downward trend has been driven by a reduction in inequality between countries—the main driving force of global income disparities—and should not be surprising, as growth rates in low-income Asian countries, especially China, significantly outpaced the global average. However, within countries, inequality has tended to increase. The pandemic led to a rise in global inequality, while for the following years, the data show a return to the downward trend, albeit at a slow pace and with differences across countries (Milanovic, 2019; World Inequality Report, 2022).
In particular, global inequality in the final quarter of the 20th century shows substantial changes. A rising global middle class in Asian countries — mainly China—, the establishment of a real plutocratic elite, and the steady income levels of the lower middle classes in wealthier countries are changing global economic, social, and political dynamics. In relative terms, the emerging global middle class has emerged as the primary “winner” of globalization; however, in absolute terms, the wealthiest and ultra-wealthy individuals have reaped the biggest rewards, while the poorest groups have received only a minimal share of the global wealth.
Regarding within-country inequality, three primary factors have influenced its development: technology, globalization, and politics. As a result, inequality in the most advanced Western economies, particularly the United States, includes the growing share of capital in the national pie, the high concentration of capital ownership, the higher return on assets of the richest, the rising correlation of high capital and labor incomes in the same people, the rising mating among people of similar incomes, the greater intergenerational transmission of disparities and the strong control of the political process by those at the top who wield increasing power in a move towards plutocracy (Milanovic, 2019).
In this framework, the traditional political economy inquiry regarding the division between capital and labor in global income reveals a decline for the latter (Piketty, 2014), which has also been influenced by the race between technology and education (Goldin and Katz, 2008).
In China, the share of private capital earnings has increased in the context of a growing privatization process led by capitalist-business sectors and the professionals of the new middle class, who also, through their savings, significantly enhanced their status. The political structure in terms of bureaucratic effectiveness, absence of the rule of law, and state autonomy has, in contrast with Western experience, overshadowed the influence of the emerging capitalist class pandemic (Milanovic, 2019).
Regarding between-country inequality, the population-weighted measure indicates a decline since the late 1970s. Given that this measure represents the bulk of global inequality, changes in between-country inequality allow us to capture changes in the total quite accurately. Nevertheless, income gaps between countries persist today (World Inequality Lab, 2024).
China’s growth performance, and to a lesser degree India’s, has been a crucial equalizing element in driving this decline. Curiously, the swift economic expansion of this country is related to its idiosyncratic policymaking that clearly reveals a rejection of the principles of neoliberalism in its domestic policies, combined with its acceptance in its international economic interactions. And that sets China apart from numerous other developed and developing countries that adopted both the domestic and international aspects of globalization with great seriousness (Maddison, 2006; Hung and Kucinskas, 2011).
While the pandemic caused the most significant rise in global income inequality in over thirty years, the trajectory of global inequality largely depends on the growth of incomes in different regions worldwide. If the trends of the past thirty years persist, inequality could rise as the growth in those countries that helped reduce inequality now leads to greater inequality, as they occupy the higher tiers of the global income distribution. However, if less affluent countries today expand more rapidly than their wealthier counterparts, worldwide inequality might keep declining (García Rojas et al., 2025).
- Summing up, global inequality is higher than at the dawn of capitalism, but it stopped increasing and even started a downward trend in recent decades.
- Since 1800, within-country inequality has decreased its share in global inequality, thus narrowing class divisions in societies, but has recently shown an upward trend.
- Since 1800, between-country inequality has increased its share in the total, and while it has registered a downward trend since the late 1970s, it still accounts for the majority of global inequality, so the location where we are born undoubtedly influences our future. Furthermore, existing disparities between countries still reflect inequality of income and opportunity.
References
Garcia Rojas Diana C., Nishant Yonzan and Christoph Lakner, 2025, Global Inequality and Economic Growth The Three Decades before Covid-19 and Three Decades After, Policy Research Working Paper 11093, World Bank Group.
Goldin Claudia and Lawrence F. Katz, 2008, The Race between Education and Technology. The Belknap Press of Harvard University Press.
Hung, Ho-F. and Jaime Kucinskas, 2011, Globalization and Global Inequality: Assessing the Impact of the Rise of China and India, 1980-2005, American Journal of Sociology, 116 (5).
Milanovic Branko 2019, Capitalism Alone, The Belknap Press of Harvard University.
Neckerman, Kathryn M. and Florencia Torche, 2007, Inequality: Causes and Consequences, Annual Review of Sociology, 33.
Piketty Thomas, 2014, Capital in the Twenty First Century, The Belknap Press of Harvard University Press.
World Inequality Lab Activity Report, 2024, World Inequality Lab, available at https://wid.world/www-site/uploads/2025/03/WIL-Activity-Report-2024.pdf
Susana Nudelsman is a Doctor in Economics focused on international political economy. Counselor at the Argentine Council for International Relations and visiting fellow at CLALS.
