Pinpointing the true income level of people is a hard job. The extremes are those who are super rich and those who are poor. The rich have incentive to hide their true income as it may also cause him more tax penalties. People who are living in extreme poverty, on the other hand, are located in remote areas which sometimes makes it hard for surveys to grab their data. The extreme poor also may be incentivized to disreport their true income, so that the flow of government subsidies and aids continue.
Anyway, there are two conclusions about inequality and income that are widely accepted. The first one is that extreme poverty has declined in recent decades. According to world banks data in 2019, 659 million people lived in poverty, with daily expenditures of less than $ 2.15 (measured in PPP terms). Whereas in 1990 around two billion people used to live with such daily expenditure. That simply means that extreme poverty has declined around 70 percent in the last three decades. That is widely celebrated as the success of free market enterprise.
The other common knowledge, which usually is cited as a negative and side effect of globalism, is inequality. It is widely accepted that the top ten percent and especially top one percent of different societies became much wealthier over last decades. The super rich in China and India emerged. In the United States and Europe, they successfully avoided taxes.
Many economists look at this as a negative and drawback of globalism. Anyway, too much inequality inspires social unrest and may even lead to extreme revolts and populism.
However, a new paper published by Maxim Pinkovskiy and his colleagues at the University of Colombia suggests that the rise in equality may be a myth. It is true that the super rich were successful in creating wealth, but so was the poor! Therefore the inequality remained intact or even diminished.
In this paper the researchers measured the difference between income reports of the households and the measured domestic product of the same area. According to the paper results, the inequality has not risen and may have fallen as well. The study is still naive, and much more research needs to be done to confirm the results. But if true, it can change the common narrative of globalism. However, confirming scientific results is one thing, convincing people it is yet another issue!
Source: Economist
