By Andrew Hammond, associate at LSE IDEAS, Special to CNN
Editor’s Note: Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics, and a former UK Special Adviser.
The opinions expressed in this commentary are solely his.
(CNN) – Economic inequality is now center stage in the global debate, and the World Economic Forum asserts that this issue is the single biggest risk facing the planet. Yet, amid all the justifiable concern, we may be on the cusp of a “game-changing” point in history.
• World Bank research indicates that, for the first time in about 200 years, overall global income inequality (one of the key measures of economic inequality) appears to be going into reverse.
This is a cause for optimism, and will be a key topic discussed at the 50th G77 summit of developing nations in Bolivia this weekend. The meeting, which the G77 is co-hosting with China, has the overriding ambition of promoting a “more equitable world order.
“The powerful forces that determine the overall global income landscape are complex and cross-cutting. Chief among them are growing income equality between countries, as the global “South” (Africa, Latin America, the Middle East and Asia) develops, at the same time that there is increased income inequality within many nations. These opposing mega-trends, like tectonic plates, are pushing against each other.
China and India have been key in promoting greater global income inequality between nations. Combining their recent economic growth, and very large collective populations (estimated at more than 2.5 billion people), both have lifted a massive amount of people out of poverty — an estimated 600 million between 1981 and 2004 in China alone.
This is truly remarkable. And it has helped catalyze what Branko Milanovic, former lead economist of the World Bank’s Research Department, has described as the “profoundest reshuffle of individual incomes on the global scale since the Industrial Revolution.
“But at the same time, there is a more pernicious, countervailing mega-trend: growing income inequality within many countries across both the developed and the developing world. This issue has become increasingly politically important, especially since the international financial crisis in 2008-09.
Taken overall, the interplay of these forces over the past 200 years has resulted in greater global income equality. However, in the period since 2002, something dramatic may be on the change.
There is evidence that the “positive effect” of growing income equality between countries, driven by the development of the South, is superseding the “negative effect” of increasing inequality within nations. If true, this would be a momentous moment in world history.
As the World Bank itself says, this conclusion is hedged with uncertainty as data sources on income across the world are inevitably incomplete and imperfect. So more evidence, over a longer period, is needed to judge whether the process is real, robust and sustainable.