Global Income Inequality

Over the past four decades, global production as measured by GDP has increased more than threefold. But the vast majority of this additional output has been captured by the rich. This graph shows that the richest 1% have claimed 54% of total gains from growth, while the richest 5% have claimed 70%. In other words, the vast majority of all the additional output we have produced—with our collective labour and our planet’s resources—has gone to make the rich richer. Meanwhile, the majority of humanity—those who work in the sweatshops, mines and plantations that power the world economy—have received only a small fraction of the gains. 

Global inequalities are also extreme when it comes to the distribution of wealth, which can be seen by using the dropdown menu beneath the graph.  According to the World Inequality Database, the richest 1% control 42% of the world’s wealth. The richest 5% control 69% of the wealth.  Meanwhile the poorer half of the world’s population controls less than 1%. Wealth is not just about consumption, it is about power. It is about who controls the means of production: the land, the factories, the banks, the corporations. Power in the world economy is far from equitable or democratic; it is concentrated in the hands of a few.

Prior to the modern period, there was little difference between most regions in the world in terms of income. That changed during colonialism, as Western Europe — and the European settler colonies — organized a global system of production that relied on extracting cheap labour and resources on a vast scale from Eastern Europe, the Americas, Africa and Asia, while forcing these regions to serve as captive markets for Western corporations.¹ In some cases, this was achieved through direct colonization, as in the Americas or India, while in other cases it was achieved through a combination of strategic military interventions and alliances with local comprador elites, as in Eastern Europe and the Ottoman region, or Africa during the slave trade. The result was an inequitable world economy divided between an imperialist “core” in the global North and the exploited “periphery” of the global South.²

By the middle of the 20th century, progressive and radical movements across much of the South had overthrown these colonial arrangements, and began taking steps to build economic sovereignty and organise production around meeting human needs. This caused problems for the core states, however, as it constrained their access to the cheap labour and resources that capital accumulation requires. So they retaliated, wielding their geopolitical and commercial power to constrain economic sovereignty in the South, push the prices of labour and resources back down, and restore the imperialist structure of the world economy (see the entries on structural adjustment and drain from the South).³

As a result, the income gap between North and South has continued to increase over the past several decades. As this graph shows, the gap has increased from around $14,000 in 1960 to almost $52,000 in 2023. 

The dropdown menu allows you to change currency concepts. MER-based figures are better for understanding unequal purchasing power over goods sold on the world market, while PPP data is better for measuring inequality in consumption of domestically-produced goods and services (for more information, please see our post on the three currency concepts used by the Global Inequality Project).​⁴  Regardless of the currency concept, the gap between the core and periphery has increased dramatically since 1960.

Another way to assess trends in inequality is to look at what economists call relative inequality. This graph shows the GDP per capita of global South regions as a percent of the core’s GDP per capita. This is a more conservative approach than looking at the absolute gap between regions. However, even when measured in relative terms, “catch-up development” is not occurring. 

For several regions, their position is worse today than it was in the 1960s and 70s. China is the only region that has meaningfully improved its position, but this represents convergence with the middle-income regions of the global South, such as Latin America, rather than convergence with the core. China’s GDP per capita is still only one-fifth that of the core’s.

According to Giovanni Arrighi’s interpretation of this indicator, the average command of the inhabitants of the global South over the resources and labour of the global North is on average only 14% (3% to 22%, depending on region) of the average command of the North over the resources and labour of the South.⁵ This is an expression of “the totality of power relations” that privileges the inhabitants of the North in their direct and indirect dealing with the regions of the South.

The graph uses the ‘core’ and ‘periphery’ categories based on the IMF lists of ‘advanced’ and ‘developing’ economies in 1960. However, during this period a few global South countries (such as South Korea and Israel) have been selectively integrated into the core with US support for geopolitical reasons, with privileged access to US markets and capital, and freedom to use state-led development strategy. The dropdown menu allows users to select a ‘variable’ definition of core and periphery, where countries move between groups as indicated by the IMF. This more accurately depicts the position of peripheral regions today.

The North’s economic dominance is enabled in large part by their disproportionate power within the key institutions of global economic governance. The World Bank and the IMF were founded in the 1940s; they were established during colonialism and were shaped by colonial principles. Global South countries were integrated into these institutions on unequal terms, and they remain unequal to this day. The United States has veto power over all major decisions, and together with the rest of the G7 controls more than half of the vote. The global South, which has the vast majority of the world’s population, has only about one-third of the vote. If this was the case in any national parliament, it would be considered apartheid and the world would be outraged. And yet apartheid principles operate right in the centre of the global economic governance system. Something similar is true in the World Trade Organization (WTO), where bargaining power is determined by market size (measured here by GDP). The core states are able to determine the rules of the international economy in their own interests. For more, see our entry on global economic governance.

Total GDP is often used to measure a country's commercial and geopolitical power, but it is not always adequate for this purpose. A populous country may have a large GDP, but if most of its productive capacity is expended on meeting basic needs and maintaining domestic security, it may have little surplus available to exert much geopolitical power. Michael Beckley suggests that "net resources" is a better metric – i.e., resources beyond what is needed to maintain domestic stability, which can be used to project power on the international stage. Beckley argues that a country’s net resource availability relative to other countries can be approximated by multiplying total GDP by GDP per capita.⁶

This graph shows the share of global net resources controlled by the core versus the periphery, with the ‘new core’ group changing categories in the relevant year. The periphery's share of global net resources increased in the 1960s and 1970s during the period of state-led industrial policy, declined under structural adjustment during the 1980s and 1990s, and is now recovering (due in large part to industrial expansion in China).

The dropdown menu can be used to separate out select 'Great Powers,' including the United States, China, and the former Soviet Union (USSR). We see that even relatively strong peripheral states have had only a small fraction of global net resource availability. Even during the 'Cold War',⁷ and with China today,⁸ the power imbalances are extreme. While strong peripheral states may have the capacity to contest the dictates of the imperialist states, they have never had the capacity to impose an alternative world order. The core has always maintained overwhelming dominance, while seeking to cast even marginal increases in the power of peripheral states as an existential threat.

It is important to bear in mind that this indicator is only an indirect measure of net resource availability, and also may not adequately account for factors such as control over strategic resources, nuclear weapons, territory size or international alliances.

The Gini index is often used to measure inequality.  According to this metric, a score of 1 represents perfect equality, while a score of 0 represents perfect inequality. This chart shows the Gini index of inequality between all countries, weighted by population. It demonstrates high inequality across the whole period since 1960, with a modest decline in the 21st century, driven mostly by China. Outside of China, global inequality is virtually unchanged since 1960.

The Gini index is limited, however, in that it is a relative measure. To understand how this works, imagine person A has $100 and person B has $100,000. Now imagine A's income goes up by 10% to $110, and B's income goes up only 5% to $105,000. Because the income of the poor person has increased by a greater percentage than that of the rich person, the Gini index interprets this as a reduction in inequality, even though the absolute gap between the two has increased (person B started off $99,900 richer, and is now $104,990 richer).  This might be reasonable if persons A and B live on isolated islands and never interact. But if they are part of the same economy, and if the increased output (worth $5,010 in this case) is generated collectively by both of them, then we might find it problematic that person A gets less than 1% of it while person B claims the lion's share. 

Because the world economy is an integrated system, where the consumption of the rich depends on production performed by ordinary people, the absolute Gini index may be a better measure of inequality in the world-system. Measuring inequality this way shows a dramatic increase since 1960, albeit at a gradually slowing rate.

Some argue that the old core/periphery divide is obsolete. For evidence, they point to the rise of the East Asian "Tigers" (South Korea, Taiwan, Singapore and Hong Kong) and others that have developed to the point of “catching up” and moving into the core. But this argument is not supported by empirical evidence. If the periphery was moving into the core in any substantial way, the core’s share of the world population would increase. Yet we see the opposite is occurring: the core’s share of the world population is shrinking. The core/periphery divide remains entrenched.

The economic historian Immanuel Wallerstein observed that while “some individual countries and regions may shift positions,” the structure of capitalism ensures that “the rise of some has always meant the relative decline of others, to maintain the same approximate percentages in the various zones [core and periphery] of the world economy.”⁹ It is not possible for peripheral regions to enter the core in any substantial way, given the imperialist structure of the world-system. The core powers maintain their high levels of material consumption by net-appropriating labour and resources from the South. This arrangement cannot be universalised. Under capitalism, some 80% of humanity must always be located in the periphery in order to work the mines, plantations, and sweatshops upon which Northern affluence depends.