Rich and Poor People

The Rich Get Rich and Poor Get Poorer. Or Do They?, asks the New York Times:

Over the last three decades, and especially since the 1980’s, the world’s two largest countries, China and India, have raced ahead economically. So have other Asian countries with relatively large populations.

The result is that 2.5 billion people have seen their standards of living rise toward those of the billion people in the already developed countries %u2014 decreasing global poverty and increasing global equality. From the point of view of individuals, economic liberalization has been a huge success.

“You have to look at people,” says Professor Sala-i-Martin. “Because if you look at countries, we do have lots and lots of little countries that are doing very poorly, namely Africa – 35 African countries.” But all Africa has only about half as many people as China.

In his paper, “The Disturbing `Rise’ of Global Income Inequality,” he estimates the worldwide distribution of income by individuals rather than countries. The results are striking.

In 1970, global income distribution peaked at about $1,000 in today’s dollars, a common measure of poverty ($2 a day in 1985 dollars). In 1998, by contrast, the largest number of people earned about $8,000 %u2014 a standard of living equivalent to Portugal’s.

“That’s what I call a new world middle class,” says Professor Sala-i-Martin. It is mostly made up of the of the top 40 percent of Chinese and Indians, and the effect of their economic rise is big.

The papers are available on Professor Sala-i-Martin’s website.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.