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Xavier Salai-i-Martin Asks About Economic Inequality

26th June 2012

Xavier Salai-i-Martin, keynote speaker and BRIC expert, talks to The Economist about whether economic inequality around the world is getting better or worse.

“Critics of capitalism are convinced that the gap between rich and poor is widening across the world,” begins Salai-i-Martin.

He responds that there are three broad areas of difficulty. “The first is measuring what people, especially the poorest people in developing countries, consume. The second is valuing consumption in a way that allows useful comparisons to be made across countries and over time. And the third, in effect, is settling on an appropriate basis of comparison.”

“In short,” he summarises, “once you take account of the fact that China and India have performed so well since 1980, and especially since 1990, together with the fact that these two countries account for such a big share of all the world's poor, it is difficult to stay as pessimistic about global trends in poverty and inequality as the critics of global capitalism wish to be.”

Work by Sala-i-Martin shows rapid—indeed historically unprecedented—falls in poverty during the 1980s and 1990s, the new golden age of global capitalism.

His calculations demonstrate that the proportion of the world's people living in acute poverty (on less than a dollar a day) fell from 17% in 1970 to 7% in 1998; the proportion living on less than $2 a day fell from 41% to 19%.

“But what of the fear that global capitalism is making progress at the expense of the poor?” he asks. “On any estimate, poverty is at its most impervious in sub-Saharan Africa. Can it be plausibly claimed that these countries are the victims of globalisation? That would be an odd conclusion, given that sub-Saharan Africa's economies are so comparatively isolated from the rest of the world economy—by force of history, circumstance and, to a large extent, the policies of their own and other governments. Sub-Saharan Africa plainly suffers not from globalisation, but from lack of it.”

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