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Global Inequality in Historical Perspective

by Richard Jolly

During the 18th and 19th centuries ,political economists wrote about inequality as a central issue of their time, important as a mechanism of development and for its links with poverty and social harmony. Adam Smith declared:

‘Wherever there is great property, there is great inequality. For one very rich man there must be at least fi ve hundred poor, and the affl uence of the few supposes the indigence of the many.’

Smith emphasized the way such inequality led on to the need for government to maintain law and order.

‘The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property… can sleep at night in security… The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government.’

Smith though blunt, was measured. Thomas Paine writing two decades later presented his analysis with pre-Marxian vitriol. He focused on land as the source of inequality.

‘It is very well known that in England (and the same will be found in other countries) the great landed estates, now held in descent, were plundered from the quiet inhabitants at the conquest. The possibility did not exist of acquiring such estates honestly… That they were not acquired by trade, by commerce, by manufactures, by agriculture or by any reputable employment is certain. How then were they acquired? Blush, aristocracy, to hear your origin, for your progenitors were Thieves…When they had committed the robbery, they endeavoured to lose the disgrace of it, by sinking their real names under fictious ones, which they called Titles. It is ever the practice of Felons to act in this manner.’

By the mid 19th century, industrialization had advanced and poverty had deepened, especially in the towns in the United Kingdom. The statistics suggest that in terms of income distribution little had changed. The average income of the richest fi ve per cent was still some 80 times estimated income per head. By this time, John Stuart Mill and Marx had taken up the cudgels. Mill, though considering the acquisition of individual property through one’s own labour as just, wrote damning indictments of the origins of the actual distribution of property in Europe at the time.

‘The social arrangements of modern Europe commenced from a distribution of property which was the result... of conquest and violence: …the system still retains many and large traces of its origins. The laws of property have never yet conformed to the principles on which the justification of private property rests. They have made property of things which never ought to be property, and absolute property where only a qualified property ought to exist. They have not held the balance fairly between human beings, but have heaped impediments upon some, to give advantage to others; they have purposely fostered inequalities, and prevented all from starting fair in the race.’

Mill analyzed the role of law in this process, which seems to have its own parallels today.

‘…if the tendency of legislation had been to favour the diffusion, instead of the concentration of wealth – to encourage the subdivision of the large masses instead of striving to keep them together; the principle of individual property would have been found to have no necessary connexion with the physical and social evils which almost all Socialist writers assume to be inseparable from it.’

We need to jump ahead to the time of the United Nations to recover some of the blunt and colourful language of the early and mid 19th century economists. The 1951 UN report on Measures for the Economic Development of Underdeveloped Countries made much of the need for land reform – and re-introduced some of the early outspokenness. The UN expert committee (including two subsequent Nobel prize-winning economists, Arthur Lewis and T.W. Schultz) shifted the emphasis from how the land was acquired to how it was owned and how it was used – with the focus on landlord- peasant relationships.

‘In many under-developed countries, the cultivators of the soil are exploited mercilessly by a landlord class, which perform no useful social function. This class strives to secure itself the major part of any increase in agricultural yields, and is thus a millstone around the necks of the peasants, discouraging them from making improvements in agriculture and, in any case, leaving them too little income from which they might save to invest in the land. In such countries, land reform abolishing the landlord class is an urgent prerequisite of agricultural progress.’

In the 1970s, income distribution emerged again in the context of the ILO’s World Employment Programme. The ILO country mission to Columbia in 1970 made inequality of income distribution the centre of its analysis. Within two years, redistribution from growth became the integrating core of the ILO mission to Kenya which in 1974 led to the IDS/World Bank Study on Redistribution with Growth, generalizing strategies for linking growth with redistribution and providing case studies of experience in India, Cuba, Tanzania, Sri Lanka, South Korea and Taiwan.

It is noteworthy that until the last few years, the World Bank gave little attention to income distribution, as shown in its history, The World Bank: its fi rst half century. The major exception was during the Presidency of Robert McNamara, from 1968- 81. McNamara highlighted ‘Latin America’s scandalous income and wealth disparities’ in a major speech in 1972. But after this, the emphasis was shifted away from equity and towards ‘the absolute poor’. Thus the work of the Bank on income distribution over the last ten years is noteworthy as is its latest World Development Report, 2006 on Equity and Development.

In the first few years, the UN’s own work on national income raised concerns among delegates about income distribution, within and between countries. In 1951 in ECOSOC, for instance, the Indian delegate noted that ‘65 per cent of the world’s population which lived in Africa, Asia and Latin America received only about 15 per cent of the world’s income’.

This led to some surprising reactions. The delegate of the USSR made a strong attack on internal income distribution within the United States. This was followed by the American delegate about the need to tackle global inequalities.

‘Everyone would agree’ he said, ‘that it was desirable to reduce and in due course to eliminate the existence of such large discrepancies...’.

He entirely agreed with the representatives of those countries that national and international action must be taken to secure a greater equality in living standards in the world. It was believed in the United States that the existing disparities in national income must be reduced by an expansion of the world’s total income, an increasing share of that expanding income going to underdeveloped areas. The problem must be viewed dynamically in terms of increasing the world’s volume of goods and services and in raising general well-being’.

The Brazilian delegate put the point with fewer qualifications:

‘The problems was not to restore the old balance, but rather to create a new equilibrium by which the disparities of income and wealth throughout the world would be eliminated…’.

Concerns with global income distribution returned in the 1970s with the North South debate on the need for a New International Economic Order. This need had been brought into sharp relief by the massive increases in oil prices, which had shifted the equivalent of about 2 per cent of global income in favour of the oil producing countries. But debate on NIEO met with strong opposition from the industrial countries and was effectively terminated by the end of the 1970s. It took until 1988 before the General Assembly again came out strongly on global inequality.

‘Mindful that the existing inequalities and imbalances between the international economic system are widening the gap between developed and developing countries and thereby constitute of major obstacle to the development of the developing countries and adversely international relations and the promotion of world peace and security.’

Conclusions

Some of the greatest economists and philosophers of one or two centuries ago were bold and outspoken about the injustices of extreme inequalities then existing nationally and internationally. Their words stand in sharp contrast to the more measured descriptions of analysts today. Yet by almost every standard, global income inequalities have grown substantially since that period – just as national inequality has grown and appears to be growing over the last two or three decades. There is a case today for more outspokenness, both about the situation, the underlying causes, the links with development and what can be done to mitigate the extremes. There is also a case for giving more attention to the way today’s inequalities reflect and embody some of the extreme international injustices of the past.

Richard Jolly is a co-director of the UN Intellectual History Project at the City University of New York. Before this, he was for over 18 years an Assistant Secretary General of the UN, first as Deputy Executive Director of UNICEF for Programmes and for the last five as Principal Coordinator of UNDP’s Human Development Report. In the 1970s, he was Director of IDS at the University of Sussex.