Twin Peaks to Burgeoning Precariat?

The co-evolution of global inequality and global poverty, 1990-2030

Peter Edward and Andy Sumner

Contents

1. Introduction

2. The GrIP model of growth, inequality and poverty

3. Is global inequality really falling?

4. Who benefited from growth since the Cold War?

5. Global poverty, 1990-2030

6. Conclusions

1. Introduction

• What has happened to global inequality & poverty since the Cold War? Major source of contention – benefits of growth, liberalisation since end of Cold War

• Data has got a lot better but still quite questionable. Not only methodological issues – conceptual too. Various concepts of pro-poor/inclusive growth

• Orthodox narrative fragile? Global poverty falling fast; Global inequality (between countries and individuals) falling too; market orientated growth poverty reducing; Policy implications = don’t worry too much about managing growth benefits or national inequality?

2. The GrIP model of growth, inequality and poverty

GrIP v2.0• Growth, Inequality and Poverty GrIP is model of consumption, output and

distribution

• Model built from:– Survey distributions, survey means, PovcalNet, 8 Oct 2014 – HFCE and GDP in 2011 PPP, population headcounts, additional survey distributions, WDI, 17

Oct 2014; HFCE and GDP in 2005 PPP, WDI, 18 Dec 2013– Additional survey distributions, WIID3b, Sept 2014– GDP growth forecasts, IMF World Economic Outlook (WEO), Oct 2014– Population growth forecasts, UNPD World Population Prospects (WPP) 2012 (medium

forecast)

• Conceptual and methodological issues (of many):– Differing concepts of global inequality and poverty– 2005 vs 2011 PPPs (here 2011PPP unless stated)– Consumption/income surveys – Top income adjustment or not– Etc…

3. Is global inequality really falling?

Global Gini, 1990-2012

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

1990 1995 2000 2005 2010 2015

Between individuals, 2005PPP

Between individuals, 2011PPP

Between countries, 2005PPP

Between countries, 2011PPP

Within countries

But… global Gini exc. China, 1990-2012

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

1990 1995 2000 2005 2010 2015

Between individuals, 2005PPP

Between individuals, 2011PPP

Between countries, 2005PPP

Between countries, 2011PPP

Within countries

Global density curve, 1990-2012: Twin peak to burgeoning precariat

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

10 100 1,000 10,000 100,000

<= C

on

sum

pti

on

Den

sity

Po

pu

lati

on

=>

Income ($ PPP per capita pa) - log scale

1990 2005PPP

2012 2005PPP

1990 2011PPP

2012 2011PPP

$1.25 (2005PPP)

$2.5 (2011PPP)

$10 (2011PPP)

Expansion in consumption in top global decile ($30+ per day)

Global density curve exc. China (again), 1990-2012

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

10 100 1,000 10,000 100,000

<= C

on

sum

pti

on

Den

sity

Po

pu

lati

on

=>

Income ($ PPP per capita pa) - log scale

1990 2005PPP

2012 2005PPP

1990 2011PPP

2012 2011PPP

$1.25 (2005PPP)

$2.5 (2011PPP)

$10 (2011PPP)

4. Who benefited from growth since the Cold War?

Absolute benefits by fractile (2011PPPs push crossover point left ward)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

0 10 20 30 40 50 60 70 80 90 100

Ch

ange

of

co

nsu

mp

tio

n $

PP

P p

er c

apit

a

Fractile location (%)

1990 to 2012 Global average 1990-2012 (2005PPP)

Relative benefits by fractile(2011PPP ‘lifts’ poorest 60%)

-20

0

20

40

60

80

100

120

0 10 20 30 40 50 60 70 80 90 100Per

cen

tage

ch

ange

of

co

nsu

mp

tio

n p

er c

apit

a

Fractile location (%)

1990 to 2012 1990 to 2000 2000 to 2012 Global average 1990-2012 (2005PPP)

Regional and national variation important for policy/politics

• Regional and national patterns suggest benefits of growth can be managed or growth governed differently

• So, a low tech quiz…

Guess the growth incidence curve, 1990-2012

Which region? Which country?

Stylized growth incidence curve, 1990-2012

Which region?

Which country?

See literature on varieties of (late) capitalism; welfare regimes; etc.

5. Global Poverty, 1990-2030

What consumption level?

• Every dime under $2.50 adds 100m people so…• $1.25 rejigged to $1.90 & fall in poverty due to rejig • Multi-dimensional poverty double $1.90 and close to

$2.50 level (1.7bn)• $4 = developing world median• $10 = security from poverty & poorest OECD decile

2012: 2005 PPP vs 2011 PPP

0.00

0.10

0.20

0.30

0.40

0.50

50 500 5,000

Pop

ula

tio

n D

ensi

ty =

>

Income ($ PPP per capita pa) - log scale

2012 2005PPP

2012 2011PPP

$1.25 (2005PPP)

$2.5 (2011PPP)

$10 (2011PPP)

Global poverty (2012-IMF WEO – 1% & historic distribution trend)

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

He

adco

un

t b

elo

w P

ove

rty

Lin

e (

mil

lio

ns)

Year

$10 (2011PPP)

$2.5 (2011PPP)

$2 (2011PPP)

$1.78 (2011PPP)

$1.25 (2005PPP)

Global poverty exc. China

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990 1995 2000 2005 2010 2015 2020 2025 2030

He

adco

un

t b

elo

w P

ove

rty

Lin

e (

mil

lio

ns)

Year

$10 (2011PPP)

$2.5 (2011PPP)

$2 (2011PPP)

$1.78 (2011PPP)

$1.25 (2005PPP)

But… how much difference might inequality and growth make?

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

He

adco

un

t b

elo

w P

ove

rty

Lin

e (

mil

lio

ns)

Year

Pessimistic growth, extrapolated inequality trend

Moderate growth, extrapolated inequality trend

Optimistic growth, extrapolated inequality trend

Moderate growth, best historic inequality trend

Optimistic growth, best historic inequality trend

Kuznets revenge? Growth & structural change accompanied by rising net Gini where much of global poor live thus future growth less pro-

poor

China Indonesia Bangladesh India Pakistan 0

10

20

30

40

50

60

1990-5 2010-12

Data: Solt (2014)

6. Conclusions

a) Poverty > precarity & twin peaks to burgeoning precariat of 3.2bn (half global popn & half of popn in most MICs)

b) Much heralded fall in global inequality barely visible when China exc. (or top income adj) & national inequality flat overall but rising where world’s poor conc.

c) Growth benefits vary drastically so role of policy in governance of growth – varieties of late capitalism; welfare regimes.

d) Considerable uncertainty about future level and location of poverty

e) The orthodox narrative for post 1990 looks fragile?