Tuesday 13 May 2014 3:45 pm

How the global economy became more equal – thanks to capitalism


Yet on a global scale, in terms of the degree of inequality which exists between nations, the past 50 years have seen a huge movement towards a much more equal world. And it is precisely the institutional structure of capitalism – of companies motivated, at least in part, by profit, operating in a market-oriented system – which has brought this about. This was the system that England introduced to the world in the late eighteenth century with the Industrial Revolution.

Until then, over the whole span of the millennia of organised human society, and in terms of the difference in living standards between regions, the world had been a very egalitarian place. Most people lived for most of the time on the brink of starvation. A widely used summary measure of inequality is the so-called Gini coefficient. In a completely equal society, the Gini coefficient is zero – no inequality – and in a society in which one person has all the income it is 100. So the higher the value, the more unequal the society. For most of human history, the Gini coefficient between regions of the world seems to have been between 10 and 15, a far more equal distribution than currently exists within any individual country.


Japan forced its way in, with absolutely spectacular growth in the 1950s and 1960s, closely followed by other East Asian countries such as South Korea and Taiwan. More recently, of course, China and, to some extent, India have adopted capitalist principles of economic organisation and have boomed as a result. In the former Soviet bloc, those countries that oriented themselves towards the West have prospered, while others, like Russia itself, have floundered. Even in Africa, where countries went backwards following independence in the 1960s, there are very encouraging signs of recent progress.


