Global Policy Forum

by Larry Elliott and Charlotte Denny

The world's richest 50m people earn as much as the poorest 2.7bn and may soon be forced to live in heavily protected gated communities to escape the resentment of the billions living below the poverty line, a senior World Bank economist warns today.

Research from Branko Milanovic, published today in the Economic Journal, shows a staggering increase in global inequality, which has been rising as rapidly internationally as in Britain under Mrs Thatcher.

In a wide ranging study covering 85% of the world's population from 91 countries, Mr Milanovic has found that the richest 1% of the world have income equivalent to the poorest 57%. Four fifths of the world's population live below what countries in North America and Europe consider the poverty line. The poorest 10% of Americans are still better off than two-thirds of the world population.

"We can wonder how long such huge inequalities may persist in the face of ever closer contacts, not least through television and movies, where opulent lifestyles of the rich influence expectations and often breed resentment among the poor," said Mr Milanovic.

"Should it be of concern to the rich? Perhaps, if we believe that wide income gaps lead to immigration and resentment breeds terrorism. For ultimately, the rich may have to live in gated communities while the poor roam the world outside those few enclaves."

Mr Milanovic said there were three main reasons for the increase in global inequality. Firstly there has been a growing gulf between sluggish rural incomes in Africa and several populous Asian countries such as India and Bangladesh compared with the rich west.

Secondly the shock treatment administered to the former Soviet Union and its satellites in eastern Europe emptied out the global "middle class". Before the fall of the Berlin wall, most citizens in socialist countries had incomes between those in the rich west and the impoverished south.

Finally, China's embrace of the market economy has opened up a divide between more affluent urban dwellers and poor farmers in the world's most populous country.

Mr Milanovic's research compares inequality in 1988 with the position five years later. However, he has since used 1998 data to check his findings and said that the level of inequality globally has remained the same.

The study used a measure of inequality known as the Gini coefficient which uses a scale from zero to 100 where zero is a completely equal country and 100 is a country where one person has all the money.

Mr Milanovic said that the world's Gini coefficient was 66 - double that in Britain - and equivalent to 66% of people having zero income and the remaining 34% dividing the entire world among themselves equally.

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