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Thursday, 17 January, 2002, 23:16 GMT
World inequality rises
by BBC News Online's Steve Schifferes

The world is becoming a more unequal place, with a growing gap between rich and poor households, a study has said.

The news will raise concerns about the effects of globalisation on the world's poor.

Poverty is greatest in India
Most of the poor are in India and rural China

According to the economist Branko Milanovic, global inequality has risen fast - increasing by around 5% between 1988 and 1993, the same rate that inequality widened in Britain during the Thatcher years.

The gap is so big that the richest 1% of people (50 million households), who have an average income of $24,000 (16,000), earn more than the 60% of households (2.7 billion people) at the bottom of the income distribution.

Gains go to the rich

The study is the first to compare household income across countries, using a series of surveys that cover 84% of the world's population and 93% of world income.

Rich consumers have 114 times the income of the poorest
Rich consumers have 114 times the income of the poorest

Previous research has only been able to compare the average income of one country against another.

But this study showed that the gap between rich and poor is much greater than previously understood.

Nevertheless, the biggest source of inequality is the difference between the income of people in the five major economies (USA, Japan, Germany, France and Britain) and the poor in rural India, China and Africa.

The study points to the growing gap between urban and rural areas in China as another major source of inequality.

In the five years of the study, world per capita real income increased by 5.7%.

Inequality worsened most in Eastern Europe
Inequality worsened most in Eastern Europe

But all the gains went to the top 20% of the income distribution, whose income was up 12%, while the income of the bottom 5% actually declined by 25%.

Two regions in which the poor got much poorer were Eastern Europe and the former Soviet Union - where the income distribution worsened dramatically after the collapse of the communist regime - and sub-Saharan Africa, where wars, famine and disease led to falls in economic output.

Causes and consequences

The study raises the concern about the lack of a "middle class" at the world level, with most people concentrated at the bottom or at the top of the income scale.

The huge gap between rich and poor - with 84% of the world receiving only 16% of its income - has become more worrying since the world has faced the threat of organised terror from groups based in some of the world's poorest countries.

And the spread of global communications may make the income gap - with the richest 10% receiving 114 times the income of the poorest 10% - more difficult to maintain.

However, with the world's richest countries on the verge of recession, there appears little hope that an ambitious development agenda will emerge from the most recent round of negotiations.

Talks have stalled over increases to the World Bank's development lending, while the proposals by UK Chancellor Gordon Brown for the doubling of aid to the poor do not seem to have found favour in Washington.

Poor countries also made only limited gains in recent trade talks in Doha in the Gulf Arab state of Qatar.

As aid flows and the movement of private capital to poor countries continues to slow down, other measures to address the income gap could become more urgent in the future.

The research, carried out for the World Bank, is published in the Economic Journal, January 2002.

See also:

15 Jan 02 | Business
Eastern Europe's difficult decade
08 Jun 01 | Business
World sinks into deeper poverty
19 Nov 01 | Business
Terror attacks 'will worsen' poverty
29 Apr 01 | Business
World Bank's plea for poorest
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