Trade and Inequality
How international trade has lifted billions out of poverty while widening the gap between winners and losers within countries.
The Elephant in the Room
Economist Branko Milanovic's famous 'elephant chart' captures the distributional impact of globalization between 1988 and 2008. The chart shows real income growth across the global income distribution. The biggest winners were two groups: the rising middle classes of China, India, and other emerging economies (who saw income gains of 60-80%) and the global top 1% (who captured a disproportionate share of gains). The biggest losers were the lower-middle classes of developed countries -- workers in the American Midwest, Britain's industrial north, and France's periphery -- who saw near-zero income growth.
Between-country inequality has fallen dramatically since 1990. China's entry into global trade lifted over 800 million people out of extreme poverty, the most rapid reduction in poverty in human history. But within-country inequality has risen in most nations. The global trading system has been spectacularly effective at increasing total wealth while being remarkably bad at distributing the gains.
