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The great convergence: global income inequality reverses course

The great convergence: global income inequality reverses course

Money Moves

After Two Centuries of Widening, the Gap Between Rich and Poor Countries Is Shrinking

November 19th, 2024: Data Confirms Continued Global Inequality Decline

Overview

For two centuries starting in 1820, global inequality widened until the 1980s, then began falling — the first reversal since the Industrial Revolution. The global Gini coefficient dropped from 70 points in 1990 to 62 by 2019, driven almost entirely by rapid income growth in China, India, and other populous developing nations.

In 1980, the richest 10% of the global population earned 53 times what the poorest 50% earned; by 2020, that ratio had fallen to 38. More than 800 million people in China alone escaped extreme poverty. The decline paused during COVID-19, when global inequality increased more in 2020 than in any prior year, but the underlying forces driving convergence remain active.

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Key Indicators

70 → 62
Global Gini coefficient (1990-2019)
The standard measure of inequality fell 8 points over three decades.
800M+
People lifted from extreme poverty in China
China accounted for over 70% of global poverty reduction since 1980.
53 → 38
Top 10%/Bottom 50% income ratio
The gap between richest and poorest halved between 1980 and 2020.
~2027
Projected turning point
Some researchers predict inequality will begin rising again as China converges and Africa's population grows.

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Timeline Five events from this story — drag them oldest to newest. Log in to play
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People Involved

Branko Milanovic
Branko Milanovic
Presidential Professor at CUNY Graduate Center
 Thomas Piketty
Thomas Piketty
Professor at Paris School of Economics

Organizations Involved

WB
World Bank Group
Multilateral development bank
Primary data source for global poverty and inequality metrics

Maintains the Poverty and Inequality Platform providing poverty estimates for 170+ economies.
World Inequality Lab
World Inequality Lab
Research Institution
Maintains World Inequality Database

Produces the most comprehensive database on historical income and wealth inequality across countries.

Timeline

January 1820 November 2024

13 events Latest: November 19th, 2024 · 2 years ago Showing 8 of 13
Tap a bar to jump to that date

  1. Data Confirms Continued Global Inequality Decline

    Latest Data

    Updated figures show global income inequality continues multi-decade decline, driven by growth in non-Western economies.

  2. World Inequality Report 2022 Released

    Research

    Piketty, Chancel, Saez, and Zucman document that global inequality remains at early 20th-century levels despite recent decline.

  3. COVID-19 Reverses Progress

    Crisis

    Pandemic causes largest single-year increase in global inequality since 1990. 97 million more people fall into extreme poverty.

  4. Global Gini Falls to 62

    Data

    Three decades of decline bring global inequality to lowest level since early 20th century.

  5. Elephant Curve Published

    Research

    Lakner and Milanovic publish iconic chart showing globalization's winners and losers from 1988-2008.

  6. Within-Country Inequality Divergence Accelerates

    Research

    While between-country inequality falls, inequality within countries rises in both developed and developing economies.

  7. Global Poverty Rate: 36%

    Data

    World Bank begins systematic tracking. 1.9 billion people live in extreme poverty.

  8. Great Convergence Begins

    Milestone

    Developing countries begin sustained growth exceeding advanced economies. Between-country inequality starts falling.

  9. Global Inequality Reaches All-Time High

    Milestone

    Top 10%/Bottom 50% ratio hits 53—the highest ever recorded. Global Gini approximately 0.70.

  10. China Begins Market Reforms

    Policy

    Deng Xiaoping initiates economic reforms that will lift 800+ million people from poverty over four decades.

  11. Simon Kuznets Proposes Inverted-U Curve

    Research

    Economist Simon Kuznets hypothesizes that inequality rises then falls as economies develop.

  12. Between-Country Inequality Peaks (First Wave)

    Historical

    Western imperialism reaches peak. Top 10% earn 41 times what bottom 50% earn, up from 18 in 1820.

  13. Global Inequality Begins Rising

    Historical

    Industrial Revolution concentrates economic growth in Western Europe and North America. Global Gini around 0.50.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

1820-1980

The Great Divergence (1820-1980)

The Industrial Revolution concentrated economic growth in Western Europe and North America. Britain, then the US, pulled away from the rest of the world. By 1980, Western countries controlled two-thirds of global income despite comprising a fraction of world population. The global Gini rose from 0.50 to 0.70.

Then

Living standards in industrialized countries rose dramatically while most of Asia and Africa remained subsistence economies.

Now

Created the 'developed' vs 'developing' world division that persisted until the 1990s. Established the baseline from which current convergence is measured.

Why this matters now

The current decline in global inequality is a reversal of this 160-year trend—the first sustained movement toward equality since industrialization began.

1960-1997

Asian Tigers Rapid Development (1960s-1990s)

South Korea, Taiwan, Hong Kong, and Singapore achieved 7.5% annual growth for three decades through export-oriented industrialization, investment in education, and strategic government intervention. South Korea went from GDP per capita similar to Ghana's in 1960 to matching European levels by 1997.

Then

Four small economies achieved developed-country status within a generation. Land reforms in South Korea and Taiwan reduced inequality during growth.

Now

Provided the template that China and other Asian economies would follow. Demonstrated that rapid convergence was possible outside the West.

Why this matters now

Showed that developing countries could grow faster than rich countries and narrow the global gap—a pattern China and India later replicated at massive scale.

1978-2020

China's Reform and Opening (1978-2020)

Deng Xiaoping's market reforms transformed China from a closed agrarian economy to the world's manufacturing hub. GDP per capita rose 7-fold. Over 800 million people escaped extreme poverty—accounting for 70% of global poverty reduction.

Then

Created the world's largest middle class. Chinese workers moved from farms to factories, driving the 'elephant trunk' in Milanovic's famous chart.

Now

Single-handedly bent the global inequality curve downward. By 2024, China is too wealthy to continue pulling global inequality down—its convergence effect is nearly exhausted.

Why this matters now

China's rise is the primary cause of declining global inequality since 1980. As China's growth slows and its population ages, the question is whether India and Africa can continue the convergence.

Sources

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+4
Our World in Data World Inequality Lab Human Progress World Bank Blogs Brookings Institution NBER/PMC World Inequality Database World Bank Wikipedia World Inequality Lab