Between 1980 and 2016, the top 1 per cent captured 28 per cent of the aggregate increase in real incomes in the US, Canada and western Europe, while the bottom 50 per cent captured just 9 per cent of it. But these aggregates conceal huge differences: in western Europe, the top 1 per cent captured “only” as much as the bottom 51 per cent. In North America, however, the top 1 per cent captured as much as the bottom 88 per cent. These extraordinary facts prove that aggregate growth itself tells us very little — indeed, in the case of the US, virtually nothing — about the scale of improvements in economic welfare for the population as a whole.
These striking data come from the World Inequality Lab’s recently released World Inequality Report 2018. The broad picture is one of convergence among countries and divergence within them. But the latter has not happened to the same extent everywhere. Thus, “since 1980, income inequality has increased rapidly in North America and Asia, grown moderately in Europe, and stabilised at an extremely high level in the Middle East, sub-Saharan Africa, and Brazil.” The report also shows that, after the second world war, shares of the top 1 per cent were relatively low, at least by prewar standards, across the west. But, since then, these shares have jumped in the anglophone countries, especially in the US, but little in France, Germany or Italy.
Walter Scheidel, a historian of the ancient world and author of the The Great Leveler, would say that rising inequality is just what one should expect. In this remarkable study, he argues that after agriculture (and the agrarian state) was invented, elites were amazingly successful in extracting all the surplus the economy created.