Inequalities in the global economy are shrinking due to spectacular growth in Asia, which is drawing a new equilibrium
The world equilibrium has changed since the emergence of Asia and China. This is shown by this graph which traces the GinI index on a world scale from 1820 to 2013. Since 1820 this index had increased continuously except during the crisis of the 1930s.
This pace reflected first the rapid growth of Europe with the industrial revolution, then the grip of the United States on world growth. Western pre-eminence crushed the world.
The emergence of Asia and the Chinese very strong growth profoundly change this equilibrium. Gini’s index is falling for the first time.
The Asian dynamic is currently more robust than that of the West and this characteristic is here to stay. This means that the economic and political equilibrium of the world will continue to change radically.
The challenge for the USA and Europe is how to be part of this new equilibrium in coming years
For now, the American response is that of a unilateral strategy in which what is not American is not reliable. The European response is under construction with the new European Commission In a recent interview (in French) with. Les Echos, Ursula Van der Leyen advocates more balanced relations between Europe on the one hand and the United States and China on the other. Will these American and European responses be sufficient to thwart the wishes expressed by Xi Jinping to make China the undisputed world leader?
The world is changing dramatically. This will result in the establishment of new institutions to support this new equilibrium. The evolution of the Gini coefficient is only a powerful signal on this break.
Branko Milanovic original tweet that shows this graph ”This is global inequality (btw all citizens of the world) with the updated Bourguignon-Morrisson numbers (up to 1990). Afterwards it is Lakner-Milanovic and myself. [Unpublished] ”