91av

THE chasm between the rich and poor is becoming ever more difficult to cross,
according to a bleak new assessment of global income trends. While the rich get
richer and the poor get poorer, the middle classes are disappearing like never
before, says Branko Milanovic of the World Bank. With an increasingly slender
link between the two extremes, society is bound to become more unstable.

Milanovic鈥檚 study is the first to investigate the worldwide distribution of
household incomes. Unlike previous studies that have compared the average
incomes of whole nations, the new study reveals the huge disparities that can
exist within each country.

Worldwide, the income of the bottom 75 per cent of people was significantly
less in real terms in 1993 than in 1988, Milanovic found. The poorest 5 per cent
lost almost a quarter of their income. Incomes for the richest 5 per cent grew
by 12 per cent, giving them over 100 times the earnings of the poorest 5 per
cent (see Graphic).
Incomplete data gathered for the years since 1993 suggests
that the gap is still widening, Milanovic told 91av.

Meanwhile, many people who once belonged to middle-income groups are either
climbing aboard the gravy train or missing out altogether. This erosion of the
middle class began in Britain and the US in the 1980s under Ronald Reagan and
Margaret Thatcher, but has since become a worldwide phenomenon in which
three-quarters of the world鈥檚 population have lost out.

The death of the middle class is dragging down whole nations. 鈥淲e see income
declines in countries whose populace was part of the world middle class of the
1960s and 1970s,鈥� says Milanovic. 鈥淩eal incomes in Latin America are now the
same as in the 1980s, and in former communist countries they are about a fifth
濒别蝉蝉.鈥�

The implications of the findings are profound. Globalisation of trade and the
鈥渢rickle-down鈥� effect鈥攚hich supposedly channels money spent by the rich
into the pockets of the poor鈥攁ren鈥檛 working. 鈥淥ver the longer term,
trickle-down might work,鈥� says Milanovic. 鈥淏ut if it takes 20 years, that is
just too long. It鈥檚 the poor that have to do the waiting.鈥�

The widening gap could lead to more mass migration and even terrorism, says
Milanovic. 鈥淗ow long can such huge inequalities persist, where opulent
lifestyles of the rich influence expectations and breed resentment?鈥�

But Carol Graham of the Center on Social and Economic Dynamics at the
Brookings Institution in Washington DC is more cautious about concluding that
trickle-down is failing. She says the collapse of the former Soviet economies
and rising incomes in urban China probably explain most of the rising disparity.
鈥淭his is a very short time to capture the effects of globalisation, which has
been going on for decades. We have to be very careful about making sweeping
补蝉蝉耻尘辫迟颈辞苍蝉.鈥�