The misleading ‘elephant curve’ graph

Click to enlarge.

This widely-circulated graph supposedly shows that the great growth in income of the world’s richest 1 percent is justified because the world’s poorest people also are making great gains under the present system.

The problems of poor and middle-class people in rich countries are supposedly a necessary sacrifice to make this happen.

What makes this chart misleading is that it deals with percentages rather than amounts (dollars, euros, etc.)  So a tiny gain in income for a poor person in, say, Bangladesh or Sudan is a large percentage, even though it is a small amount.

Annotations by the famous French economist Thomas Piketty, in his book, Capital and Ideology, show the true picture.  The poorest 50 percent of the world’s population got only a one-eighth share of the growth in world income over a 38-year period.

The next 49 percent, even though their proportionate gain was less, enjoyed more than sixth-tenths of the amount of the gain.  The world’s richest 1 percent got more than a quarter of the gain.  The richest 0.01 percent got the biggest proportionate gain of all.

The graph does show that the poorest 50 percent of the world’s population made some gains.  A lot of that consists of progress in just one country, China.  A lot of it may consist of people moving from a barter economy to a money economy, and from the “informal” off-the-books economy to the visible economy.

Many of the world’s poorest people may be slightly better off than they were 40 years ago. It’s possible. Even if this is so, there should be a better way to improve their lot than the trickle-down system illustrated by this chart.

LINKS

World Poverty Is NOT Decreasing by Ian Welsh.

No, the World Isn’t Getting Better for Everyone by Ian Welsh.

Worldwide inequality report shows gap between rich and poor by Sam Meredith for CNBC

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