Go to the Globe and Mail homepage

Jump to main navigationJump to main content

A coal-burning power station can be seen behind migrant workers as they walk carrying their shovels on the construction site of a water canal, being built in a dried-up river bed located on the outskirts of Beijing October 22, 2010. The top U.S. climate change negotiator Todd Stern was in Beijing this week for talks about rifts between the world's top two economies. China is the world's biggest total emitter of greenhouse gases from human activity, having surged past the United States, the world's second biggest emitter and long the world's largest. China rejects an absolute cap on the country's greenhouse gas emissions as unfair because it has contributed less to the problem historically, claiming its emissions per capita are still relatively low and it needs leeway to grow its economy. (DAVID GRAY/David Gray/Reuters)
A coal-burning power station can be seen behind migrant workers as they walk carrying their shovels on the construction site of a water canal, being built in a dried-up river bed located on the outskirts of Beijing October 22, 2010. The top U.S. climate change negotiator Todd Stern was in Beijing this week for talks about rifts between the world's top two economies. China is the world's biggest total emitter of greenhouse gases from human activity, having surged past the United States, the world's second biggest emitter and long the world's largest. China rejects an absolute cap on the country's greenhouse gas emissions as unfair because it has contributed less to the problem historically, claiming its emissions per capita are still relatively low and it needs leeway to grow its economy. (DAVID GRAY/David Gray/Reuters)

Doug Saunders

International inequality is alive and well Add to ...

It was hard to avoid the feeling, watching as Chinese President Hu Jintao stood beside his American counterpart at the White House on Wednesday and used the occasion to engage in the subtlest form of rhetorical sparring, that the leaders of the world's two largest national economies are becoming equals.

More related to this story

Not only are the two countries becoming more similar in their international ambitions, it appears, but their citizens are drawing closer as Americans and many other Westerners watch their incomes stagnate while their Chinese neighbours burst forth into full-fledged consumerdom.

A number of observers are beginning to call this a "great convergence," a reversal of the "great divergence" that carried China and the West from positions of near-equal prosperity 250 years ago to extremes of wealth and poverty in the late 20th century.

Indeed, since 1950, the Chinese have seen their average incomes grow more than 10 times faster than those of U.S. citizens. In 1980, the purchasing power of the average Chinese citizen's income was the equivalent of $525 per year; it now stands somewhere between $5,000 and $6,000. Over the same period, productivity per Chinese worker rose from 3 per cent of U.S. levels to 19 per cent. And the convergence seems to be speeding up: During the past five years, as the U.S. economy has grown only 5 per cent, China's has grown by 70 per cent.

The consequences of such a shift to pan-Pacific equality would be vast. No longer would our economy be based on dirt-cheap goods from China, our debt provided by a huge Asian country struggling to dispose of enormous currency surpluses. Life would be more expensive, but also vastly better for the world's majority. And conflicts between equals are less likely.

But before we get too excited by this looming prospect, let's look hard at the realities behind this supposed convergence. Comparisons between countries are not as simple as we might think.

Luckily, we have a wonderful new book, The Haves and the Have-Nots, by economist Branko Milanovic, who has made international inequality his life's work. He shows, with devastating logic, just how far we still have to go.

When the world returned to its normal state of globalization after the angry decades of the 20th century, the result was enormous growth almost everywhere. China, starting in the 1980s, made its people wealthy enough to render starvation-level poverty non-existent.

But surprising economic circumstances have caused wealthy countries to grow at an even greater rate, Mr. Milanovic notes. The advantage has stayed with the well-off.

"If the U.S. GDP per capita grows by 1 per cent, India's will need to grow by 17 per cent, an almost impossible rate, and China's by 8.6 per cent, just to keep absolute income differences from rising," he observes. "As the saying goes, you have to run very, very fast just to stay in the same place. It is therefore not surprising that despite China's (and India's) remarkable success, the absolute income differences between the rich and poor countries have widened."

And they have: Even as the Chinese worker has gone from $525 per year to $5,000 in two decades, the average American worker has gone from $25,000 to $43,200 - meaning that the income gap has widened from about $25,000 to $38,000, and, he notes, "of course so has the absolute gap in welfare between the average American and the average Chinese."

The economic crisis, which continues in the United States but occupied only a few months of 2008 in China, might help, but it will still take a very long time before the most prosperous Chinese worker can touch the purchasing power of the worst-off American.

You may think of the United States as a place of extremes of wealth and poverty, and it is. Nevertheless, at the moment, the very poorest people in America, the 5 per cent with the lowest incomes, have better lives and more purchasing power than the top 5 per cent of income earners in India and the top 10 per cent in China.

The consequences are important: First, the forces of national inequality that drive large numbers of people to emigrate will certainly be with us for decades longer.

Second, the old theories of social class should be replaced: Today, 80 per cent of income difference is caused by geographical location, and only 20 per cent by income category; those geographic barriers may be harder to overcome than the old class barriers of the 19th century were. "We still have a long way to go," Mr. Hu said on Thursday. It may be longer than he thinks.

Follow on Twitter: @dougsaunders

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories