The most unequal countries in the world
Extremely wide disparities of income and wealth exist between countries, as we all know. For instance, the per capita income of Switzerland is almost two hundred times that of Afghanistan.
And Afghanistan’s per capita income is twice that of Burundi, one of the poorest nations in the world.
But, inequalities within countries have been growing very rapidly in the last few decades, as the World Inequality Report 2022 has shown.
So, which countries are the most unequal in the world?
Below are some methods used to estimate inequality within countries.
For decades, the most commonly used metric to estimate inequality has been the Gini index. The Italian sociologist Corrado Gini, who also flirted with fascism for a bit in the Benito Mussolini era, developed the index.
The index takes values between 0 and 1. If everyone in a country earned the same income, its Gini coefficient would be 0. If all the income accruing in a country was earned by 1 person, the Gini coefficient would take the value 1.
Seven of the ten most unequal countries in the world are in Africa, an outcome of centuries of slavery and colonial oppression. South Africa, which is among the richest African nations, is also the most unequal country in the world.
As Daron Acemoglu and James Robinson have explained in their seminal book ‘Why Nations Fail’, South Africa’s inequality is very much by design – an outcome of the discriminatory laws and rules created by the state as part of the Apartheid regime. (Why Nations Fail, by the way, is a must-read for anyone even remotely interested in understanding the state of the world.)
The Gini index, however, has its limitations. Its reliance on relative income distributions can lead to situations where it understates inequality.
It is also known to be oversensitive to changes in the middle of the income distribution and not sensitive enough to the extremes. So, it doesn’t capture very well the changes in the top 10 percent or the top 1 percent, which is where most of the action has taken place in the last few decades.
In 2013, Alex Cobham and Andy Sumner suggested an alternative to the Gini index, the Palma ratio. It is arrived at by dividing the income share of the top 10 percent by that of the bottom 40 percent.
They named it after Chilean economist José Gabriel Palma who found that incomes of those in the middle of the income distribution—or the middle class—remain quite consistent even when the overall levels of a country’s income change.
According to the Palma metric, South Africa remains the most unequal country in the world. This once again goes to show just how extractive the Apartheid regime was and how its consequences continue to be felt.
We also see developed and rich nations like the USA and the UK show up in this list. And we also find that two nations part of the European Union—Bulgaria and Lithuania—are among the ten most unequal nations in the world.
Income share of the top 1 percent
Another way to estimate inequality is to look at what percentage of the total income in a country is being earned by just the top 1 percent of the population sitting comfortably near the top of the income distribution.
This is becoming more and more relevant as the incomes of the top one percent grow more rapidly than those in the middle or those at the bottom.
The 3 most unequal countries in the world, according to this metric, are also among the poorest in terms of per capita income.
Mozambique, the Central African Republic and Malawi all have annual per capita incomes around $500 a year, or about $42 a month.
Most of the population in these countries would be living on substantially less because a large proportion of the total income is going to just the top 1 percent.
India also features among the most unequal countries in the world. (Pardon me if I have a few extra comments to make about India.)
In the last few years, there has been considerable concern about how the gains of India’s growth accrue only to a handful of people.
The list of people benefitting from any remnants of economic growth in India is growing ever smaller. Two of India’s richest men—Gautam Adani and Mukesh Ambani—own $176 billion in wealth, that's about 15 times the amount the Indian government plans to spend on education in 2022-23.
In fact, Adani—known for his proximity to India’s Prime Minister Narendra Modi — is the fastest-growing billionaire in the world. Since 2014, when Modi was elected Prime Minister, Adani’s wealth has increased by 3,000 percent. The coal tycoon is now the richest man in Asia.
In other but similar news, India and West Indies are playing three pointless one-day internationals in Ahmedabad. The stadium is named after Narendra Modi and the two bowling ends after Adani and Ambani.
This much better person is not impressed.