Interesting Factoids from IMF ‘Globalization and Inequality’

A great deal of attention was paid to the IMF’s most recent survey of globalization and inequality, specifically to the growing disparity it revealed between the world’s richest and poorest. However, there are two important findings within the study that, in our opinion, deserve more attention than they received.

First is that "per capita incomes have risen for all income groups in all regions" (see chart 4). While the perceptions and realities of the ’income gap’ are important, judging by primate studies and human history, it is still important to acknowledge that all income groups are at least nominally better off in material terms during the period studied. Policy measures aimed at narrowing the gap could have the unintended effect of undermining the overall rate of income growth.

Second, and of the utmost importance, is that the biggest contributor to inequality (see chart 7) is not global trade and financial integration, but technological progress! What does this imply? To us, it signifies that investment is the key driver of rising incomes, and that lagging income growth is therefore a symptom of lagging investment. Where does investment tend to lag? In regions and countries where factors such as property rights, tax burdens, human capital, et cetera are poor and uncertain.  

Thus, contrary to popular interpretations, the growing gap between richest and poorest may not be caused by greed among the well heeled, but by poor governance in the neediest regions of the world.