The View | Competing ideas
Efficiency and equity do not have to be conflicting objectives, but they can only be made compatible by harnessing the forces of competition
Since 1980, the world has experienced the highest rate of growth in real GDP per capita in human history. This has coincided with the global economy becoming more open, free and integrated, and with poverty rates declining significantly. World income inequality has fallen from 0.665 in 1980, as measured by the Gini-coefficient, to 0.61 in 2006.
Yet in every country the popular media is full of reports that globalisation has worsened income inequality and further impoverished the poor. Why?
Many in the middle-income class in rich developed countries, who are actually among the world’s high-income class, have experienced no improvement in their standard of living.
This is a political problem for national governments and it has attracted daily media attention, but it has led to the mistaken belief that the world today is more unequal and impoverished because of globalisation.
Globalisation has made enormous economic achievements in alleviating world poverty and promoting growth, but this has been hugely under-appreciated.
For as long as I can remember, talk of a trade-off between economic efficiency and social equity has framed political debate in most countries. The right favours more efficiency and faster economic growth and the left wants greater equity at the expense of economic progress – even though, since 1980, there does not appear to have been any trade-off between the two.