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The Winners and Losers of Globalization: Finding a Path to Shared Prosperity

02/04/2015 16:22

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The Winners and Losers of Globalization:
Finding a Path to Shared Prosperity
October 25, 2013

Left to right: Kaushik Basu, Branko Milanovic, Asli Demirguc-Kunt, Augusto Lopez-Claros


The global middle class was created by, and benefited from, globalization
Boosting shared prosperity requires addressing global inequality
Incomes are mainly determined by citizenship

Globalization has benefited an emerging “global middle class,” mainly people in places such as China, India,
Indonesia, and Brazil, along with the world’s top 1 percent. But people at the very bottom of the income ladder, as
well as the lower-middle class of rich countries, lost out.
The findings, presented by economist Branko Milanovic to a packed audience of more than 120 people at a Policy

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Their incomes. as well as many people in Latin America and former Communist countries in Eastern the divisions between countries are more pronounced than those between different income classes within countries. including the lower-middle class of rich countries. Inequality between nations also grew.worldbank. He made the cross-country comparisons using a newly-created database of World Bank. In fact. In fact. Those people represent a global upper-middle class. By contrast. however. about 400 million people. More than half of the variability in people’s incomes across the globe is simply due to one factor: the place where one lives.The Winners and Losers of Globalization: Finding a Path to Shared Prosperity 02/04/2015 16:22 Research Talk at the World Bank earlier this month. In absolute terms. incomes were almost stagnant among the world’s poorest 5 percent. depending on where you live raises a question: How can we reduce global inequality? Milanovic pointed out three paths. Either poor countries will become richer.print Page 2 of 3 . It also largely depends on China and India maintaining their high growth rates. compared with some $400 for those around the median. The reality that opportunities are highly unequal. but it’s not easily achievable. Milanovic said. the decline of global inequality so far is largely due to the high http://www. were still a paltry $3 to $5 per capita per day. but across countries as well. “Those goals are very ambitious. “Boosting shared prosperity also requires us to tackle inequality. Not surprisingly. The inflation-adjusted real income for the group around the global median rose 80 percent between 1988 and 2008.” The new global middle class. high growth rates among poor and middleincome countries. earned more and consumed more in the 20-year span before the global financial crisis hit in 2008. Research Department. who hosted the event. despite the recent drop in global inequality between individuals. who saw zero growth in their real income. said Milanovic. Their real income went up by more than 60 percent during the 20-year period. propelled by economic growth in countries such as India and China. the top 1 percent of the world’s earners were big winners. as globalization has made it easier for goods and people to move around the world.” says World Bank Research Director Asli Demirguc-Kunt.managed household surveys that covers some 120 countries from 1988 to 2008. or poor people will move to rich countries Branko Milanovic Lead Economist. they saw their incomes increase by nearly $23. That would be the best path. a lead economist in the Bank’s research department who has been studying inequality since the 1980s.000 per capita per year. come just as the institution mobilizes around two goals: ending extreme poverty by 2030 and boosting the income growth of every country’s bottom 40 percent. World Bank Least satisfactory was the outcome for the people in the 75th to 90th percentile of the global income distribution. since the pace of growth is uncertain. not just within countries. First. despite the fact that real income did increase for the bottom and the second-lowest deciles.

The Winners and Losers of Globalization: Finding a Path to Shared Prosperity 02/04/2015 16:22 growth rates of China and India – what Milanovic called “two big sumo wrestlers” tilting the scales in the fight to reduce global poverty and inequality. he said. as development assistance is just a little more than $120 billion a year. or poor people will move to rich countries. The third path would be to promote migration. or ensuring that girls have greater access to education. Policy makers. Augusto Lopez-Claros.print Page 3 of 3 . From a global point of view – though not necessarily from a nation-state political point of view – what matters is that people should prosper. “Either poor countries will become richer. for example. a complex subject. director of the World Bank Group’s Global Indicators and Analysis Group. wherever they end up. making sure that energy subsidies. can benefit from the research by. not countries. All Rights Reserved. That means development should be seen through the prism of people. http://www.and higher-income groups. That isn’t likely to happen. and isn’t showing any signs of increasing. © 2015 The World Bank Group. A second path would be a global redistribution scheme pushing ever larger amounts of money to poor countries. which are highly regressive and benefit largely the middle. The resources can then be used in more productive ways.” Milanovic said at the event that Milanovic made income distribution. such as educating 800 million people with low levels of literacy skills.worldbank. easy to understand. are phased out. which can be an expeditious way for people to improve their fortunes.