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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
A Brief and Idiosyncratic History of Global Inequality
Do you think a capitalist society would have different levels of inequality than would a socialist society?
Your answer is probably “yes,” but in the early days of income distribution studies, the answer wasn’t always so obvious.
In the early 1900s, Italian economist Vilfredo Pareto, a pioneer in the field of inequality, was the first scholar to study inequality in terms of income distribution among individuals rather than among classes.
Pareto’s central belief was that social arrangement – whether a society was capitalist, socialist or feudalist, for instance – had almost no effect on income distribution.
He reached this conclusion through the omnipresent 80/20 law, which states that 80 percent of an economy’s effects – such as sales in stores – are a result of 20 percent of the causes – such as the demand of clients.
In turn, this means that the wealthiest 20 percent of the population controls 80 percent of the total income.
In Pareto’s view, changes in social arrangement couldn’t ever effectively challenge this law. As a result, Pareto believed that levels of inequality would always remain more or less unchanged.
Russian-American economist Simon Kuznets challenged this idea in 1955 when he theorized that inequality among individuals does, in fact, change as society changes.
After conducting extensive research, Kuznets found that economic growth initially increases income inequality, but later decreases it.
When society shifted from an agricultural focus to an industrial focus, the new industrial class began to earn much more money than did farmers, and thus income inequality increased.
As society advanced, however, increased education and progressive state policies – such as government spending, taxes and other forms of income redistribution – caused income inequality to stall and eventually decrease.
Such policies shifted the balance of income toward the bottom and showed that, in contrast to Pareto’s ideas, Kuznets was correct in believing that social arrangement does have an impact on income inequality.
The Haves and the Have-Nots (2010) shows how inequality throughout history has made its mark on society at large. These blinks explore three types of inequality: inequality among individuals in a single country; inequality among countries; and global inequality, or inequality among all the world’s citizens.
There are no countries where all people are paid equally, nor are there countries where only one person appropriates the entire income.
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Try Blinkist to get the key ideas from 7,000+ bestselling nonfiction titles and podcasts. Listen or read in just 15 minutes.
Start your free trialBlink 3 of 8 - The 5 AM Club
by Robin Sharma