Worldwide, the difference in per capita income between countries has fallen on average in 30 years. But not all poor countries have caught up. Why?
The World Trade Organization (WTO) acknowledges that not all countries and not all members of society benefit from trade and economic development. Nevertheless, world trade has contributed to poverty reduction in many countries, according to the 2024 World Trade Report.
Inequality was as high in 2020 as it was in 1910
In absolute terms, however, global income inequality is practically as high as it was a good 100 years ago, writes the WTO, referring to the 2022 Global Inequality Report. In 1910, the income of the richest 10 percent of the world’s population was 41 times higher than that of the bottom 50 percent. In 2020, it was 38 times higher.
World trade offers opportunities, but these must be accompanied by social measures and international cooperation, according to the WTO. What is needed are training and further education opportunities, unemployment benefits, a competition policy to reduce prices, a reliable infrastructure and well-functioning financial markets.
Financial crisis and corona pandemic as a turning point
The discrepancy in per capita income between countries has shrunk over 30 years – in parallel with the greater integration of poorer countries into world trade, according to the WTO. On average, the per capita income of low- and middle-income countries tripled between 1995 and 2023, adjusted for inflation, while the global average only rose by 65 percent. The development has slowed since the financial crisis of 2007/2008, and the corona pandemic has reversed it again.
Between 1996 and 2021, a good 40 countries in Africa, Latin America and the Middle East with low and middle per capita incomes hardly participated in the positive development: especially those that engaged in little international trade, attracted little foreign investment and exported raw materials rather than processed products.
In total, the World Bank categorizes around 130 countries as low and middle income, including China. Germany is in the group of high income countries.
Source: Stern
