The hump counter attack! Jose Manuel Roche sets me straight on the global transition (or lack of it)

March 20, 2019

     By Duncan Green     

José Manuel Roche

Quite a few people disagreed with aspects of my recent post shifts in the global distribution of income. José Manuel Roche, Head of Research for Save the Children UK, felt moved to respond.

I enjoyed Duncan’s recent blog about the shift from a two hump to a one hump world. Who wouldn’t? So I’d like throw in my two pennies’ worth – and bring some more controversy to the mix.

A debate started recently on twitter when some people questioned the income mountain graph from Gapminder. I like the graph in many ways but also sympathise with some of the critics. In my view the problem is that by stacking different regions one on top of each other the graph hides inequalities between countries. Also, regions are heterogeneous. Who would put the USA in the same group as Bolivia, Haiti or Guatemala?

I went back to the amazing Gapminder tool, played a bit with the parameters and, voilà, the humps are back!

This new graph compares countries according to the World Bank’s country and lending groupings. At one extreme we have high-income countries and at the other, low-income countries. A comparison of 1975 and 2018 shows the incredible global shift in the last four decades, with middle-income countries like China, India and Indonesia making great advances.

Graph of income levels in 2018

Thinking about the implications of this shift, here are three quick ‘take-aways’:

First, the gaps are bigger than they look. Let’s not fool ourselves, there are still huge inequalities between countries. The graph rightly expressed income in purchasing power parity ($PPP) to compare consumption, and the scale is expressed in log income to show marginal gains (see diminishing returns) and because you won’t see anything in a linear scale graph (see full Gapminder  documentation). That’s all a bit techie, but what it really means is that income gaps are bigger than they look. Just consider that the median income in rich countries is PPP $35 a day but rich people in those countries enjoy more than PPP $100 a day. Whereas in poor countries the median is PPP $2 per person per day, while the rich are only scratching PPP $10 a day. So we’re still talking about huge gaps. And this is income and consumption data, not wealth. Inequality matters indeed.

Poor and rich countries are still two completely different worlds. The two extreme distributions (poor and rich humps) hardly overlap meaning rich people in poor countries are only at the level of the bottom tail in rich countries – if it sounds too abstract, look at these photos comparing  living standard for families in Malawi and the UK. (By the way, Gapminder has a whole photo centre to bring stats to life). The implications are clear for global development finance and who needs to contribute more. Surely, emerging middle-income countries can also do their share. Wait. China contributing to development in Africa? Unthinkable!

Incomes in 1975

Second, inequalities between countries persist. I agree with Duncan, there are plenty of reasons to go beyond nation states and look at group inequalities. I’ve been working on this now for a while with colleagues in OPHI and at Save the Children (see our recent paper Still Left Behind and our Child Inequality tracker). But looking beyond national averages does not mean the nation state completely loses relevance. A comparison of 1975 and 2018 shows poor countries have hardly moved. And don’t be fooled, they’re not only fragile states or sub-Saharan African countries. As well as unstable Afghanistan and Central Africa Republic, it includes stable poor countries like Cambodia, Tanzania, Malawi and Nepal. We don’t need to go back to traditional “north/south” or “developed/developing” narratives. Yes, poverty and marginalization is partly caused by dynamics that occur within country borders, but it’s also the result of current and past relations between nation states (go back to 1800s in Gapminder and see how rich countries evolve into a second hump over time). Achieving social justice is surely about addressing both of these?

Multiple humps

Third, multiple worlds need multiple strategies. The world today is more like a camel with multiple humps around a global average. So strategies need to be different in different settings and for different organisations. What if any is the role of international NGOs in middle-income countries? “Localisation” would clearly be different depending on context. Child rights organisations like Save the Children need a different strategy in fragile states where there isn’t a clear duty-bearer to hold to account. There may be a rationale for direct service delivery in some settings, but not in others. Clearly system building is different depending on the context too. Issues of redistribution and how to fund public services are ever more important in emerging economies.  Then there’s the question of how to deal with global challenges and the various roles of countries in different humps of the camel. And the whole global inequality problem also.

To close, let me give credit to the original income mountain graph. It shows we’ve certainly moved away from a bimodal distribution around two opposite clusters, as Branko pointed out. We live in a less polarised world. (Incidentally, there’s a group of economists who study polarised distributions like this.) I particularly like Duncan’s point that this polarisation fed into the “us and them”, “third world/first world” narrative. So yes, the world is not bimodal anymore. It’s not two humps. But the world is still very unequal. And we face greater complexity that affects not only INGOs’ operations, but every global institutions.

So these are my three takeaways in addition to Duncan’s initial thoughts. Who’d like to take it on from here?

March 20, 2019
Duncan Green