In 2013, Christoph Lakner and Branko Milanovic published a graph—quickly dubbed the “Elephant Chart”—that depicts changes in income distribution across the world between 1988 and 2008. The chart has been used to support numerous reports of rising inequality fueled by increased globalization.
The x-axis of the graph shows the percentiles of the global income distribution, while the y-axis shows the cumulative growth rate percentage of income. The graph shows that the global middle class has grown rapidly in recent decades, while the incomes of the upper middle class in developed countries have stagnated but the incomes of the global elite have soared.
China is the main driver of the hump in the Elephant Graph, as its rapid economic growth has lifted hundreds of millions of people out of poverty and into the middle class. The US is a major contributor to the valley and the trunk. Its upper middle class has seen its incomes stagnate in recent decades, while its global elite has enjoyed soaring incomes.
Currently, the US and China are both facing significant challenges with reference to income inequality.
United States
- Stagnating incomes for the middle class.
- Rising incomes for the top 1%.
- Racial and gender disparities.
- Lack of access to affordable housing, education and healthcare.
China
- Increasing income inequities.
- Regional disparities – the coastal provinces are much richer than the inland provinces.
- Rural-urban disparities..
- Implementation of common prosperity policies.
The US prides itself as being a capitalist country. China calls itself a socialist country with Chinese (Confucius) characteristics. Both countries have prospered under globalization and both are experiencing increased income inequities.
The $ 64,000 question is what will the Elephant Chart look like in the future?