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Why rising income inequality matters

From the US to India to Brazil, inequality isn't just about poverty — it's about a closing window of opportunity.
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A view from the abandoned Remington Arms factory in East Bridgeport, CT on Nov. 26, 2012. (Ed Kashi/VII/GlobalPost)

In cities around the world, the gap between the rich and the poor is widening.

And in each of these cities, that growing inequality comes with a cost.

The greatest cost is the political and economic instability that accompanies vast disparities of wealth, Nobel Prize-winning economist Joseph Stiglitz told GlobalPost, using the United States as an example.

“We are paying a very high economic price for this inequality – our economy is less productive and efficient,” Stiglitz said. “We are also paying a price in terms of our politics and our society — inequality is undermining our democracy and our basic values.”

In this GlobalPost Special Report titled “The Great Divide,” correspondents around the world are examining the global phenomenon of income inequality and why it should matter to all of us.  

To most Americans, this inequality seems an obvious and age-old reality of the developing world, a cliché of the global economy.

In countries like Brazil, it is not news that the searing poverty and violence of the favelas on the hillsides of Rio tumble down to the beachfront palaces of Brazil’s ‘plutocrats,’ as author Chrystia Freeland calls the “global super-rich.”

We carry images of India with the vast and intractable poverty in cities like Mumbai up against the new wealth of a small elite generated through India’s surging business sector of technology and innovation. 

We may accept that places like Thailand have desperately poor swaths of the city where people live in shanties and that they lie a stone’s throw from the shiny, downtown shopping centers where there Gucci and Apple stores thrive with the business of the high society, or “hi so,’ as they are referred to in Bangkok.

But what most Americans don’t realize is that the metric of inequality used to measure the income gap worldwide mirrors the gap in many American cities. To tell that story, GlobalPost correspondents and editors have collected and analyzed data and sought out human narratives that reveal how income inequality globally compares to income inequality in America. 

Starting today, GlobalPost Special Reports sets out on a reporting journey to get at the ‘ground truth’ on global income inequality and to allow American readers to hold a mirror up to their own country, a chance to see how closely our income inequality compares to other parts of the world. 

For example, it might surprise some American readers to know that the gap between rich and poor in Thailand compares to the income gap represented in the Connecticut congressional district that includes the communities of Bridgeport, with its urban poverty and industrial blight, and Greenwich, with its sprawling mansions and horse farms and the vast wealth created by hedge fund managers who live there.

It turns out, Connecticut's Fairfield County is among the most unequal communities in terms of income distribution in America, using the measurement of the Gini Index. To express the data simply, the level of income inequality in these two very different sides of Connecticut -- Bridgeport and Greenwich -- compare to the very different sides of Bangkok's poorest and richest neighborhoods.

The methodology for our economic analysis is based on what is known as the Gini coefficient, or the Gini Index, the most commonly used metric to gauge a society’s income inequality. It takes its name from the early 20th century, Italian statistician Corrado Gini, who first developed the measurement.

And using this Gini Index, America as a whole has a degree of income inequality that is higher than almost any other developed country, according to the most recent data compiled by the Organization for Economic Cooperation and Development. According to the study, only ChileMexico and Turkey rank higher in inequality among the 34 members of the OECD.

The stories in The Great Divide examine not only the vast disparity in wealth, but the extent to which the people believe – or not – that the poorest can rise up out of poverty and make it into the upper echelons of wealth. In the developing world, it seems there is a greater acceptance of income inequality as a fact of life. In America, it seems the belief remains very much alive that the poor, if they work hard enough, can become rich. Americans hold onto this belief in the American dream even as the data suggests that the middle class has crumbled and that the possibility for any American to rise from poverty to wealth is becoming increasingly difficult. Some analysts cite economic data that shows economic mobility is disappearing in American society. 

President Barack Obama, more than any president since Franklin Delano Roosevelt, has dedicated himself to addressing the problem of inequality and its cost to society. Obama has essentially set out to 'redistribute' wealth through a tax policy that will end tax breaks for the wealthiest Americans, define as those earning more than $250,000 per year. This pouplulist approach apparently helped to get Obama elected, but now his tax policy is squarely in the crosshairs of an intense, partisan standoff in Congress between Republicans and Democrats as the White House tries to edge the country away from the so-called ‘fiscal cliff’ that may be deferred, but still looms.

In Obama’s view, class has become a more stark dividing line in America than race. To start the series, GlobalPost Special Reports presents a comparison of income inequality in Thailand and Connecticut by two GlobalPost correspondents. Michael Moran, who came of age in and around Bridgeport and who has written a book on the global economy titled “The Reckoning,” takes us on a journey from the dilapidated factories and housing projects of the crumbling city to the well-manicured lawns and the yacht clubs and high couture that is Greenwich.

Patrick Winn, who has lived for nearly five years in Bangkok and who speaks the language with solid proficiency, takes readers on a vivid exploration of the despair of the slums of Bangkok to the palaces of commerce symbolized by Bangkok’s legendary shopping malls.

What is most striking about these two reports is how much these seemingly opposite ends of the world – Thailand and Connecticut – have in common.

Our reporting shows that rising inequality isn’t just about poverty. A widening gulf between societies’ rich and poor weakens social ties, increasing disenfranchisement, undermining job growth and setting off example after example of societal instability and unrest in recent years: the London Riots, Occupy Wall Street, the Arab Awakening and a correlated rise in violent crime rates including homicide.

The Great Divide of global economic inequality is one of the great issues of our time, and one that should concern us all. We hope you will follow this Special Report as it unfolds in the coming months. On January 17, the journey for more than 10 teams of reporters and photographers will get underway and explore income in equality in American cities and town how they compare to foreign countries with similar levels of inequality.  

 

This Special Report is being produced with support from The Ford Foundation and in partnership with the VII Photo Agency. The compilation of US and global Gini coefficient data will be featured in an interactive map, a co-production of GlobalPost and the Pulitzer Center for Crisis Reporting.

http://www.globalpost.com/dispatches/globalpost-blogs/groundtruth/why-rising-income-inequality-matters