James Pethokoukis includes the following graph and commentary in his post Actually, global income inequality seems to be on the decline.
As a follow-up to my blog post on the Pope Francis and his recent statement on economic inequality, here is what’s been happening on inequality globally. While inequality has increased within countries since 1970s — it’s not just America, gang — it’s dropped between countries. See the above chart from this study (h/t to Overcoming Bias.) When you combine the two, it looks like inequality has been declining.
Very poor countries tend to have high percentages of the population living at subsistence levels with a small fraction of people with high income at the top. That means a distribution with the masses bunched at the bottom with a small tail extending off toward high income.
But the high-income people in these poor countries would not compare to the wealthy in West. The gap between the poorest and richest persons is much smaller in poor countries. As economic growth occurs, the distribution begins to look more like a bell curve where no one is living at subsistence levels but the high-income part of distribution has extended much further out. That is to say that absolute poverty is eliminated but the distance between the bottom and the top widens considerably. Nations are finally becoming more economically developed, thus there is widening within countries but narrowing between countries and narrowing on the global level.
You can see this graphically in a presentation at Gapminder: Human Development Trends, 2005. Here are four slides: