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How to End Global Income Inequality

Children playing outside a primary school in the village of New Pohan, Liberia
Children playing outside a primary school in the village of New Pohan, LiberiaPhotograph by Canadian Press via AP Photo

With a speech on inequality last week, President Obama sought to kick-start a national debate about the growing gap between America’s rich and poor and what to do about it. Since 1979, U.S. productivity has increased by more than 90 percent, but the income of the typical family has increased by less than 8 percent. Worse, inter-generational inequality is huge. “A child born in the top 20 percent has about a two-in-three chance of staying at or near the top. A child born into the bottom 20 percent has a less than one-in-20 shot at making it to the top,” Obama noted. Behind growing inequality lay the impact of technology, greater competition, slashed taxes on the rich, limited investment in public goods, a lagging minimum wage, and weaker unions, argued the president. The unspoken implication: A growing wealth gap wasn’t primarily because of the harder work of the people at the top.

What the president didn’t note is that almost everything he suggests about the U.S. income gap is also true about income distribution worldwide. This has implications for how we should think of fighting global poverty.