The World Inequality Report has been making the rounds in the media, and a variety of experts and commentators have written about the claim that we are witnessing a level of inequality today that the world last saw in 1913.
The range of interpretations shows not only the known biases of the writers, but demonstrates perspectives on the data that allow for completely opposing views all the way to declaring the claim of huge inequality overblown, or even a "fairy tale".
The main, and most simplistic line of dissent is based on pre-tax income versus income and benefits after accounting for redistribution, expressed by the GINI coefficient. Using the German GINI index values based on disposable income for the last 10 years, the country is in a pretty good position compared to others.
The "huge inequality is a fairy tale" article in today's ZEIT makes exactly that argument.
The author goes even further, stating that there was almost no income tax in 1913, while today's highest incomes in Germany are subject to an income tax rate of 47%. Also according to the article, the share of income of the top 1% in 1913 fell from 18% to 13%.
Add to this the author's correct statement that on a worldwide scale, the number of people living in absolute poverty has declined from 40% in the early 1980s to 10% today, and one could be tempted to accept his conclusion.
The gentleman is fully aware that different methods for measuring inequality produce different outcomes - only to leave aside some major drivers of said huge inequality.
For example, the top marginal rate on income in Germany was higher not long ago, at just over 50%.
Unknown to most. German effective tax rates for low income earners and high income citizens are almost the same, at around 25%. High indirect taxes, such as a national sales tax at 19% (with some essential goods at 7%), and a variety of other indirect taxes basically equalize the relative tax burden on the poor and the rich. What the poor do not pay in income tax is taken via indirect taxes, some of which are "taxes on taxes", for example when sales tax is charged on electricity rates which already include a special tax on power.
Capital income is taxed at a flat rate of 25%, and generational transfer of wealth is largely tax exempt. Both substantially increase overall inequality.
There can be no doubt that we live in a world that is much better off than the world of 1913 in so many respects, from low infant mortality to better medical care, to smartphones.
But in the Germany of 2018, more pensioners have to use food pantries to make ends meet, and this alone shows the "huge inequality is a fairy tale" claim to be shaky at best.
From the perspective of "different measures", the blogster likes to point out that the overall "life gap" between average people and the 1% is greater today than it was in 1913.
Nobody could receive an organ transplant in 1913, no matter how rich they were. The CEO with a bad heart enjoyed a marginally better prospect of survival than the worker with heart troubles.
Dying in childbirth was as much a life threatening prospect for queens as for maids. While both queens and maids do better today, the CEO can buy himself a new heart in most countries, the worker can not.
Dismissing stunning inequality as a fairy tale also ignores the fact that humans have the means and the resources to provide people in poor Asian, African, or American communities with more than one pair of shoes, education, and healthcare.
Not doing so is a choice, and no relatively good national GINI coefficient can gloss over this.
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