Social mobility is restricted by inequality – equality of opportunity is increased by greater equality of outcomes. More equal countries tend to have higher rates of innovation, probably because of greater social mobility. Poverty reduction is compromised by income inequality.
People experience inequality throughout the life course, beginning in early childhood. Inequality early in life can affect life chances for the rest of one's life. Inequality means people have unequal access to scarce and valued resources in society.
Since growth in China has been so outstanding, the overall poverty reduction has been very substantial – despite the rise in inequality.
The question that can be asked about China is [what will happen] if there is a deceleration of growth and the country continues to have really high inequality. Can social stability, what the Chinese call “harmonious development,” be maintained? It’s difficult to see how it would.
Brazil represents a different trend. Brazil still remains one of the countries with the highest inequality in the world. But the level of inequality was reduced over the last 10 years. At the same time, the country has had a fairly good rate of economic growth.
So in the case of Brazil, high growth rates and a reduction in inequality helped reduce poverty – although Brazil is more unequal as a nation than China is.
[Editor’s note: Brazil’s Gini was 54.7 in 2009, down from a high of 63.3 in 1989. Only a handful more countries are ranked as more unequal.]
Clearly, some of these high incomes are no longer seen as legitimate. That’s true even in the United States, where only five years ago there would have been no questions raised about it.