While much of the world's attention is focused on the increase of income inequality in wealthy nations, income distribution is actually becoming more equal in developing countries, says Harvard economist Kenneth Rogoff.
"Reading Thomas Piketty’s influential new book 'Capital in the Twenty-First Century,' one might conclude that the world has not been this unequal since the days of robber barons and kings," Rogoff writes on Project Syndicate.
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"That is odd, because one might conclude from reading another excellent new book, Angus Deaton’s 'The Great Escape,' that the world is more equal than ever. Which view is right? The answer depends on whether one looks only at countries individually or at the world as a whole."
Deaton’s book points out that several billion people in the developing world have emerged from overwhelming poverty over the last few decades, Rogoff says.
"The same machine that has increased inequality in rich countries has leveled the playing field globally for billions," he writes. "Looking from afar, and giving, say, an Indian the same weight as an American or a Frenchman, the last 30 years have been among the greatest in human history for improving the lot of the poor."
Piketty’s book focuses on "the rich world," Rogoff points out. "Much of the cultural groundswell surrounding his book has come from people who view themselves as middle class within their own countries, but who are upper middle class or even rich by global standards."
Rogoff is skeptical of Piketty's policy prescriptions.
"Would Piketty’s followers be nearly as enthusiastic about his proposed progressive global wealth tax if it were aimed at correcting the huge disparities between the richest countries and the poorest, instead of between those who are well off by global standards and the ultra-wealthy?"
A global wealth tax would have credibility and enforcement issues, Rogoff says. He also believes it's a non-starter politically.
"There are much better ways to address rich-country inequality while still fostering long-term growth in demand for products from developing countries," he writes.
"For example, a shift to a relatively flat consumption tax (with a large deductible for progressivity) would be a far simpler and more effective way to tax past wealth accumulation."
Piketty also recommends a top income tax rate of 80 percent for the United States.
"Though I strongly believe that the U.S. needs more progressive taxation, particularly of the top 0.1 percent," an 80 percent rate would cause significant distortions, Rogoff says.
Nobel laureate economist Joseph Stiglitz calls the growth of income inequality in the United States a betrayal of our values and "morally wrong," Bloomberg News reports.
"An economic system that only delivers for the very top is a failed economic system," he said in the text of a speech he gave Thursday.
To correct the inequality, Stiglitz recommended higher taxes on the rich, an increase in the minimum wage, more spending on education and stronger antitrust laws.
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