Understanding the inequality in the distribution of wealth in the world is one of the main challenges faced by economists and public policy developers. Since 2011, a new index aims to present the situation more clearly, highlighting aspects that remained hidden in previous measurements. The Palma Index, through a simple ratio between the income of the richest 10% and the poorest 40% of each country, indicates the locus of the structural maladjustment that permeates all capitalist societies, regardless of their level of wealth. José Gabriel Palma, whose studies gave rise to the measure, participated this Tuesday (11), in the celebrations of 50 years of the Institute of Economics (IE) from Unicamp, with the lecture "Why is inequality so unequal around the world?".
PhD in economics from the University of Oxford and in Political Science from the University of Sussex, José Gabriel Palma is a full professor at the Faculty of Economics at the University of Cambridge and co-editor of Cambridge Journal of Economics, one of the most important academic journals in the field.
Palma's investigations revealed that the income of the 50% of the population located between the extremes of wealth and poverty, the middle class, almost invariably holds approximately half of the national income. “This data indicates that income inequalities are concentrated at the extremes”, highlighted Roberto AZ Borghi, professor at IE, who was supervised by Palma during his doctorate at Cambridge.
According to Palma, what changes in inequality around the world is the ability of the richest to “crush” the poorest, represented in the graph below by the d10+ sector, which does not appear in the German graph and is 8% in the case of Uruguay . “It is the size of this slice of the pie that changes around the world and it is where income distribution efforts live”, she pointed out.
However, as Palma highlights, there is a group of countries in which another sector is beginning to appear (marked in the graph below by d10++). In these countries, where inequality is extreme, “in addition to crushing the poorest 40%, those at the top also crush those in the middle”, stated the economist. “Suddenly, those in the middle lose ownership of their half of the pie,” he added.
Palma also highlighted the growing market inequality, which has affected developed countries since the beginning of globalization and financialization. “Today, Sweden has market inequality equal to the Latin American average,” he highlighted. Such inequality is equalized, in these countries, by increasing transfers promoted by the State. “To maintain average inequality levels, despite growing levels of inequality in the market, the distributive effort needed to be increasingly greater,” he explained.
According to Borghi, the Palma index has been widely used in reports from international organizations, such as the United Nations, and academic research on the topic of inequality. “The indicator captures differences between countries more clearly, as well as becoming a more objective measure to combat the phenomenon of inequality,” she reported.
At the opening of the event, André Biancarelli, associate director of IE, recalled that the date, September 11th, in addition to the fall of the Twin Towers, marked 45 years since the military coup that deposed Salvador Allende in Chile, Palma's homeland. “It’s a difficult but necessary memory, at this strange time in Brazil’s history,” said Biancarelli.
Follow the upcoming 50th anniversary events on Facebook. IE on social media.
