LONDON – This year’s World Economic Forum Annual Meeting in Davos came at a moment of puzzlement for the world’s economic and financial elites. Although the global economy has lately been doing rather well, voters have been rebelling against them.
Despite much-publicized challenges and weak points, there has been plenty of good economic news in recent years. Globalization and technological progress have supported annual global per capita GDP growth of 2.5% since 2009 – lower than before the Great Recession, but still very high by historical standards. In the last 35 years, the share of the world’s population living in poverty has fallen from 40% to just 10%.
Perhaps the biggest grievance of the past year has been inequality. But, at the global level, inequality is falling. And while inequality has risen within some advanced economies, the increase has not been particularly dramatic, and it remains at reasonable levels.
But that is not what the average citizen sees. According to the European Bank for Reconstruction and Development’s new Transition Report, based on the 2015-2016 Life in Transition Survey produced by the World Bank and the EBRD (where I am Chief Economist), the perceived increase in inequality far exceeds the reality described by official data, typically based on household surveys.