It’s that time of the year, when Oxfam releases the same report it releases every year and the New York Times, the Guardian and the other usual suspects publish the same misleading headlines about it. The problem is that, as many people have pointed out repeatedly, the way in which they measure wealth inequality doesn’t make any sense. In order to do that properly, instead of comparing net worths, one would have to compare how much people consume over the course of their whole life, because that and not their net worth is what determines their well-being. (There is a nice study which does that for the US and tries to deal with other problems that people often ignore when they try to measure inequality.) If you did that, you would no doubt still find a lot of inequality, but it wouldn’t give you those catchy headlines, which is precisely why that’s not how Oxfam measures inequality. One should also look at the trends, which would reveal that, largely thanks to the fact that capitalism is spreading across the world, global inequalities are diminishing at what is probably the fastest rate in history.
The most well-known example of how free-market reforms have made people richer is China, but you can also make the case about India. India started liberalizing its economy in 1991, after the collapse of the USSR, whereas before that it was a largely socialist country. Between 1960 and 1991, GDP per capita in India went from $307 to $536, which corresponds to a growth of approximately 1.8% per year. Between 1991 and 2015, it went from $536 to $1750, which corresponds to a growth of approximately 5% per year. (In order to make those calculations, I used the figures from this website, which gives India’s GDP per capita between 1960 and 2015.) In other words, after Indian introduced free-market reforms, its GDP per capita grew almost 3 times faster than when it had socialist policies. India adopted those socialist policies in the first place in part because Indian politicians listened to Western economists like John Kenneth Galbraith who, not being able to ruin the West as thoroughly as they would have liked, decided to make sure poor countries stayed poor instead.