How can we provide a good quality of life and productive work for the seven hundred million to one billion people (10 to 14 percent) of the world's seven billion people who are poor or living on no more than $1 (or $1.25) a day? Economic growth is the most important factor contributing to poverty reduction. Figure 6-1 shows that, for ninety-nine developed countries (DCs) and less developed countries (LDCs), the growth rates of national income per capita for 1950 to 1999 are closely correlated with the growth of income per capita of the poorest 20 percent. The country you live in, more than any other fact, determines your position within the world's economic class system. Branko Milanovic (2002b:78) indicates that 88 percent of total world inequality in 1993 results from between-country inequality, 2 percent from within-country inequality, and 10 percent from an overlap between intercountry and intracountry inequality. Still, whereas the ratio of between-country to within-income inequality increased globally from 1820 to 1960, from 1960 to the present, this ratio has fallen back slightly to its level in the 1940s (Firebaugh 2003:23–30).

Information Sparsity

Gary Fields (1994:87) finds it regrettable that standard studies of country development provide great detail about macroeconomic conditions and the balance of payments without providing “information on who has benefited how much from economic growth and…who has been hurt how much by economic decline.” Estimates of income distribution in most developing countries are, at best, approximations of the underlying distribution we wish to measure. Despite efforts since the early 1970s to investigate income inequality, these data are weaker than national income statistics.