Assortative Mating (see yesterday’s post) has played a more significant role in increasing the earnings gap in the UK, says the report:

Unlike many other countries, the earnings gap between wives of rich and poor husbands has grown strongly: this gap was about GBP 3,900 in 1987, but increased to GBP 10,200 in 2004. [Expressed in 2005 values]

But not as much of a role as self-employment, it seems.

Remember last month, I was less than enthusiastic about the jump in the number of self-employed people. Seems I was right to be worried.

About one-half of the increase in individual earnings inequality is explained by changes in self-employment income as on the whole the self-employed earn less than full-time workers. Their share in total earnings increased by one fifth since the mid-1980s and among the self- employed, the gap between high and low earners has risen.

According to the OECD, its member state with the highest level of non-agricultural self employment is Greece. The lowest is Norway.

As the Americans say, go figure!

Christine Schwartz of the University of Wisconsin—Madison reckons that some 25-30 percent of the increase in household inequality in the USA, over the 40 years between the mid 1960s and mid 2000s, can be accounted for by the association between spouses earnings. In other words, richer men marry richer women and poorer men marry poorer women. More households now have both partners working so the income disparity between households has been magnified.

In many ways, husbands and wives have become more equal over the past several decades. Husbands and wives increasingly share the same educational background, are more similar to one another with respect to their wages and hours worked, and share a more equal division of housework and child care (Cancian, Danziger, and Gottschalk 1993; Schwartz and Mare 2005; Bianchi, Robinson, and Milkie 2006). Increases in the resemblance of spouses, however, may have unanticipated consequences, namely, increasing inequality across families. As spouses become more economically similar, inequality among married couples may rise as marriages are increasingly likely to consist of two high- or two low-earning partners.

Or, as the OECD more bluntly puts it, these days, doctors marry doctors not nurses. This is, of course, because there are more female doctors now than there were 20 or 30 years ago. Indeed, some of those women who might once have become nurses are now qualifying as doctors. The same pattern is true in a number of professions. Women in their twenties are now likely to be earning as much as their male counterparts.

High earners are therefore increasingly marrying other high earners in a process known as Assortative Mating:

Shifts in the economic foundations of marriage and increasingly egalitarian gender norms may have changed men’s and women’s preferences for mates. As women’s labor force participation has grown, men may have begun to compete for high-earning women just as women have traditionally competed for high-earning men (England and Farkas 1986, p. 182; Oppenheimer 1994, pp. 332–34). Increasing symmetry in men’s and women’s preferences for mates implies greater resemblance between spouses’ earnings and greater inequality across couples as marriages increasingly consist of partners with similar earnings.

The reorganisation process continues to complicate the push for efficiency gains. Although it may have facilitated savings in some cases, we heard that it more often creates disruption and distraction that hinders the ability of organisations to consider truly effective ways of reforming service delivery and releasing savings.

Any major corporate upheaval leads to a performance dip, at least in the short-term. A couple of weeks ago, I came across this Roffey Park paper on the psychological contract during corporate transition. It is based on research from private sector mergers but it is equally applicable to public sector reorganisations on the scale of the NHS reforms. Andrew Lansley’s proposals will have many of the same characteristics as a corporate merger. NHS trusts are often as different from each other culturally as private companies in the same sector are. After the reforms, people will be working for new types of organisation, some of which may, eventually, not be part of the NHS at all. The sense of disruption and dislocation will be every bit as acute.

The Roffey Park paper is an interesting read anyway but Chapter 2, on the impact of mergers, is especially relevant.

People start to focus on personal issues such as whether they will have a job, where it will be, who they will work with and who will manage them. Inevitably workload increases and the balance of expectations starts to tilt unfavourably. Staff start to pick up on injustice and imbalance and attribute blame. They also compare how people are treated and watch for signs or symbols of what will be valued in the new organisation. In the language of psychological contract violation, they enter a period of ‘vigilance’.

Inevitably, therefore, some of them start to look for an escape route:

The frequently documented performance dip post merger is often attributed to bedding in new structures but Roffey Park’s prior research suggests that it is at least as much due to people dusting off CVs, applying for jobs and attending interviews. While employees are re- evaluating their own future, the share price is starting to slide.

And, of course, the people who are most likely to be able to find another job are usually the ones an organisation can least afford to lose.

Don’t forget that managers suffer from all this too, so we have worried managers trying to restructure an organisation while, at the same time, trying to manage worried staff. Is it any wonder that, when most of the organisational energy goes into managing a restructure, there is precious little left for finding and implementing efficiency savings? As the Chief Executive of one of the largest PCTs warned in December 2010, “All of us are looking inwards.” Which is what happens during major changes in any organisation. People worry about themselves so the restructure takes priority over everything else.

Many people warned the government that the far-reaching restructure was incompatible with rapid efficiency savings; the Financial Times, Manchester Business School and the right-of-centre think tank Civitas, to name a few. The Commons Health Committee’s findings suggest that they were right.

When it came to power, the government said that its priority was to reduce the public deficit by making public services more efficient. Whatever else may be claimed about the Coalition’s NHS proposals, they clearly do not answer the exam question. They are not making the NHS more efficient. If anything, by diverting time, resources and energy into a pointless restructure, they are making it less efficient than it was two years ago.

Doubtless the NHS will save money over the next few years. It will have to if the government wants to meet its budget targets. Most probably, though, this will be by what one comment in the Commons report describes as “unsophisticated attempts to reduce costs.” Otherwise known as salami-slicing, or, to put it less politely, panic-stricken slash-and-burn.

According to ITV’s Laura Kuenssberg, David Cameron’s veto of the EU fiscal compact is having a similar effect on some British companies.

For the many who have applauded the stance the PM has taken so far, and there are very many, don’t there don’t be mistaken that there are very real risks too. There are fearful rumblings from City sources I’ve been speaking to in the last couple of days. I’m told that big financial firms are starting to pull away from using the UK’s official representatives in Brussels, UKRep, choosing instead to go direct to talk to other countries’ teams, because ‘no one wants to be wrapped in the union flag right now’. There are suggestions that one very significant financial institution is moving away from describing itself as a UK institution, instead choosing to emphasise itself as a ‘global brand’.

It’s the corporate equivalent of talking in a Steve McClaren style mid-European accent and pretending to be from somewhere else. Like my Northern Irish friend, these companies have concluded that being British is more of a liability than an asset at the moment.

With the odd exception, British business did not applaud David Cameron’s veto. As Ms Kuenssberg’s report indicates, a lot of business leaders are quite worried about it. The UK becoming politically isolated from its biggest market is nothing to cheer about.

Though they tend to keep pretty quiet these days, it is still possible to find some people in the City who think Britain should go into the Euro. The world’s main financial centre being inside its largest currency zone would have advantages for some. It is also clear, to those who take a longer term view, that Britain’s position, inside the EU but outside the Eurozone, will become increasingly difficult to maintain as time goes on. EU summits will be preceded by pre-meetings of Eurozone members at which deals will be done and agreements reached before the British delegates arrive.

None of this is to say that Option 2 is untenable but is a position that will require a high level of diplomatic skill to sustain. Britain will need to do its own deals and make its own alliances outside the Eurozone meetings. It can be done; the Eurozone countries are a diverse group with competing interests. But it means that the UK will have to get a lot cleverer. Upsetting even our longstanding allies with the petulant use of the veto is not a good way to start. Even the Poles, says Ms Kuenssberg, are pissed off with us:

Another source told me even Poland, who the UK has often built alliances with is starting to drift away, some saying privately they can’t do business with the UK anymore. And I’ve been struck by the shock that some still feel at the tactic the PM chose. Not least by a source who attended a meeting with a senior minister on the day of the summit itself, who was told that the negotiating position was ‘very soft’. The same source was shocked when next morning it emerged that David Cameron had used the veto – ‘he didn’t protect us while he left the room’, and ‘he stopped the eurozone from sorting itself out’, comparing his stance to Mrs Thatcher’s on Europe, ’she was intelligent enough to stay in the room…he left, and shot himself in the foot’. Ouch! In reality the whole situation is so uncertain that it’s impossible to predict the eventual impact the PM’s position will have but the domestic political success it has brought him is not without its risks.

Indeed, it isn’t. The draft EU agreement shows that the countries of the Eurozone are prepared to go ahead with their treaty without the UK’s blessing and that they intend ultimately to use the legal structures of the EU to enforce it. I don’t agree entirely with Laura Kuennsberg’s reading of it. She claims that the treaty will eventually bind all EU members but, given that the document refers to ‘the contacting parties’ (i.e. The Eurozone countries) throughout, I can’t see how she came to that conclusion. I also, therefore, think Rafael Behr is overstating the case when he says that the agreement will compel the UK to leave the EU within five years. However, his point about the loss of British influence within the EU is well made. To avoid it will require a level of political and diplomatic savvy that the Prime Minister has shown himself woefully short of.

So it’s hardly surprising that some corporations are playing down their Britishness. Companies don’t really do patriotism. If they think their interests are threatened, those that can will abandon their home country if the risks become too great. Ultimately, if they decide that being based in an increasingly peripheral part of the EU becomes a hinderance, they will move elsewhere.

Whatever interests David Cameron thought he was protecting with his unprecedented use of the veto, it wasn’t those of British business. There is widespread dismay at his ham-fisted diplomacy and fear about the impact his actions may have on the UK’s position. It will take time and a lot of hard work to restore Britain’s reputation in the EU. In the meantime, is it any wonder that some British companies are hedging their bets.

The fourth change required is that we need simple contracts that allow CEOs to be fired for breaching performance targets without a pay-off (which means changing the law on unfair dismissals).

No it doesn’t! Chief executives are subject to the same employment laws as everyone else. Employee’s who don’t perform can be sacked, however high and mighty they are. There is nothing to stop boards giving senior executives a couple of warnings and then sacking them if there is no improvement, it’s just that, for the most part, they don’t.

This has nothing to do with the law, it is simply convention. When executives get beyond a certain level, some things are beneath their dignity, especially things which call into question any aspects of their capability. They don’t do assessment centres any more. They don’t attend management development courses, they have one-to-one coaching instead. And they don’t get formal warnings from their bosses.

It has therefore become the norm to pay underperforming senior executives off. The sums are usually way in excess of anything the employer would be legally obliged to pay. I have known senior managers paid off after less than a year’s service, who would therefore  have no legal right to bring an unfair dismissal case. Even if a sacked chief executive could prove he was unfairly dismissed, the most he would get would be around £80k. Executive payoffs in large companies are usually significantly higher than that.

So why has the convention become established? It’s here that the people-like-us factor and the there-but-for-the-grace-of-God factor kick in. The people most likely to be issuing the warnings or doing the dismissing are often in, or recently retired from, similar roles in other companies. They therefore treat each other as they would like to be treated themselves.

People Like Us don’t get formal warnings, we have quiet words with each other. People Like Us don’t get sacked, we come to mutual agreements. And People Like Us don’t make a fuss in public with employment law cases. Our colleagues give us a big enough payoff to make sure we don’t need to. The further up the organisational hierarchy you go, the closer you get to being People Like Us and, therefore, the less likely you are to be sacked in the conventional way.

All of this is due to social convention. True, some of the payoffs given to senior executives may have legal force but that will be because of contractual obligations rather than anything laid down by legislation; terms negotiated under what Allister Heath calls the “absolutely essential freedom of contract”. And why do employers agree to be bound by such contracts? Again, it’s convention. No ordinary mortals would get away with writing such terms into their employment deals.

There are many reasons why senior executive pay has risen at such a rate, why it continues to outstrip company performance and why executives are paid off handsomely even after dismal failures. Shareholder inaction, cronyism and social convention all play their parts. But none of this can be blamed on employment protection legislation. The law does not stop companies from firing under-performing managers nor does it insist that they should have high severance payments when they go. Whatever changes are needed to prevent bosses being rewarded for failure, the removal of unfair dismissal laws is not one of them.

The most popular posts were:

1. Murdoch’s Frankenstein - The day I posted this, the blog traffic broke all previous records, as Mr Murdoch was bitten by his own monster.
2. Public debt – how does the UK compare? - Well everyone’s talking debt at the moment, aren’t they?
3. Why are public sector efficiency savings so hard? (Part 1 – The processes) - Part of a trilogy. 2 and 3 are here and here.
4. What causes the gender pay gap? - Surprising because I think this more recent post on this subject is better.
5. ‘Gingerism’ – the next form of discrimination - This, er, vintage post continues to get hits. I suspect that the picture of Kate Dillon might have something to do with it.

The top referrers for Flip Chart Fairy Tales were similar to last year: The Guardian, Personnel Today and Chris Dillow’s Stumbling and Mumbling. Twitter (which is, of course, lots of different people) was also in the Top 5, as was Facebook, which perhaps reflects the increasing amount of discussion taking place there.

2011 was a funny year for me. Businesswise and blogwise it was great but on the domestic front it was crap. Our house was flooded four times after a sewer burst. We are still living in temporary accommodation while the damage is being repaired. Having said that, when I look at what others have to face, I don’t know what I’m moaning about. My misfortune is only a minor irritant compared to the sort of hardship millions of people cope with every day. It’s all too easy to get wrapped up in your own woes.

People often ask me why I write this blog. I’m not absolutely sure but I do know that, when I have periods when I’m just too busy to write, I get withdrawal symptoms. I feel the need to express my thoughts and opinions, especially when there is a lot going on in the news. Putting my stuff out on here saves me ranting at my family, friends and colleagues. I’ve learnt a hell of a lot from doing it too and I’ve gotten a lot quicker at writing.

But without the people who read and comment, either here or elsewhere, on Twitter, LinkedIn, Facebook and suchlike, it wouldn’t be nearly as much fun and I wouldn’t learn nearly as much. I know commenting takes time and I appreciate each one – yes, even the ones that tell me I’m talking rubbish.

Thanks for reading and commenting during 2011, folks. Happy New Year to you all. I hope 2012 brings you good things and that you keep dropping in from time to time.

In shops, the layout is dictated by head office, while the produce arrives pre-sliced and pre-packaged. In the classroom, the teacher must work to the national curriculum. At the bank, branch and call-centre staff work to scripts and decisions about mortgages and loans are made centrally.

He continues:

The forces that have increased our powers of consumption are often those that are reducing our sovereignty as workers. The power and cheapness of information technology makes it easier for managers to monitor their business’s performance and also to strip out the idiosyncratic bits of an operation.

And, quoting the work of Philip Brown, he concludes:

After years of research, Brown and his colleagues talk about a future workforce in which only 10-15% will have “permission to think”. The rest of us will merely carry out their decisions; what the academics call “digital Taylorism”, in which graduates will end up on the white-collar equivalent of a factory line. Think call centres rather than groovy offices and you’re most of the way there.

It wasn’t supposed to be like this, was it?

Business textbooks have been banging on about employee autonomy, empowerment and engagement for at least the past quarter century. Employees with more autonomy will feel more empowered, will therefore be more engaged and will thus be more productive. Furthermore, they won’t need as much supervision so your management costs will go down. OK, I’m simplifying for the sake of brevity, but most of the arguments for worker autonomy run along those lines.

Workers are happier, their productivity goes up and management costs go down. You’d think everybody would have jumped at it by now wouldn’t you?

A whole industry has grown up around employee empowerment and related areas like employee engagement. But, though a lot has been written about it, there is precious little research showing whether employees have more autonomy now than they did a couple of decades ago, or, indeed, whether they even feel more empowered.

Autonomy and empowerment are subjective. It may be that people feel less empowered precisely because their expectations of empowerment have been raised. Constantly being told that you live in a free and classless society, unencumbered by status and social hierarchy, may make you that bit more resentful when you find that your workplace still resembles a feudal barony.

Some of the jobs which used to be regimented, like those on factory production lines, have been automated. We don’t have the masses of industrial workers that we once had. At the same time, though, white-collar production lines, such as call centres and financial processing factories, have appeared. So, while society might feel less rigid than that the 1970s, there is little evidence that the levels of control in the workplace have changed.  You and your boss might call each other by your first names but he is still very much your boss.

Observation of the extensive discussions about command and control vs worker autonomy have led me to come up with my own version of Godwin’s Law. Rick’s Law states: ”As an online discussion on employee empowerment grows longer, the probability of someone mentioning SEMCO approaches 1.”

What strikes me about SEMCO, though, is that there seem to be more articles, radio programmes and case studies about it than companies that have actually emulated it. Everybody seems to agree that SEMCO’s form of industrial democracy is a wonderful inspiration but few seem to have followed its example.

Perhaps this is because command and control works, at least up to a point. It’s safe and everybody knows where they stand. Sometimes, employees push back against empowerment just as much as their managers do. Fear that they will be held responsible if things go wrong and a sense that ‘We’re not paid enough to make decisions like these’ contribute to the backlash. For a number of reasons, despite all the exhortations of management academics, employers have proved reluctant to dump the comfort blankets of hierarchy and control.

Are we becoming ever less autonomous at work as Aditya Chakrabortty says? It’s a difficult call. My sense is that we seem to have as many, though perhaps different, restrictions as we had a couple of decades ago. I think he is probably right when he says that autonomy and permission to think are the preserve of some 10-15%. I’m less convinced, though, that this figure is much different from what it would have been in the 1980s. Despite all that has been written over the last two decades about empowering workers, there isn’t a great deal of evidence that much has changed.

Should we be surprised? Not really. After all, as Joel Bakan said, if corporations really were people, they would be regarded as psychopaths. The legal duties on directors to pursue profit and shareholder value mean that corporations often behave in a way that is so selfish it would be regarded as pathological in a real person.

In some situations, the attributes of psychopaths can be quite useful. If I were involved in a turf war with a neighbouring clan, fighting my way through Normandy in 1944 or even needing to sack a lot of people quickly with a minimum of fuss, having someone on my team whose heart-rate and sweat level barely changed when faced with terrifying threats would be a distinct advantage. Psychopaths walk towards the sort of situations which have most of us running in the opposite direction.

So, when there are millions to be made and lost with the click of a mouse, who better to employ than someone with ice-cold calm and very little empathy. If your strategy is to make as much money as you can in as short a time, you need people who will push mortgages at customers who can’t afford them, buy up and asset-strip companies, package up high-risk debt with triple-A assets and sell it on or pile into asset bubbles and make a killing. It makes sense to recruit people with nerves of steel and no remorse, then reward them to do more of what comes naturally to them anyway.

This may not have been a good strategy for the long-term future of the banks or for the wider economy but no-one was thinking too much about that in the mid 2000s. Given the business strategies at the time, the recruitment and reward strategies which fell out of them did exactly what they were supposed to do.

What should we do about psychopaths running banks and other corporations? Same as we do for psychopaths in any other context. Contain them and limit the damage they can do.

Banks (and others) hell-bent on making huge amounts of money in as short a time as possible will inevitably employ people who, even if they are not clinically diagnosed as psychopaths, share some of the same characteristics. Just as we have laws and law enforcers to protect us from psychopathic gangsters, so we must have laws to protect us from the worst excesses of the corporate world. And institutions with the power and political backing to enforce those laws. That’s what we have regulation for. The mistake was assuming that these hugely powerful organisations could be left to police themselves.

As Mr Basham concludes:

In attempting to understand the complexities of what went wrong in the years leading to 2008, I’ve developed a rule: “In an unregulated world, the least-principled people rise to the top.” And there are none who are less principled than corporate psychopaths.

All the more reason, then, not to have an unregulated world.

Update: More on this theme: William D. Cohan’s Bloomberg piece, “Did Psychopaths Take Over Wall Street Asylum?” and Clive Boddy’s article in the Journal of Business Ethics,
“The Corporate Psychopaths Theory of the Global Financial Crisis.”

The reason was simple. Like most Russian cities at the time, Ekaterinburg was broke. During the Yelstin years of the 1990s, the Russian state, at national and local level, almost lost its ability to collect taxes. As it failed to pay police and tax collectors, their vulnerability to corruption increased, so the problem got worse. Ekaterinburg became one of Russia’s gangstergrads and much of what little state money remained was skimmed off through corruption. A couple of days into my visit it rained and huge ponds appeared in the potholed roads, unrepaired after many Siberian winters. This was what a bankrupt city looked like.

There was something chilling about the sudden collapse of post-communist Europe. The economic system that had sustained the infrastructure was pulled away and, in some places, the trappings of the modern world seemed to disappear with alarming speed. I’ve been to countries which don’t have street lights and where the toilets are holes in the ground. But if a country has never had modern amenities it’s somehow less disturbing than visiting one which seems to have gone backwards. If the streetlights are there but no longer working, and the broken remains of a ceramic toilet bowl lie next to the hole in the ground, you feel that bit closer to the thin line which separates civilisation from chaos.

And now many of our cash starved local authorities are planning to switch off their lights too. Kirklees, Essex, Watford and North Somerset are among a growing number of councils planning to switch off or reduce their street lighting. Many councils which have implemented tough spending cuts this year are being asked to make savings of a similar size next year. Having cut back on all the nice-to-haves, the axe will inevitably start to fall on the essentials.

So far, the cuts have been invisible to many people. If you don’t use libraries and social services and your children’s school has, as yet, escaped the accountants’ scrutiny, you may not have had any direct experience of austerity. But this may be the year that the reduction in council spending becomes visible to all. Unmended and unlit streets are hard to ignore.

Some councils argue that switching off streetlights makes little difference to public safety and accident rates. Maybe they are right. But dark streets are deeply symbolic. Only the oldest among us can remember cities with dark streets. Most of us who live in cities have grown used to the permanent neon glow. Take it away and the streets look eerie. Whether or not dark cities are statistically any less safe doesn’t matter. Dark urban streets make people feel less secure. Putting the lights out is a very visible sign of austerity.

I’m told that the lights are back on in Ekaterinburg these days. The Russian state pulled back from the brink of collapse and the city has benefitted from central government and private investment.

I’ll never forget those unlit streets though. I hope we never reach the point where whole cities are plunged into darkness. The effect on the public morale and sense of well-being could be damaging for councils, for the economy and for the government. Local authorities should think hard before reaching for the light switch.

I’m old enough to remember comedians making jokes about Latin American debt: ‘My bank called me today and said, “There are three accounts we are worried about; Mexico’s, Argentina’s and yours!”‘ Doesn’t sound quite so funny now, does it?

The G20 summit showed just how far things had changed. As recently as twenty years ago, the dominance of the European nations and their colonial offspring seemed unassailable. But this autumn, Europe held out the begging bowl and even the Americans seemed less sure of themselves than usual. Britain, the country that was, 100 years ago, the most powerful in the world, looked like a passive observer. Only China emerged from the summit looking stronger. The old G7 countries carry on meeting, as though they still run the show, but the other major economies go on their way regardless. Power is slipping away from them by the day.

As the OECD notes:

[T]he world has undergone a shift of historical significance over the past decade, with the centre of economic gravity moving towards the East and South. The figures speak for themselves: in 2000, OECD countries represented around 60% of global GDP but by 2010 this was down to 51%, and it will be only 43% by 2030. In fast-growing economies, per capita growth rate was more than double that of high-income OECD countries over the last decade.

Is this a good thing or a bad thing? Some argue that the rising power of Asian and Latin American countries can only be a good thing. People have been lifted out of poverty and wealthier consumers in the rest of the world will generate more business opportunities and provide new markets for British exports. Others say that the loss of power and prestige will eventually impoverish us as we are forced to compete against low wage countries which are rapidly catching up with us technologically. China will eat your lunch and India will eat your dinner, they say.

But are these scenarios mutually exclusive? What if they both happen?

When we ask the question, “What does this mean for us?” it depends who we mean by ‘us’. Usually, when commentators write about economics, ‘us’ means the British economy. What would the Euro’s collapse do to Britain? Is immigration good for the economy? Will the UK gain or lose from the rise of China? That sort of thing.

The trouble is, to paraphrase our former prime minister, there is no such thing as the economy. It is simply a concept we use to aggregate all the economic activity in the country. So, to give a crude example, if the off-shoring of low paid jobs makes four people £250 a week better off and six people £100 a week worse off, we could say that the economy has gained by £400 a week. The six people who are worse off are unlikely to see it that way though.

It is therefore possible that the British economy, and indeed most economies, could gain from the Great Rebalancing yet many people could still find themselves relatively poorer. There is no guarantee that the fruits of globalisation will be equally shared. In fact, it’s looking much more likely that they won’t be.

A recent study by the OECD noted that, while the gap in incomes between countries is, in many cases, falling, the gap in incomes within countries is increasing. (Click on the picture for the free preview.)

Shifting wealth ushered in the beginnings of a reversal in long-term trends in inequality between countries. At the same time, inequality has grown within some developing countries and particularly in a number of large economies, as shifting wealth has reconfigured the global economy.

[T]he period 1820-1950 showed a clear trend where inequality between countries increased, while falling within many countries thanks in large part to the expansion of social safety nets and redistribution.

In other words, the rich western economies had a huge share of the world’s wealth but chose to redistribute it more evenly among their citizens.

The report goes on to note that, since the 1980s, the rise of India and China began to reverse this trend. Inequality between countries has fallen as non-OECD economies have developed. Over the same period, though, inequality within countries has risen both in the BRICS and in the OECD.

It is clear that per-capita GDP is rising much faster in China (10%) and India (7%) than it is in the USA (2%) or the UK (1%). It could therefore be argued that the ‘average Chinese’ and the ‘average Indian’ is catching up with the ‘average American’ and the ‘average Briton’. But rising inequality levels suggest that more people in every country are pulling away from the average. So it may be true that the gap between rich Britons and rich Indians is narrowing. It is probable too that the gap between middle-class Britons and middle-class Indians is narrowing. In time, as development lifts more poor Indians out of poverty, the gap between the poor in India and Britain will reduce too. But the OECD data suggests that the gap between rich, middle-class and poor in most continues to grow.

Last year, McKinsey drew a similar conclusion:

[O]ver the past 100 years, an income inequality gap split the world into two large camps—Western economies buoyed by an increasingly prosperous middle class, and other nations caught in a seemingly endless cycle of poverty. Now, while inequality among nations (and across this former divide) is thankfully shrinking, the gaps between rich and poor within individual nations are widening.

While overall standards of living have risen across the globe, the gap between rich and poor has grown in almost three-quarters of OECD countries over the past two decades. Inequality is rising even faster in emerging markets: in China, it is increasing more quickly than in any Western economy.

The Great Rebalancing, then, is restoring equality between the regions of the world. Military, political and economic power is gradually being redistributed. The share of global wealth, too, is becoming less geographically concentrated. But that doesn’t mean that the people of the world are becoming more equal. The gaps between rich and poor are widening even in the hitherto egalitarian societies of the West. Inequality too, it seems, is being redistributed.