Naked Statistics: Stripping the Dread from the Data

by Charles Wheelan

Is globalization making income inequality around the planet better or worse? By one interpretation, globalization has merely exacerbated existing income inequalities; richer countries in 1980 (as measured by GDP per capita) tended to grow faster between 1980 and 2000 than poorer countries.2 The rich countries just got richer, suggesting that trade, outsourcing, foreign investment, and the other components of “globalization” are merely tools for the developed world to extend its economic hegemony. Down with globalization! Down with globalization! But hold on a moment. The same data can (and should) be interpreted entirely differently if one changes the unit of analysis. We don’t care about poor countries; we care about poor people. And a high proportion of the world’s poor people happen to live in China and India. Both countries are huge (with a population over a billion); each was relatively poor in 1980. Not only have China and India grown rapidly over the past several decades, but they have done so in large part because of their increased economic integration with the rest of the world. They are “rapid globalizers,” as the Economist has described them. Given that our goal is to ameliorate human misery, it makes no sense to give China (population 1.3 billion) the same weight as Mauritius (population 1.3 million) when examining the effects of globalization on the poor. The unit of analysis should be people, not countries. What really happened between 1980 and 2000 is a lot...