How much does inequality cost us? The United States holds far more wealth than any other nation in the world. Yet average people in 11 other countries, says landmark new UN research, are enjoying a higher standard of living than Americans.

By Sam Pizzigati

Twenty years ago, in 1990, the United Nations began publishing an annual Human Development Report. The economists behind this new initiative — India’s Nobel Prize-winning Amaryta Sen among them — clearly saw themselves as scholarly subversives. They were openly challenging economic orthodoxy and that orthodoxy’s ultimate yardstick and holy grail, the “Gross National Product.”

To register social progress, economic orthodoxy held back then, nations needed to simply hike their “GNP,” their sum total of economic goods and services.  

But real human development, Sen and his colleagues countered, involves much more than economic growth. Real progress, their first Human Development Report in 1990 emphasized, encompasses “the freedom to be healthy, to be educated, and to enjoy a decent standard of living.”

GNP cannot measure this real human development. The inaugural Human Development Report offered a statistical yardstick that could: a Human Development Index, a measure that tracked not just economic growth, but health and education — as expressed in life expectancy and literacy — as well.  

The UN has been releasing an annual “Human Development Index” ever since, grading almost every nation in the world by a single number that reflects people’s capacity to live life to the fullest. And this Index, the HDI, has had an impact.

“It is now universally accepted that a country’s success or an individual’s well-being cannot be evaluated by money alone,” as UN Development Program director Helen Clark writes in her intro to the UN Human Development Report’s just-published 20th anniversary edition. “We must also gauge whether people can lead long and healthy lives, whether they have the opportunity to be educated.”

Acing that gauging, the authors of the 2010 Human Development Report go on to argue, now requires a correcting of the inadequacies that marred the original HDI measure. The most notable of these inadequacies: “a reliance on national averages” that conceal “skewed distribution.”

Over the past 20 years, the new Human Development Report contends, the UN development index hasn’t taken the reality of unequal distribution into account. The new 2010 Human Development Report does — by adding a new “Inequality-adjusted Human Development Index.”

In nations that distribute health, education, and income in a dramatically unequal fashion, this new index recognizes, the national “average” for health, education, and income will tell us precious little about how a nation’s “average” person experiences health, education, and income.

The 2010 UN Human Development Report applies the new inequality adjustment to 139 nations — and generates some striking results. Some nations that rank relatively high on the standard Human Development Index drop significantly when the focus shifts from national averages to the average person.

The United States, for instance, ranks fourth on the traditional UN Human Development Index, trailing only Norway, Australia, and New Zealand. On the new inequality-adjusted index, the United States falls to 12th.

Why, after 20 years, is the United Nations finally getting around to recognizing the impact of inequality on the lives average people lead? One reason: We have more inequality today than we had back in 1990, the year the UN Human Development Index first appeared.

For every one nation where levels of inequality have dropped over recent decades, the 2010 Human Development Report notes, these levels have “worsened in more than two.”

A second reason for acknowledging inequality in the new UN data: a growing body of global research “that shows how reducing inequality — both in the population as a whole and across gender and other groups — can improve overall outcomes in health and education, as well as economic growth.”

Our globe, in short, “has much to gain from concentrating its efforts on equity-improving reforms.” And we have, as the new UN report notes, a lot of inequity that needs improving.

“Nearly 7 billion people now inhabit the earth,” the report observes. “Some live in extreme poverty — others in gracious luxury.”

One British daily, the Guardian, is already predicting that the new Human Development Report‘s emphasis on distribution “could again revolutionize our way of assessing progress” — because nations “do care” about where the UN Human Development Index has them ranked.

Countries that manage to reduce inequality in the future, the Guardian notes, will see themselves move up on the new UN index rankings. As well these countries should.

“Inequitable development,” as the new 2010 Human Development Report sums up, “is not human development.”

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.