POLITICS

Bernie Sanders Exaggerates Claim About Income Inequality

05/28/2015 03:52 pm ET | Updated May 29, 2015

The following post first appeared on FactCheck.org.

Vermont Sen. Bernie Sanders claims that “in America we now have more income and wealth inequality than any other major country on earth.” Not really. Sanders excludes nations such as Russia, Turkey and Brazil from his definition of “major.”

  • According to the World Bank, at least 41 counties have greater income inequality than the U.S. And those include Israel, Brazil, Mexico, Chile and Argentina.
  • And according to the most recent Global Wealth Databook, the U.S. ranks 16th out of 46 economies studied in the share of wealth held by the richest 1 percent. Russia, Turkey, Egypt and Brazil are among those whose top 1 percent hold more of their nations’ wealth.

Sanders has made this claim a part of his standard political speech, and he repeated it May 26 as he formally announced that he is running for the Democratic presidential nomination in 2016. We judge it to be misleading, and an exaggeration.

He mentioned both income and wealth, which are not the same things. We’ll deal first with income.

Income Inequality

It’s true that the U.S. has greater income inequality than most countries. It ranks 42nd out of the 117 nations for which the World Bank has recently estimated a “Gini index,” a widely used measure of inequality. First place goes to the country with the most inequality. In that index, zero represents perfect equality, with everybody getting exactly the same income, and 100 represents perfect inequality, where one household would get all the income. The World Bank puts the U.S. index at 41.1 in 2010, the most recent year for which data was available.

It’s possible the U.S. would rank even lower if the World Bank had more data. To be conservative, we have excluded any data older than 2007. The U.S. would rank lower if we included some older data. And the World Bank lacks any data at all for Saudi Arabia, Qatar, Kuwait and the United Arab Emirates, for example, where massive oil revenues are controlled by ruling elites. That’s why we say “at least” 41 countries have higher inequality.

The U.S. also fails to top a different and much shorter list, which compares only industrialized nations rated by the Organisation for Economic Co-operation and Development. Figures from the OECD Income Distribution Database put the U.S. in 8th place among 33 countries for which the organization has calculated income inequality, before taking into account the effects of taxes and such income-transfer programs as Social Security.

The U.S. has a less progressive income tax and less generous social programs than many other countries, so it ranks higher on OECD’s measure of “disposable” income inequality. After accounting for taxes and benefit payments from government programs, the U.S. climbs to 5th place in “disposable” income inequality among the 35 for which OECD has comparable figures. Chile, Mexico, Turkey and Russia rank higher among this group.

To be sure, income inequality is growing — and growing faster in the U.S. than in most other OECD countries. Last year an OECD report that focused on the U.S. said that since the mid-1980s, “only in Sweden (from a low level), Israel and New Zealand did inequality grow faster than in the United States.”

But that doesn’t change the fact that many nations have greater disparities of income than the U.S.

When we inquired where Sanders got his information, a spokesman emailed us a link to a May 21 CNN Money story that said, “The U.S. and Israel have the worst inequality in the developed world.” CNN’s story was based on an OECD report, but its list of “developed” nations excludes many — such as Russia and Brazil — that would be considered “major” based on population or strategic importance. As we’ve already noted, Chile, Mexico, Turkey and Russia have greater income disparities in “disposable” income when measured by the OECD’s Gini index.

Wealth Inequality

So far we’ve dealt only with income inequality. Sanders also said “wealth inequality” was higher in the U.S. than in any other major country.

To check this, we consulted the most recent “Global Wealth Databook” published last October by Credit Suisse Research, which says it aims to provide “the best available estimates of the wealth holdings of households around the world.”

That reference work puts the U.S. near the top in terms of wealth concentration — but not at the top. It estimated that in 2014 the richest 10 percent of Americans owned 74.6 percent of all the country’s wealth. That put the U.S. at 7th place among the 46 economies covered by the report.

Those with greater wealth concentrations were Russia (where the top 10 percent held 84.8 percent of the country’s wealth), Turkey (where they held 77.7 percent), Hong Kong (77.5 percent), Indonesia (77.2 percent), Philippines (76 percent) and Thailand (75 percent). The full list can be found in table 4-4 on page 126.

The U.S. ranks even lower when looking at the share held by the wealthiest 1 percent. Those fortunate few held 38.4 percent of all American wealth, according to the study. But that was enough to put U.S. 1-percenters only in 16th place — behind those in Russia, Turkey, Hong Kong, Philippines, Thailand, Indonesia, India, Egypt, Peru, Brazil, Malaysia, Argentina, Chile, South Africa and the Czech Republic.

For the full list, see table 4-3 on page 125 of the report.

So how does Sanders justify claiming that the U.S. has greater wealth disparity than any “major” country? It turns out, he’s also relying on the same Credit Suisse report we’ve just cited, but limiting his comparison to only “developed” nations. The spokesman said in an email, “In terms of wealth, according to Credit Suisse, the U.S. has the highest rate of wealth inequality among developed economies (excluding Hong Kong, a city with a population of some 7.2 million).”

For the record, there’s no consensus on which nations qualify as “developed.” The CIA World Factbook lists Turkey as a “developed country,” for example. It also lists tiny nations such as Andorra, the Faroe Islands, Monaco and Iceland among “developed countries,” and whether any of those are also considered “major” is a matter of opinion.

When politicians use superlatives — such as “best,” “highest” or “more than any” — we’ve always advised our readers to be skeptical, and to ask, “compared with what?” Sanders’ exaggeration on wealth and income disparities is a case in point.

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