"With facts like these," said Lagarde, "it is no wonder that rising inequality has risen to the top of the agenda." When Oxfam and the IMF converge on an agenda item, you know it's gone beyond ideology. Another striking fact emerged last week. In an impressive compendium of research, the OECD has produced a statistical databook of living standards around the world since 1820. It's called "How Was Life?" The survey confirms much of what we already know about humanity's overarching success in the past two centuries. It documents how, although global population has increased seven-fold, living conditions and physical security have improved tremendously for the great mass of the human race since the start of the Industrial Revolution.

For instance, the average human in 1880 could expect to live to 30. For someone born in 2000, longevity is almost 70. Fewer than a fifth of people on the planet could read in 1820; today it's 80 per cent. But in one key indicator of civilisation's success, the world has made no net progress at all – inequality. Countries made big strides towards a more equal distribution of income until about the 1980s. "However," reports the OECD, "this trend reversed strongly in the last decade, as within-country inequality levels returned to the values recorded in 1820." Australia's progress to income equality reversed in the 1980s. This was no accident. "The enormous increase of income inequality on a global scale is one of the most significant – and worrying – features of the development of the world economy in the past 200 years."

And what about Australia, in particular? It turns out to be a pretty good example of the global trend. The OECD report's earliest estimate of income inequality in Australia is for 1850 and its most recent is for 1990. Using a common indicator for looking at equality, the Gini coefficient, Australia's reading at the outset was 41. That is a scale where zero is perfect equality where income is shared exactly evenly; 100 is utter inequality where one person collects every dollar in the country. For comparison, in 1850, the most equal country included in the survey was Canada with a score of 27 and Russia the most unequal with 54. The global average was 38. Australian inequality then became quite a bit worse in the 1870s to hit 48 before heading into a long trend towards greater equality. The most equal decade in the Australian story was the 1970s. Australia's progress to income equality reversed in the 1980s. This was no accident. The Hawke and Keating governments launched Australia on a dramatic move from an emphasis on fairness to a new stress on efficiency.

It was part of the wider Thatcher-Reagan revolution to pro-market economics, an intellectual movement later captured as the "Washington consensus", avidly advanced by the IMF. Hawke and Keating aimed to revive the economy. Howard and Costello followed up. It worked. But Australia's generation of pro-market reform came at the cost of a degree of equality. "Rising inequality and rising prosperity" says an ANU expert on equality, Peter Whiteford, are "characteristic of Australia's recent inexperience." The 1980s was also the inflection point for the global trend. Australia's inequality score then rose to 39 in the 1980s and 42 in the final decade of last century. So over almost a century and a half, Australia returned almost exactly to its starting point of inequality, a movement from 41 to 42. The world average Gini score did pretty much the same. In 1820 it was identical to its score for 2000 – 45, after trending to its most equal score in 1980 with 36.

Is Australian inequality destined to worsen? That's largely in the hands of the Abbott government. Its first budget would increase inequality, but only if enacted. As it has managed to progress through the Senate so far, it could, perversely enough, actually make the country more equal, at least for a while. It has put an extra 2 per cent tax surcharge on the rich, but has failed in its bid to revise the generous rate of indexation for pensioners, for example. But look around. World stockmarkets are falling; growth forecasts are being cut as fast as they're published. The oil price, a canary in the economic coalmine, have hit their lowest in four years as markets anticipate a global slowdown. The world economy needs growth, most urgently. Joe Hockey's agenda for the G20 countries, comprising four-fifths of the global economy – is well-aimed. He's pressing for policies to add 2 percentage points to growth over five years, and the G20 nations have nominated policies assessed to go about 80 per cent of the way towards it. But the world, like Australia, needs both. It needs growth, and it needs a reasonably fair distribution of its benefits. It's a matter of policy. That is, it's a national choice and we know how to do it. What is the purpose of a country's economy unless it is for the benefit of its people?

Peter Hartcher is the international editor.