Increases in inequality within countries and between countries is one of the most disturbing developments at the beginning of the twenty-first century. The rise of inequality runs counter to much standard economic thinking. Trade and capital flows are, after all, supposed to reduce economic differences between countries and, while they may increase earnings differentials in advanced countries, are supposed to reduce those differentials in less developed countries. The increase in educational attainment within countries should reduce inequality within countries as well. But the facts tell a different story.