Definitions first,
as the issue requires.
There are several definitions of income inequality. Income inequality refers both to disparities of income amongst people in the same geography and to disparities in average income amongst countries or continents.
Estimates vary, and I haven't as of yet seen comprehensive stats, but it is often reported that 20% of people receive 80% on incomes, both within and amongst countries.
Why is inequality bad?
Inequality is bad for a number of reasons you can look up on wikipedia, I will assume the reader is fairly familiar with most. I will only mention three:
1. Ethics. Today's material and financial resources would suffice, if more equally distributed, to provide water, food, education, health to the whole of the global population, saving MILLIONS of lives every year. Most of them are in Africa, some are in New York City, Los Angeles, etc.
2. Efficiency. Undernourished, impoverished people, with impoverished lands and impoverished minds are a wasted resource (called labour). These people, if empowered with a certain amount of physical and human capital (fertilizers, water infrastructure, learning structures, food processing) could jump on the wheel of progress and meet those basic needs that keep them in that state. Africa is the biggest wasted resource of the world. Educated and democratic societies in Africa could put solar stations in the Sahara and plug Europe off the nuclear and oil hooks and into a sustainable energy policy (but this is a topic for another post).
3. Our own safety. Impoverished people which for some reasons are marginalised in our cities are responsible for many crimes. I'm just guessing here, but I think the 80/20 rules may apply again. Should check but I will pay a beer to whoever sends me a better stat. I say 80% of violent crimes in cities are done by the lowest 20% income group. More equal societies produce less social attrition. In an era of abundance, it would be possible to drastically reduce crime levels simply by reducing inequality in our cities.
Wealth and income inequality
Wealth inequality measures the distribution of wealth in a population and is also in the 80/20 ballpark.
First of all, let's note that on a purely theoretical level, the two inequalities are strictly related. indeed, wealth produces income in the form of dividends or interest payments, or other forms of remuneration of capital.
Therefore, when we speak about income inequality, we also speak of wealth inequality and more in general of the process of capital accumulation. Therefore, it is important to acknowledge that the process of capital accumulation, which is so engrained in our society, tends to increase inequality and reduce social mobility.
We therefore live in a world where a privileged elite consumes on average 100 times more than his counterpart in the lowest quintile.
Who is the elite?
If you are reading this blog, you are probably part of this elite. If you live in Europe, Japan, States, you are probably part of this elite. If you live in China, Brazil, Mexico, Argentina, India, Australia, and work for a big international company, law firm or bank, you are probably part of that 20% too. I'm in too, no doubt about it.
On the other hand, if you are readying this blog from rural China or India, or from anywhere in Africa, sorry but you are probably not part of the elite, you've been unlucky. If you believe in resurrection, good luck for next time.
Personally, I'm in favour of drastic actions to reduce income and wealth inequality both amongst citizens of the same country and on a global scale. However, I can see how the political process may need to be fed little steps at a time, and have therefore written down a couple of ideas, hoping my dear reader will provide with more.
as the issue requires.
There are several definitions of income inequality. Income inequality refers both to disparities of income amongst people in the same geography and to disparities in average income amongst countries or continents.
Estimates vary, and I haven't as of yet seen comprehensive stats, but it is often reported that 20% of people receive 80% on incomes, both within and amongst countries.
Why is inequality bad?
Inequality is bad for a number of reasons you can look up on wikipedia, I will assume the reader is fairly familiar with most. I will only mention three:
1. Ethics. Today's material and financial resources would suffice, if more equally distributed, to provide water, food, education, health to the whole of the global population, saving MILLIONS of lives every year. Most of them are in Africa, some are in New York City, Los Angeles, etc.
2. Efficiency. Undernourished, impoverished people, with impoverished lands and impoverished minds are a wasted resource (called labour). These people, if empowered with a certain amount of physical and human capital (fertilizers, water infrastructure, learning structures, food processing) could jump on the wheel of progress and meet those basic needs that keep them in that state. Africa is the biggest wasted resource of the world. Educated and democratic societies in Africa could put solar stations in the Sahara and plug Europe off the nuclear and oil hooks and into a sustainable energy policy (but this is a topic for another post).
3. Our own safety. Impoverished people which for some reasons are marginalised in our cities are responsible for many crimes. I'm just guessing here, but I think the 80/20 rules may apply again. Should check but I will pay a beer to whoever sends me a better stat. I say 80% of violent crimes in cities are done by the lowest 20% income group. More equal societies produce less social attrition. In an era of abundance, it would be possible to drastically reduce crime levels simply by reducing inequality in our cities.
Wealth and income inequality
Wealth inequality measures the distribution of wealth in a population and is also in the 80/20 ballpark.
First of all, let's note that on a purely theoretical level, the two inequalities are strictly related. indeed, wealth produces income in the form of dividends or interest payments, or other forms of remuneration of capital.
Therefore, when we speak about income inequality, we also speak of wealth inequality and more in general of the process of capital accumulation. Therefore, it is important to acknowledge that the process of capital accumulation, which is so engrained in our society, tends to increase inequality and reduce social mobility.
We therefore live in a world where a privileged elite consumes on average 100 times more than his counterpart in the lowest quintile.
Who is the elite?
If you are reading this blog, you are probably part of this elite. If you live in Europe, Japan, States, you are probably part of this elite. If you live in China, Brazil, Mexico, Argentina, India, Australia, and work for a big international company, law firm or bank, you are probably part of that 20% too. I'm in too, no doubt about it.
On the other hand, if you are readying this blog from rural China or India, or from anywhere in Africa, sorry but you are probably not part of the elite, you've been unlucky. If you believe in resurrection, good luck for next time.
Personally, I'm in favour of drastic actions to reduce income and wealth inequality both amongst citizens of the same country and on a global scale. However, I can see how the political process may need to be fed little steps at a time, and have therefore written down a couple of ideas, hoping my dear reader will provide with more.
Proposals for action to tackle internal income inequality
1. What I would like to see is the improvement of mid frequency measurements (month or quarter) of income inequality at least at national level, with full statistical mapping of incomes and wealths, which should ANONYMOUSLY be collected from a national statistical office.
2. Politicians that give during the campaign explicit targets in terms of income distribution or social mobility. "Hello, I am Candidate Smith, and hope that in my 5 years in office I will reduce the kurtosis of the income distribution by this much, while increasing social mobility by this much. Vote for me".
Proposals to tackle global income inequality
This is a bit more complicated, but there are a few things to start with:
1. Donate, volunteer, stay informed, read.
Do you think you could live with 1 dollar a day? Do you know there is 1.1 billion people leaving with less than 1 dollar a day?
I am reading from Jeffrey Sachs the number of people living in extreme poverty (less than 1 dollar a day in purchasing power parity) is 1.1bln (World Bank, 2001).
If we were to efficiently transfer 1.1 bln peole 1 dollar a day of purchasing power we would more than double their life standards (we would significantly reduce the number of kids dying of malaria, AIDS, etc).
How much would it cost? 1.1bln*1USDperday*365=c USD400 bln a year. This is a tiny percentage of our developed western economies (3% of US GDP, much less if one includes other countries who can help out...). Could we consume 3% less, tax ourselves 3% and solve the problem once and for all? True, there will be problems of infrastructure and access, but once the big problem is solved for most of them, these people will be able to fend for themselves.
It's late and the topic is daunting, I hope to come back to it in due course. Meanwhile, I WANT YOUR THOUGHTS!!!
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