Wednesday, October 1, 2008 0 comments ++[ CLICK TO COMMENT ]++

World Income Inequality

Income inequality is something that many so-called capitalists, particularly most right-leaning individuals, ignore. One big reason is because free market proponents argue the inequality is a characteristics of capitalism and it doesn't indicate anything. However, it's a big issue with most left-leaning individuals. It's a very tough solution for anyone that is "liberal" and a free-market supporter (another tough issue is the environment.)

The Economist has a nice graphic depicting world income equality using the Gini coefficient:

There are many measures of inequality, with some measuring income, others wealth, some dealing with "happiness", and so on. These measures often contradict each other. This one is looking at income using the Gini coefficient. Note that inequality is not the same as being poor. I think this is one reason a lot of capitalists, particularly American capitalists, often argue that USA is better off than most of Europe or Canada, even though inequality is higher. Americans are wealthier but inequality is high (I'm exaggerating a bit but some people are actually scared of walking 2 blocks in the wrong direction in many American cities; in contrast, not as many are scared of taking the wrong turn in Toronto.)

Some interesting items to note are the following:

  • Roughly speaking, the worst inequality is found in Africa, then South America, followed by Asia. North America and Europe are the most equal using this measure.
  • USA is less equal than many poorer countries. It is less equal than, say, India even though India is one of the poorest countries on earth and perhaps more people live close to or below the poverty line in India than in USA.
  • What is not shown but is even more important is progress! It would be insightful to see how nations have changed, say, over the last 20 years. For example, I don't know in terms of the Gini coefficient but Brazil is supposed to be a success story in reducing inequality over the last decade. Such a change is arguably more important in the long run than where you place right now.

I personally think income inequality is going to be a big issue in the future. In a purely capitalistic society, inequality will probably be high. However, my opinion is that high inequality leads to instability. Best policy is to balance the two: foster capitalism without ending up with massive disparity in wealth; maintain equality without ending up with communism that promotes mediocrity.

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