The Ninth Millennium Development Goal: Business Development?
Last night I was reading up Japan’s road to industrialization. Specifically, I was learning how it went from a backwards set of earthquake prone islands in 1868 to one of the most powerful economies on the planet.
In 1900, the average Japanese person could expect to live to be about 44 years old, which is almost the same as a Malawian, both in 1900 and in 2013. However, a Japanese person in 2013 can expect to live to be more than 80 years old.
How did it do this? Ignoring the complexities and numerous details, Japan developed because it recognized early on that it had to develop its business sector. Development can’t occur without livelihoods and livelihoods come from cash producing jobs.
For example, following the Meiji restoration, Japan developed a system of land taxation, took the funds and invested them into buying second hand sewing machines from Europe. Rather than aiming for labor saving technologies, Japan aimed for labor intensive, individual sewing machines so that it could leverage as many people as possible. What it lacked in economic resources, it made up for in hands. Japan in the 1920’s then became a major exporter of textiles to Europe.
Japan didn’t stop there. Out of its land taxation system, it also made sure that capital was available for merchants wishing to diversify their businesses and encouraged farmers to convert their crops into products. A soy farmer can process his output into tofu and soy sauce. Similarly, a rice farmer can manufacture sake and sell it.
I am looking at the UN’s Millennium Development Goals:
Eradicating extreme poverty and hunger
Achieving universal primary education
Promoting gender equality and empowering women
Reducing child mortality rates
Improving maternal health
Combating HIV/AIDS, malaria, and other diseases
Ensuring environmental sustainability
Developing a global partnership for development
Out of eight goals, not a single one focuses on private sector development and entrepreneurship, which is arguably, if the cases of Japan and Korea are to be applicable to the African context, the key to consistent economic growth.
Where is the ninth goal? Where is the goal which calls for increased access to capital for small and mid level entrepreneurs? Where is the goal that calls for an elimination of onerous export taxes and corruption which kills the ability for businesses to competitively sell their products to the rest of the world? Why is there no call for proper systems of taxation which allow domestic investment?
The goal of sustainable business development is fundamental to the success of at least each of the other eight goals. I suspect that suspicion and cynicism toward the private sector is the culprit. No doubt, this ambivalence toward business killed the Affordable Medicines Facility – malaria, a supply side subsidy intended to increase access to anti-malarial medications in small private drug shops.
Even in public health, which is supposedly focused on holistic solutions to public health problems, the issue of private sector development and the relationship of economics to human health hardly appears.
People in my field seem to be happy to stick with models of pharmaceutical solutions to health problems, delivered through publicly funded health systems. What they fail to address is how to support those public clinics and hospitals though other means than donations from first world countries.
The evidence that Africans will flourish when given appropriate amounts of capital under reasonable terms (not microfinance as it currently exists) is out there. A strategy to give money to the poor, without strings or promise to repay, conditional on a reasonable business plan found that African households will invest in tools or technology to provide them income in the long term. They find that households which enlarge their business through an influx of capital keep their kids in school longer than households which do not.
I did a small survey of business on Lake Victoria, Kenya and found that businesses’ second most common stumbling block (the first was security) was a lack of access to capital. They need money to expand. Microfinance schemes, with their very high interest rates, are not a viable option to most, though loans at more favorable terms to the right people might make a huge difference.
True development will require a dramatic shift in focus for the development world. We will have to face the reality that business is good for human health, that the negatives of entering the cash economy are small compared with the negatives of trying to fruitlessly maintain a pre-colonial lifestyle in a post-colonial world and that Africans themselves are willing to step up to the plate.
Movie of the Week: 三里塚 第二砦の人々 (Sanrizuka: People of the Second Fortress) (Dir: 小川紳介 Ogawa Sinsuke) 1971
The University of Michigan is hosting a series of films from Japanese documentary film production group, Ogawa Productions. Last night I had the pleasure of seeing “Sanrizuka: People of the Second Fortress” for the first time.
Narita airport was built on agricultural land claimed through eminent domain. Some of the residents, who were nearly all peasant families, sold early on and left. A number of families, however, feeling slighted by the Japanese government’s unwillingness to engage them in dialogue, stayed and fought.
This was no sit in protest, but a violent confrontation of peasants against government and private forces. The peasants built elaborate fortresses to prevent construction on the land, deep tunnels to hide in , and used spears, molotov cocktails and hurled projectiles to protect themselves. The Zengakuren (an anarchist group similar to America’s SDS) maintained the front lines armed with spears and throwing stones at riot police.
The entire scene is filmed like a grand Kurosawa epic. Armed forces besiege a well defended fortress on a hill top, while troops on the ground go toe to toe in battle. The riot police were clearly unprepared for the level of violent resistance they encountered and retreat more than once. In desperation, the Japanese government hires non-locals (at a rate of 20,000 yen a day, presumably to minimize liabilities and accountability) to charge in on their behalf.
A few questions came to mind. First, where did the non-locals come from? I’m wondering if they were hired from the day laborer slums of Kamagasaki and Sanya, again illustrating the complex relationship between anti-social dropouts and the State. Day laborers are simultaneously marginalized by the State and completely necessary to its survival. Even as recently as 2011, despite decades of exclusions and abuse, the Japanese government called upon day laborers in Kamagasaki to clean up Fukushima (again for 20,000 yen a day), presumably since few would care about the threats to their health.
Second, the Zengakuren play a major role in defending the fortress. It is mentioned during the film that the Socialist Party of Japan (社会党) initially involved itself, acting on the behalf of the farmers, but at some point during the five year struggle, became disinterested. It was mentioned by others that the Communist Party of Japan (共産党）was also involved. As I was watching the film, I was wondering how the situation could have become as extreme as it did, and though that these political actors might have agitated the farmers to move to more and more extreme methods. If that was the case, then the farmers might have been mere political pawns for an anti-establishment agenda. Though the Zengakuren obviously stuck it out to the bitter end, I’m wondering if they too might have self-servingly exacerbated the situation.
While Ogawa takes time and care to film and interview the farmers, both individually and as a group, not a single member of the Zengakuren speak for the entirely of the film. In fact, Ogawa never even shows them in close-up. Not only do we not know what they think, we don’t even know what they look like. Even more mysterious are the large crowds of bystanders, which are shown only through holes in the barricades the farmers have constructed or on the tops of hills in the distance. We actually know more about the riot police than any of the Zengakuren.
Third, and a minor point, the farmers had set up a tower with which to broadcast inspirational leftist music and speeches to the riot police and bystanders. It’s not clear why the riot police didn’t knock the largely unguarded tower out immediately. Also, though the film is incredibly violent, one has to wonder how much of the violence is performance. All sides had ample opportunity to kill and injure people, but, miraculously, only a handful of people were killed.
When farmer ladies are chaining themselves to trees to prevent airport crews from entering, they make a big production out of wrapping the chains around their neck, but have arranged them in such a way that one would merely have to bend down a bit to break free. One has to question how serious the farmers were, and how much of the fighting they preferred to leave to the Zengakuren, and whether they wanted the anarchists there at all. Though some of the farmers suggest directly engaging the riot police at one point, it is clear that there isn’t much consensus on how violent they were willing to become.
The relationship of the farmers, who prior to the planned building of the airport had likely lived in relative isolation from the rest of Japan, to the outside political upheaval of Japan is perhaps the most interesting part of the film. Though the farmers are very serious about protecting their land and continuing their lifestyles, they seem rather ambivalent to Japan’s political problems, but are regardless resigned to become a part of them.
As with many documentaries from Japan, it’s unclear how sympathetic the film’s producers are to the subjects they have chosen. On the one hand, Ogawa seems to want to advocate on behalf of the farmers, but on the other, he spends much time showing them as isolated and slightly naive. He makes no attempt to deny the futility of their cause.
“People of the Second Fortress” is a fantastic film. The producers risked their lives to make the film. Miraculously, the camera wasn’t smashed during filming.
Here are some great pictures from that time.
Unfortunately, I couldn’t find a clip of “People of the Second Fortress,” but here is an extended clip of one of the films from the same series:
Blog of the Week: Africa is a Country
I just ran across this great must follow blog, “Africa is a Country.”
It’s a collective of many people who write and think about Africa who seek to shatter common notions of what Africa “is” (or “isn’t”). The writing is great and the subject matter fantastic. Posts cover present and past film, books, music, photography and politics form all over the continent.
It’s the blog that “isn’t about famine, Bono, or Barack Obama.”
“Africa is a Country” sports some great articles on such subjects as:
People who go to Africa to snatch up vinyl
Cape Town hip hop
New developments in Nigerian cinema
The beginning of Africa’s first Libertarian political party
One man’s irrepressible hatred for Bono
New music in Mozambique
Mozambiquan photographer Felipe Branquinho
A crazy article on surreal Germans who get wild in Africa
and a great and truly frightening article on how a batshit church in Kansas exports hate and homophobia to Uganda.
In their words:
Of course we don’t literally believe Africa is a Country (unlike say rapper Rick Ross). The title of the blog is ironic and is a reaction to old and tired images of “Africa”. We deliberately challenge and destabilize received wisdom about the African continent and its people in Western media — that definition includes “old (nationally oriented) media,” new social media as well as “global news media”.
Media here means more than journalism; it is also art, music, film, books, graphic design, etcetera. We don’t spend all our time criticizing though. We also celebrate and feature work that we think complicate the old, ahistoric and objectional images. We want to introduce our readers to work by Africans and non-Africans about the continent and its diaspora that have worked against the old and tired images of Africa.
The blog is that, and more. As one of the core members of the collective, Neelika Jayawardane, explains in the “About” section on our Facebook page, Africa is a Country is also about constructing a state of mind. One where the “nation” operates outside the borders of modern nation states in Africa and its continental and conceptual boundaries. So, yes, the blog announces that Africa is indeed a “country,” an imagined community whose “citizens” must reinvent the narrative and visual economy of Africa.
The cost of shipping things to Africa
I was in Durban, South Africa a couple of weeks ago. It turns out that Durban is the busiest port in all of Africa. There are 57 berths and more than 4000 ships load and unload cargo in Durban every single year. The port is open 24 hours a day, seven days a week. Though the largest port in Africa, it is only about half the size of the port of Los Angeles and not even a tenth as big as the largest port in the world, Shanghai.
The Durban port, however, is expensive. It is more expensive to park a ship at Durban than in any American port. Boats must sit in port an average of four days to clear and unload at a cost of nearly $200,000 per day. Owned by a single private company under few restrictions, Transnet is free to charge what it likes and offer service of any quality it likes. In Africa, there are few competitors.
Kenya’s port in Mombasa is even worse. On average, ships must wait nearly nine days in port. The Mombasa port is run by the state owned Kenya Port Authority.
After totaling up costs from extended time at port, onerous duties and fees on imported goods, numerous police “checkpoints” and “inspections,” a single container imported at Mombasa and shipped to Kampala, Uganda can cost nearly $4,000.
Exporting goods is no cheaper. While it takes only 10 days and costs only $1,000 to export a 20 foot container in OECD countries, it takes nearly 40 days and costs nearly $3,000 in the East African Community. If Kenya, for example, really wants to get serious about positioning itself as an export economy, it will have to tackle this major, major problem. Goods sitting in port waiting for “documents” lose value through export fees, storage and lost market opportunities.
Nearly 20% of goods shipped into Mombasa are retail goods. The costs of onerous shipping conditions are, or course, passed on to the consumer. Kenyan and Ugandan consumers pay more in shipping of imported goods as a percentage of the total price of an item than do Americans. Africa has the highest transport costs in the world.
Again, I don’t know why I went down this road, but I’m often thinking of reasons for Africa’s hobbled development. I began to consider the simple costs of goods. Transportation costs amount to more than 30% of the operating expenses of an African business. Minimizing these costs would mean that businesses could potentially reduce prices and increase sales volume. Others share my view:
The Mombasa-Nairobi segment takes on average 29.8 hours, most of this time spent at various regulatory delays, such as waiting at the two weight stations (+ 6 hours), delays to several police checkpoints (+2 hours; there can be 8 to 10 such checks for the 430 km journey) and other driver delays such as rest and personal errands (+ 11 hours). Under normal circumstances the latter would be unnecessary for such a short distance, but the various regulatory delays force the driver to rest a night during transit. A similar distance in North America would be serviced in less than 6 hours. Therefore, such a system hinders economic development because supply chains tend to be unreliable while consumers and manufacturers pay higher prices for goods and inputs. In such a setting, various public authorities are using freight transportation to generate income in a rent seeking (predatory) fashion.
It is not clear that Kenya is using money from ports or “checkpoints” to upgrade current services. I am fairly certain that the money is going into public sector employees’ pockets.
It’s easy to blame “corporate exploitation” for just about everything that’s wrong with Africa. However, there are basic structural problems which complicate doing business there. Just as it costs money to get things in to African countries from port, it costs money to get things out. Until Kenya, for example, upgrades their port facilities and relieves restrictions on trade, the cost of doing business in Africa will remain high. Contracts negotiated by international entities will continue to be unfavorable.
In short, the problem with Kenyan business is only partially with international business. The Kenyan government parasitically profits of the current inefficiencies. Until that problem is mitigated, the poor will continue to pay a premium for just about everything.
Where is the happy medium between free markets and social justice?
Clearly, if American politics are any indication, no one knows.
I’ll have to make this short, but an interesting article appeared in this mornings NYT: “Questions for Free Market Moralists” from Oxford trained philosopher and musician Amia Srinivasen.
Not being a political philosopher myself, much of philosophical the debate on justice, markets and freedom is foreign to me, though I’ve long been interested in the work of John Rawls and his monumental 1971 work “A Theory of Justice.”
Rawls explored the limits of distributive justice, that is, how goods, services and rights can be equitably pass around in a society to maximize benefits to both individuals and society. In a Rawlsian society, each individual has equal access to the same rights and opportunities as all others. Moreover, inequalities (assumed to be inevitable) are arranged such that they benefit the weakest members of society.
Nozick, penned the 1974 book “Anarchy, State and Utopia” (which I have not read) in response to Rawls’ work. He argued that goods and services can only be justly distributed through pure free exchange. The state then serves merely to facilitate exchange by protecting the rights of property.
Srinivasen rightly indicates that most large democracies are decidedly Rawlsian in construction, but that ideologies, particularly in the United States, are swinging toward Nozick (though people might argue that we are becoming more Randian than Nozickian).
Rawls and Nozick represent the two poles of mainstream Western political discourse: welfare liberalism and laissez-faire liberalism, respectively. (It’s hardly a wide ideological spectrum, but that’s the mainstream for you.) On the whole, Western societies are still more Rawlsian than Nozickian: they tend to have social welfare systems and redistribute wealth through taxation. But since the 1970s, they have become steadily more Nozickian. Such creeping changes as the erosion of the welfare state, the privatization of the public sphere and increased protections for corporations go along with a moral worldview according to which the free market is the embodiment of justice. This rise in Nozickian thinking coincides with a dramatic increase in economic inequality in the United States over the past five decades — the top 1 percent of Americans saw their income multiply by 275 percent in the period from 1979 and 2007, while the middle 60 percent of Americans saw only a 40 percent increase.
Nozick’s libertarian position (like Rand), however, leads to some inevitable moral quandries. Is pure “free trade” always fair? Is the exploitation of workers facing few other employment options, and the resultant maximization of profit fair to society?
The problems with Nozick’s position is a problem inherent in neo-classical assumptions that supply and demand markets are based on perfect information between buyers and sellers. It is assumed that buyers know all prices and can make informed choices on purchases.
We know this not to be the case, which is exactly why health markets in the United States are so inefficient and prices so vastly inflated. If one is unconscious from a heart attack, does one really have time to shop around for the best deal possible? Our market approach to health care in the United States has created a system that is neither fair nor efficient.
But the issue here is one of morals. Is it acceptable that we allow for example, loan sharks to exploit the desperate conditions of poverty, or that we allow the poor to sell their organs (or even their daughters), or that we allow the Wal Marts of the world to pay absurdly low wages and offer few benefits, simply because they operate in unemployment-endemic areas of the country?
to concede that there is more to freedom than consent, that there is such a thing as nonviolent exploitation, that people shouldn’t be rewarded and punished for accidents of birth, that we have moral obligations that extend beyond those we contractually incur — this is to concede that the entire Nozickian edifice is structurally unsound. The proponent of free market morality has lost his foundations.
Clearly, there is no happy medium between equality and freedom. What one might call freedom, for example, from exploitation, will be seen as an imposition of the other to realize his or her economic dreams.
OK, gotta go.
Microcredit: Hardly a Panacea for Entrenched Poverty
“A telling example is “microcredit”, the programme of small bank loans to poor women in the global south. Cast as an empowering, bottom-up alternative to the top-down, bureaucratic red tape of state projects, microcredit is touted as the feminist antidote for women’s poverty and subjection. What has been missed, however, is a disturbing coincidence: microcredit has burgeoned just as states have abandoned macro-structural efforts to fight poverty, efforts that small-scale lending cannot possibly replace.”
I have long been skeptical of microcredit (or its sibling, microfinance, I will use the terms interchangeably). Microcredit claims to offer a seemingly simple solution to the problem of female disenfranchisement. It allows poor women access to seed funds with which they can start tiny, income generating businesses. In the past, women has entered microcredit schemes and started cel phone rental business, small shops, textile based businesses and handicraft manufacture. Borrowers are able to then return the money from profits generated from the business. Borrowers return the money with interest.
The problem with microcredit is what’s normally touted as its strength. Microcredit aims to raise the economic profile of women, by empowering them to start small self-proprietorships selling phone time, manufacturing small handicrafts or textile products, or tiny corner stores (dukas).
Anyone who has ever visited Africa knows that once a business idea shows promise, multitudes of people will show up doing the exact same thing. Lines of women selling the exact same tomatoes for the exact same price in the exact same place to the exact same market are not uncommon.
Hypercompetition, though, causes prices to drop and margins to plummet so that no one makes any money. Profits are so low, that the recipients of microcredit wind up doing nothing more than paying back the loan prinicipal and interest so that the only entity that makes money is the lender.
Worse yet, medium sized businesses which might introduce efficiencies and provide reasonable wages and benefits are bumped out of the market, opportunities for employment and diversification of products are missed and the entire economy stagnates. Microcredit’s bottom up strategy directly encourages this phenomenon.
The emphasis on economically empowering individuals, of course, comes straight out of neo-classical economics. “The invisible hand” will turn the tide of developing economies through the hard work of a collection of individuals. The cynic could even evoke a Randian ideal: the lady with the best fruit stand will win.
And this is where I have the greatest problems. Keywords like “empowerment of women” are fine. We should, of course, encourage women to be independent both socially and economically. However, there is nowhere in the world where development has occurred simply by lending women a few dollars at exorbitant interest rates.
Microcredit doesn’t live in a bubble. In fact, it’s part of a number of strategies which are largely doomed to fail, and will do nothing but allow a significant percentage of Africa’s poor to stay right where they are. Strategies aimed at small scale agriculture risk throwing the entire sector backward by impeding the development of medium scale farms which consolidate costs and risks (some writers have even referred to the “primitivisation” of the African agricultural sector).
By far, the worse effect of microlending (and the greater neo-classical, bottom up strategy) is that it lets African governments off the hook. Rather than encouraging governments to standardize and enforce taxation, develop standards of business and production, and create systems which offer medium scale businesses access to credit, microcredit does the opposite.
It idealistically assumes that the “invisible hand” of the individual will correct for any structural problems which may already exist (which should sound like something from the American Republican Party). Microcredit undermines the ability and agency of governments to improve the economic profile of their states.
China, the US Government Shutdown and the “End of the Pax-Americana”
I was perplexed when a recent essay from the Chinese Communist Party’s propaganda mouthpiece XinHua News came running through my social meida feeds. The article in question, “Commentary: U.S. fiscal failure warrants a de-Americanized world,” which spouts a litany of transgressions that the United States has committed throughout the world, calls for an end to the “Pax Americana” and even suggests a new, international currency.
The essay is, of course, quite odd in that it conspicuously ignores China’s dangerous territorial disputes with Japan and overt threats to the sovereignty of Taiwan and the brutal occupation of Tibet. It’s glaring in its zeal to criticize America as a dangerous hegemon, but ignores China’s stated quest to become a broker of all things East Asian. It also fails to offer who would back this new, mythical international currency (can one *really* imagine the world seriously using the Chinese Yuan as a foreign reserve currency?).
The entire article sounds like a wishful hegemon-to-be poking at an existing hegemon, and bizarrely offers itself as a benign counter-factual aligned with the poor and downtrodden of the world.
Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.
Ignoring for the moment how uninterested China is in the having the world respect the key interests of Taiwan and Japan, are we really under the illusion that China cares whether the interests of Sub Saharan African countries are respected or not? Can we really take China’s call for democracy and regional understanding seriously when it fails to do either domestically?
The record of China in developing countries and its commitment to doing anything besides resource extraction, however, is decidedly mixed. Soccer stadiums and lavish dinners for African bureaucrats don’t feed people (except the fat African bureaucrats, of course).
Given its suspicious record, China is a poor spokesperson for the developing world.
Further, the article is laughable in the context of China’s own fiscal and political problems. China’s economy is export driven and follows the same model that Japan and South Korea did by encouraging household savings to fuel investment in public services through interest, while discouraging consumption. Though South Korea and Japan both moved on to consumption economies, it is unclear (at least to me) whether the Chinese Communist Party has the courage to take the political and social risks associated with such a move.
As another blogger pointed out, our disastrous Government shutdown and the public reaction to it are actually indicators that the US system works, and this fact hasn’t been lost on Chinese microbloggers. “Where are the riots?” Political violence, rioting and heavy handed responses are commonplace in China.
In the States, though the shutdown was devastating for public employees and an embarrassing waste of money and time, the effects of the political impasse were largely unfelt by the American populace (outside of some rising blood pressures). Though a repeat performance is infuriating (and inexcusable), it’s interesting to me that the long term effects are few. In fact, I would argue that, despite all of our ideological and social problems, the political system itself may have been strengthened, though it’s too early to tell.
If nothing else, we’ll see a few less Tea Party Republicans in Congress in November of 2014.
The purpose of this post is not to relieve the US of criticism. It deserves plenty. But critics need to be aware that China is not without major problems. Rage on the us all you want, but using China as a benchmark for the future of the United States is wholly unproductive.
The Shutdown is Over, But Who Really Won?
I can’t help but thinking that the biggest winner of this shutdown debacle is the American right wing.
Major media outlets (that I read) are portraying the Tea Party minority and the greater Republican Party as mindless crazies, hell bent on getting their way, no matter how destructive the methods might be. To an extent, this is true, but one has to consider the larger picture.
The extreme American right hates government. They hate that money is taken from citizens and put to programs that benefit programs they don’t like which represent ideologies they don’t like. If the Tea Party were granted three wishes, they would use them all to completely shutter the entire US Government, outside of the military and those functions which preserve and enforce property rights.
The shutdown halted many of the programs that American right wingers hate most. Poor people were unable to access welfare benefits. The NSF and the NIH were shutdown which affected me personally as I am currently applying for grants from both. The EPA and the CDC were both shut down. In the latter case, disease monitoring ceased and lab testing for rare diseases, some of which are ONLY available at the CDC.
And here is where it all lies. Shuttering grant funding agencies and labs which exclusively provide testing services impacts us not merely in the short term. By demonstrating once that a shutdown is possible, and further showing that it can and will happen again in the near future, people who use lab testing services, for example, will begin to explore other options. Everyone wants a back up.
This is where the Tea Party wins. This particular section of American politics wishes that state services were privatized. In the case of labs and grant support, I think that researchers in 2013 are savvy enough that they might just get their wish. Since the US Government has shown that we can’t depend on it, we will naturally start looking to the private sector to provide support.
The trouble is that the private sector isn’t necessarily interested in providing costly and underutilized services to test for rare diseases. There is no profit in disease surveillance, and very few tangible, short term monetary rewards for doing things like malaria research or health problems of marginalized populations in the US. The private sector might step up to replace at least some of these services, but they’ll do it in a patchy, inefficient and very costly and indifferent manner.
True, there are some private foundations which support research (Gates would be an example) but their contribution and focus is limited compared to that of the NIH, NSF, HHS, CDC and a host of other government agencies which support research and monitoring.
So, while the Tea Party and the Republicans may have lost the poltical battle and may even lose a few seats in the mid terms next year and might not even get the executive in 2016, they’ve won the ideological battle simply by forcing Americans to look for options to government provided services.
In short, we lost and the world loses, too.
Global Inequality: Is it getting better or worse?
Yes, the elites worldwide are making more money than ever before, while incomes among their less well-to-do countrymen stagnate. As an American, I see this everyday, especially on payday. That this is occurring even in poor countries is hardly a surprise, as the richest in every country are linked to the same global system which disproportionately rewards them.
Developing countries have it worse off, though, as they often don’t have systems in place to effectively tax the wealthiest and reinvest the money to reinvest into the economy. Poor countries are hobbled by bad policy which allows the wealthy to accumulate more and more wealth, which they spend and store abroad. Moreover, poor countries don’t proactively expand access to capital for small and upcoming entrepreneurs and they don’t effectively invest in infrastructure that might help support new ventures.
To me, it’s not the system of global capitalism that’s at fault here, but rather the lack of checks on rent seeking behavior of political elites in developing countries that has allowed this to happen.
But I digress.
The graph on the left is from an excellent report from the Conference Board of Canada, which takes on this specific question: Is inequality becoming better or worse globally. In the report they specifically ask whether inequality between countries is becoming better or worse.
The Gini coefficient is a measure of inequality within groups. It ranges from 0 to 1, 0 being complete equity and 1 being the case where a single person owns all the resources of the area of interest. Among developed countries, equitable Sweden has a Gini of .25, while unequal America has a Gini of .45. Many of the most unequal countries on the earth are in Africa. Angola’s Gini is .58.
The graph above tracks the Gini, or the measure of inequality of Gross Domestic Product between countries, over time. You can see that GDPs around the world were consistently unequal (or at least as unequal as incomes in the United States) until approximately 1982, at which time many of the wealthiest countries of the world started to take off. The Gini starts to come down a bit around 2000, and has been dropping consistently since then.
From 1960 to approximately 2000, economies in Africa were mostly stagnant. I suspect that the decrease in the Gini post 2000 represents some of the growth that we’ve seem throughout Africa since then, along with the rise of India and Brazil.
The world GDP Gini is now approximately .52, or a little more unequal than incomes in the United States or as unequal as incomes in Paraguay, Swaziland or Chile. While I’m encouraged that the number is going down, we clearly still have a lot of work to do.
Some inequality is unavoidable. Some countries simply have more resources available to them, are better are certain industries than others and aren’t mired in intractable social, political or public health problems. However, at present global inequality is at a level that does no one any favors at all. At present rate, we will probably never get back to where we were in 1960, though as GDPs increase overall, life might just end of better for everyone anyway. A high level of inequality, however, means that some states will have disproportionately high political power and some none at all.
SO, Question: Is global inequality getting better or worse? Answer: better, but after years of getting worse.