Social Inequality as the Antagonism of
Humanity
The
intensification of the social inequality in the world creates a fertile ground
for aggressive actions against the existing political order, undermines
democracy and actually stimulates terrorism, extremism, crime, migration, degrades human personality .
14 октября 2024 года
The Royal Swedish Academy of Sciences has decided to award the 2024
Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Daron
Acemoglu, Simon Johnson and James A. Robinson “for studies of how institutions
are formed and affect prosperity.”
Why Nations Fail: The Origins of Power, Prosperity,
and Poverty
Institutions as the Fundamental Cause of Long-Run Growth
Brilliant and engagingly written, Why Nations Fail answers the
question that has stumped the experts for centuries: Why are some nations rich
and others poor, divided by wealth and poverty, health and sickness, food and
famine?
D. Acemoglu, Simon Johnson, James A. Robinson
https://doi.org/10.3386/W10481
This paper develops the empirical and theoretical case that differences
in economic institutions are the fundamental cause of differences in economic
development. We first document the empirical importance of institutions by
focusing on wo quasi-natural experiments" in history, the division of
Korea into two parts with very different economic institutions and the
colonization of much of the world by European powers starting in the fifteenth
century. We then develop the basic outline of a framework for thinking about
why economic institutions differ across countries. Economic institutions
determine the incentives of and the constraints on economic actors, and shape
economic outcomes. As such, they are social decisions, chosen for their
consequences. Because different groups and individuals typically benefit from
different economic institutions, there is generally a conflict over these
social choices, ultimately resolved in favor of groups with greater political
power. The distribution of political power in society is in turn determined by
political institutions and the distribution of resources. Political
institutions allocate de jure political power, while groups with greater
economic might typically possess greater de facto political power. We therefore
view the appropriate theoretical framework as a dynamic one with political
institutions and the distribution of resources as the state variables. These
variables themselves change over time because prevailing economic institutions
affect the distribution of resources, and because groups with de facto
political power today strive to change political institutions in order to
increase their de jure political power in the future. Economic institutions
encouraging economic growth emerge when political institutions allocate power
to groups with interests in broad-based property rights enforcement, when they
create effective constraints on power-holders, and when there are relatively
few rents to be captured by power holders. We illustrate the assumptions, the
workings and the implications of this framework using a number of historical
examples." https://www.openread.academy/en/paper/reading?corpusId=263020556
«Economic Backwardness in Political Perspective» («Экономическая
отсталость в политической перспективе»)
Daron
Acemoglu & James A. Robinson
We
construct a simple model where political elites may block technological and
institutional development, because of a 'political replacement effect'.
Innovations often erode elites' incumbency advantage, increasing the likelihood
that they will be replaced. Fearing replacement, political elites are unwilling
to initiate change, and may even block economic development. We show that
elites are unlikely to block development when there is a high degree of
political competition, or when they are highly entrenched. It is only when
political competition is limited and also their power is threatened that elites
will block development. We also show that such blocking is more likely to arise
when political stakes are higher, and that external threats may reduce the
incentives to block. We argue that this model provides an interpretation for
why Britain, Germany and the U.S. industrialized during the nineteenth century,
while the landed aristocracy in Russia and Austria-Hungary blocked development…:
https://www.nber.org/papers/w8831
Economic Development and Democracy: Predispositions
and Triggers
Treisman, Daniel
Scholars
continue to disagree about the relationship between economic development and
democracy. I review the history of the debate and summarize patterns visible in
data available today. I find a strong and consistent relationship between
higher income and both democratization and democratic survival in the medium
term (10–20 years), but not necessarily in shorter time windows. Building on
several recent studies, I sketch out a new conditional modernization theory,
which can account for such lags. The key idea is that the effect of development
on democracy is triggered by disruptive events such as economic crises,
military defeats, or—most generally—leader change. Political outcomes depend on
both the development level and, at intermediate income ranges, how citizens
coordinate. Waves of leader turnover in autocracies correlate with temporarily
stronger links between income and democratization, which, in turn, coincide
with the first two waves of democracy…: https://www.semanticscholar.org/paper/Economic-Development-and-Democracy%3A-Predispositions-Treisman/2de2b81d72ce70db72e9593c6a1f0cc1a11c9057
Daron
Acemoğlu, James A.
Robinson
Brilliant and engagingly written, Why
Nations Fail answers the question that has stumped the experts for
centuries: Why are some nations rich and others poor, divided by wealth and
poverty, health and sickness, food and famine?
Is it culture, the weather, geography? Perhaps ignorance of what the
right policies are?
Simply, no. None of these factors is either definitive or destiny. Otherwise,
how to explain why Botswana has become one of the fastest growing countries in
the world, while other African nations, such as Zimbabwe, the Congo, and Sierra
Leone, are mired in poverty and violence?
Daron Acemoglu and James Robinson conclusively show that it is man-made
political and economic institutions that underlie economic success (or lack of
it). Korea, to take just one of their fascinating examples, is a remarkably
homogeneous nation, yet the people of North Korea are among the poorest on
earth while their brothers and sisters in South Korea are among the richest.
The south forged a society that created incentives, rewarded innovation, and
allowed everyone to participate in economic opportunities. The economic success
thus spurred was sustained because the government became accountable and
responsive to citizens and the great mass of people. Sadly, the people of the
north have endured decades of famine, political repression, and very different
economic institutions—with no end in sight. The differences between the Koreas
is due to the politics that created these completely different institutional
trajectories.
Based on fifteen years of original research Acemoglu and Robinson marshall
extraordinary historical evidence from the Roman Empire, the Mayan city-states,
medieval Venice, the Soviet Union, Latin America, England, Europe, the United
States, and Africa to build a new theory of political economy with great
relevance for the big questions of today, including:
- China has built an authoritarian growth machine. Will it
continue to grow at such high speed and overwhelm the West?
- Are America’s best days behind it? Are we moving from a virtuous
circle in which efforts by elites to aggrandize power are resisted to a vicious
one that enriches and empowers a small minority?
- What is the most effective way to help move billions of people
from the rut of poverty to prosperity? More
philanthropy from the wealthy nations of the West? Or learning the hard-won
lessons of Acemoglu and Robinson’s breakthrough ideas on the interplay between
inclusive political and economic institutions?
https://www.goodreads.com/book/show/12158480-why-nations-fail
The Poverty and Shared Prosperity series
provides a global audience with the latest and most accurate estimates on
trends in global poverty and shared prosperity, as well as in-depth research
into policies and interventions that can make a difference for the world’s
poorest. The 2016 edition takes a close look at the role that inequality
reduction plays in ending extreme poverty and improving the livelihoods of the
poorest in every country. It looks at recent country experiences that have been
successful in reducing inequality, provides key lessons from those experiences,
and synthesizes the rigorous evidence on public policies that can shift
inequality in a way that bolsters poverty reduction and shared prosperity in a
sustainable manner. In doing so, the report addresses some myths about the
global picture of inequality, and what works to
reduce it.
Poverty
1 in 10 people in the world live under
$1.90 a day, and half of the extreme poor live in Sub-Saharan Africa
Global extreme poverty continues to fall rapidly. In 2013, the year for
which the most comprehensive data on global poverty is available, 767 million
people, or 10.7 percent of the population, were estimated to be living below
the international poverty line of $1.90 per person per day. Around 100 million
people moved out of extreme poverty from 2012 to 2013, and since 1990, nearly
1.1 billion people have escaped extreme poverty. The global poor are
predominantly rural, young, poorly educated, are mostly employed in the
agricultural sector, and live in larger households with more children.
Despite progress, extreme poverty remains unacceptably high, especially in
Sub-Saharan Africa. The region now has the largest number of extreme poor in
the world, 389 million, which accounts for half of the total number of extreme
poor in the world, and more than all the other regions combined. The decline in
extreme poverty was largely fueled by the rapid advances in two regions – East
Asia and the Pacific and South Asia –specifically in China, Indonesia, and
India.
Shared Prosperity
In 60 of 83 countries monitored, the
incomes of the poorest 40 percent grew
The larger the growth rate in the income of the bottom 40, the more quickly
prosperity is shared among the poor. Despite the global financial crisis of
2008 and 2009, in 60 of the 83 countries studied, the bottom 40 experienced
positive income growth, representing 67 percent of the world’s population. In
49 countries, the income growth of the poorest 40 percent of people exceeded
that of the top 60. However, in 23 countries, mostly high-income industrialized
ones, the poorest 40 percent saw their incomes actually decline.
East Asia and the Pacific, Latin America and the Caribbean, and South Asia
registered the best average growth performance among the bottom 40 with
annualized rates of 5.0 percent, 4.1 percent, and 3.7 percent, respectively. On
the other hand, the bottom 40 in the industrialized countries experienced an
average contraction of 1 percent of their income.
*Note: an earlier
version of the report erroneously reported inaccurate shared prosperity data
for Israel, which have since been removed.
Inequality
Tackling inequality vital to ending
extreme poverty by 2030
As sluggish growth threatens to roll back the gains of the last 25 years,
tackling income inequality can play an important role in ending extreme
poverty. If countries act strategically to cut inequality, they’ll lift more
people out of poverty faster. If families have vastly different economic
resources, some children in some families will face an unfair start in life and
policies have to make greater efforts to overcome these differences at a later
stage.
Inequality between people in the world has been going down since 1990,
driven by a convergence in average incomes across countries, especially rising
incomes in China and India. And though within-country inequality is higher than
it was 25 years ago, progress since 2008 shows that for every country in which
inequality widened, there were two countries in which inequality narrowed. This
positive news aside, there remains real concern over the share of incomes
controlled by top earners, and it is important to gather more information on
this issue.
Country Perspectives
In the past decade
many low- and middle-income countries have successfully cut their levels of
poverty and income inequality. These countries have shown that it’s possible to
reduce inequality under widely different circumstances and contextual factors
not under their control have played a substantial role in enabling their
progress against inequality. The countries analyzed are – Brazil, Cambodia,
Mali, Peru, and Tanzania.
·
Brazil’s rising minimum wage and expanding safety net programs have accounted
for 80 percent of the decline in inequality.
·
Before the outbreak of conflict, Mali’s high cereal production helped raise
farm production and off-farm labor income resulting in reduced inequality.
·
Boosted by prudent macroeconomic policies and high commodity prices, Peru’s
labor market, which closed the wage gap between formal and inform workers and
provided higher participation rates, was the main driver for the country translating
higher growth into reducing inequality and poverty.
·
Cambodia’s diversification of the economy from agriculture into light
manufacturing opened labor opportunities for the poor.
·
Tanzania’s commitment to policies explicitly aimed at rendering income
distribution more equitable and a surge in retail trade and manufacturing,
which has allowed the inclusion of less well skilled workers into the economy,
have contributed to the progress in reducing poverty.
When we analyze the
drivers of inequality reduction, we find several constants including strong
growth, good macroeconomic management, and well-functioning labor markets that
create jobs and enable the poorest to take advantage of the available
opportunities.
Policy Perspectives
Many effective policy
options exist for countries that decide to tackle inequality. Evidence points
to six high-impact strategies that have helped reduce inequality and poverty,
and so have contributed to better opportunities and stronger growth in a number
of contexts.
·
Early childhood development and nutrition interventions
·
Universal health coverage
·
Universal access to quality education
·
Cash transfers to poor families
·
Rural infrastructure – especially roads and electrification
·
Progressive taxation
Some of these measures
can rapidly affect income inequality while others deliver benefits more
gradually. However, these policies have worked repeatedly in different settings
around the world and credible versions of some are within the financial and
technical reach of virtually all countries.
OECD Income Distribution Database (IDD): Gini,
poverty, income, Methods and Concepts
To benchmark and monitor income
inequality and poverty across countries, the OECD relies on a database based on
national sources (household surveys and administrative records) and on common
definitions. Indicators are based on the concept of “equivalised household
disposable income”, i.e. the total market income received by all household
members (gross earnings, self-employment income, capital income), plus the
current cash transfers they receive, less income and wealth taxes, social
security contributions and current transfers that they pay to other households.
Household income is adjusted with an equivalence scale that divides total
household income by the square root of household size. Standard concepts and
definitions of household incomes are provided by the Canberra Group Handbook on
Household Income Statistics (United Nations, 2011).
In 2015, the OECD changed its standard
definition of household income. The revision goes in the direction of
bringing the OECD income definition closer to the “operational definition”
recommended by the 2011 Canberra Group Handbook. Key changes in the new
definition include: i) the inclusion of the value of goods produced by
households for their own consumption, as an element of self-employed income;
and ii) the deduction of current transfers paid by households to non-profit
institutions and other households (e.g. alimonies). As a result, current
transfers paid by households now distinguish among: i) taxes on income and
wealth and social security contributions paid by workers; ii) contributions to
employment-related occupational schemes; and iii) current transfers paid by
households to non-profit institutions and other households.
In addition, a more detailed breakdown of
current transfers received by households was implemented. This distinguishes
among transfers received from: i) social security schemes; ii)
employment-related occupational schemes; and iii) other households and
non-profit institutions. This change allows more fine-grained measures of
redistribution by distinguishing between “primary income” (income from work and
capital and net transfers from other households), “market income”( primary
income plus transfers received from employment-related schemes), “gross income”
(market income, plus transfers received from social security schemes, less
transfers paid to employment-related occupational schemes) and “disposable
income” (gross income less taxes and other current transfers paid). Current
transfers paid by households to non-profit institutions and other households,
which were previously included in “capital income”, are now separately
identified as a component of “current transfers paid by households”.
While the new income definition implies a
break in OECD historical series (data based on both the old and new definition
are shown separately in OECD.Stat), data are available for at least one
common year (typically either 2011 or 2012) based on both definitions. The
pre-2011 data described in this brief have been corrected for this break. The
corrected values proved to be significantly different from original values only
in a handful of countries (notably Chile and Israel) and very limited or
insignificant in the others. The inclusion of the value of goods produced by
households for own consumption provides the basis for the progressive
integration in the OECD database of estimates for selected middle-income
countries, where subsistence agriculture accounts for a significant share of
household economic resources. In most OECD countries for which information is
available, the value of goods produced by households for own consumption is
generally below 1% of household income but much higher in Mexico, where it
accounts for 4% of household income (see Table 1). This income item is also
more important for low-income households. The inclusion of goods produced by
households for their own consumption lowers both income inequality and the
proportion of people falling below the poverty-threshold. In Mexico, the ratio
between the income received by people in the highest quintile to that received
by those in the lowest one decreases from 13.7 to 11.5 in 2012; the Gini
coefficient for disposable income falls from 0.482 to 0.457 and the share of
people below the poverty line, from 21.4% to 18.9% (although these changes also
reflect methodological changes introduced by the statistical office to measure
income at the bottom of the income scale). The effect on inequality and poverty
measures is smaller in all other countries.
7 Importance of goods produced by households
for their own consumption among the entire population and the lowest quintile
of the income distribution
( Percentage of household
disposable income)
Database managers:
Benoit.Arnaud@oecd.org, Maxime.Ladaique@oecd.org and Elena.Tosetto@oecd.org.
|
|
Gini
coefficient of disposable income inequality in 2014 (or latest year), 2010
and 2007, total population
|
|
Real disposable income growth between 2007 and 2014 (or latest year) by
income group, total population, OECD
average
|
|
Panel A. Real labour income growth 2007-2014, by income group, OECD
average
|
Panel B. Annual average real labour income growth, 2010-2014, by income
group
|
|
Inequality before and after redistribution though transfers and taxes,
respectively, 2007=100, working-age population, OECD average
|
|
Percentage reduction of market income inequality due to taxes and
transfers, 2007 – 2014
|
|
Change in market and disposable incomes, public cash transfers and taxes
(real terms), 2007=100, working-age population, OECD average
|
|
|
Percentage of household disposable income
|
Billionaire fortunes grew by $2.5 billion
a day last year as poorest saw their wealth fall
public-good-private-wealth-210119-summary:
https://oxfam.app.box.com/s/f9meuz1jrd9e1xrkrq59e37tpoppqup0/file/385579401962
Global MPI 2018
The United Nations
development Programme (UNDP) and the Oxford Poverty and Human Development
Initiative (OPHI) developed a new version of the global Multidimensional
Poverty Index (MPI). The global MPI covers 105 countries in total, which are
home to 77 per cent of the world’s population, or 5.7 billion people. Of this
proportion, 23 per cent of people (1.3 billion) are identified as
multidimensionally poor.
For the 2018 global MPI,
five of the ten indicators have been revised jointly by OPHI and UNDP to align
the MPI with the 2030 Agenda. This is in response to the Agenda’s call for a
better measure of progress toward Sustainable Development Goal (SDG) 1 – “to
end poverty in all its forms” – and to help achieve the principle of leaving no
one behind.
Our analysis of 2018
global multidimensional poverty offer both a global headline and fine-grained
analysis for children, rural areas, 1127 subnational regions across 88
countries, 640 districts in India, and other critical subgroups. The purpose is
only in part to inform and at times alarm: more fundamentally, the purpose is
to empower and incite action that ends acute poverty across many dimensions.
If you are interested and
download in individual countries, we have Country
Briefings for each of the 105 countries that make up the global
MPI 2018.
This animation provides
an overview of the global MPI 2018.
An
End in Itself and a Means to Good Ends:
Why
Income Equality is Important
“The social system is not an unchangeable
order beyond human control but a pattern of human action.”—John Rawls
(1971, p. 102)
In recent years “poverty reduction” has
become the watchword in development agencies, in international lending
institutions, and among development economists generally. The focus on poverty reduction reached a high
point perhaps with the articulation of the Millennium Development Goals (MDGs)
and with the extensive analytic work that has accompanied the MDGs.
Yet, much of the discussion of poverty
reduction and economic development in low and middle income countries has
either ignored the issue of income distribution or has tended to view income
distribution only in terms of its impact on economic growth.
Poverty and inequality, however, are
intimately bound up with one another.
Both as an analytic issue and as a policy
issue, there are severe limitations in attempting to deal with poverty – or,
more broadly, with economic well-being – without also examining income
inequality. Indeed, it is questionable
that we can even define poverty independently of income distribution.
In this essay, I want to develop the
argument that economists and economic policy-makers should focus much greater
attention on inequality as measured by the distribution of income (and
wealth). The traditional focus simply on
absolute levels of income as a measure of poverty and economic well-being is
fundamentally flawed. My argument here
has thee parts:
·
Poverty or, more generally, economic well-being
cannot be effectively defined as distinct from income distribution.
·
Income distribution is fundamental to our
understanding of justice (fairness) and human rights, and relative economic
equality has intrinsic value. Especially
important, the dichotomy commonly drawn in discussions of societal values
between “equality of opportunity” and “equality of outcome” is largely
non-existent.
·
Greater equality of income distribution tends to
bring about other desirable social outcomes – for example, in the realms of
health and crime.
The following
sections will take up each of these parts of the argument.
Although relative equality is a widely
shared value, policies that would engender greater equality are often opposed
on the grounds that they would violate liberty or undermine economic growth or
both. I will comment on these objections
in the conclusion.
A
point of clarification: When I assert
that income inequality is a problem and that equalization of the income
distribution is desirable, my concern is with a direction of change, not with a
particular outcome. In most parts of the
world today – to say nothing of the world as a whole – income is very unequally
distributed. For reasons I will explain
this is highly undesirable. That does
not mean, however, that equality in some absolute sense, either in terms of
people’s incomes or capabilities, should be the goal of societies. To argue for significantly less inequality
leaves open the question of what degree of inequality, if any, should be the
social goal. (I will sometimes use the
term “relative equality” to indicate this direction of change, meaning relative
to the widespread high degree of inequality that widely exists.)
“Poverty is not a certain amount of goods,
nor is it just a relation between means and ends; above all it is a relation
among people. Poverty is a social
status.”— Marshall Sahlins (1974, p. 37)
“At the risk of
oversimplification, I would like to say that poverty
is an absolute notion in the space of capabilities but very often it will take
a relative form in the space of commodities…”—Amartya Sen (1983, p 161)
In recent years, as I have noted, there
has been an increasing concern among economists and policy makers with poverty
in the sense that poverty itself is seen as an important focus of policy. This is true with regard to low-income
countries, and it has also been an issue at various times in the relatively
high-income countries.
It has not always been this way. With the burgeoning of development economics
in the era of decolonization after World War II, attention was almost
exclusively focused on economic growth.
This approach was based on the assumption that economic growth would –
at least in the long run – improve everyone’s position, the position of the
poor as well as the position of the rich.
As it became increasingly clear, however, that economic growth, when it
took place, was not relieving the material deprivation of huge numbers of
people – or at least not doing so with sufficient speed – it began to become
apparent that it would be necessary to address poverty more directly.
As attention then shifted directly to
poverty, it became necessary to specify just what poverty meant – or, more
generally, what economic well-being meant.
Usually, poverty has been defined in terms of some absolute standard,
the amount of income needed to provide basic needs. In the United States, for example, the
poverty line in 2008 for a family of four was $21,200. For low-income countries, a similar absolute
standard, though at a very different level, is generally used. The World Bank’s definition, which is widely
accepted (though also widely criticized), is set at $2/day, in terms of 1990
purchasing power parity. Dollar
inflation since 1990 would make this figure about $3.25 in 2008 prices, or
$4,745 annually for a family of four.
The Bank defines “extreme poverty” as half of this, or $2,372.50 for a
family of four. While there is a great
deal of controversy over these numbers and how they are calculated – especially
over how the number of people “in poverty” has changed over time – there is
little dispute about the idea that poverty, or well-being, is defined in terms
of some amount of goods and services, the basic needs – or the money it takes
to meet those basic needs.
Yet there are
several problems with this definition.
As Amartya Sen has argued, basic needs are best understood as
capabilities, and not all capabilities can be achieved simply with money. The capability to be free from disease, for
example, depends upon a broad set of social conditions; the capability to
travel depends in part on the public good of a transportation infrastructure;
and the capability to be educated also relies heavily on public goods. Sen sees poverty as absolute in terms of
these capabilities, but in terms of commodities (income) poverty becomes
relative, determined by the standards of the particular society.
The concept of basic needs – the concept
generally used to define poverty – when expressed in terms of commodities, is
highly socially contingent. This social
contingency is clear, for example, in the dramatic difference between the
$21,200 that marks the poverty line in the United States and the $4,745 that
defines the line in the low-income countries of the world. People’s standards, their concept of basic
needs, depend on the societies in which they live.
Furthermore, the definition and extent
of poverty will depend not only on the level of a society’s income, but also on
the distribution of income. It seems
reasonable to assume that a society’s standards, the norm of what is needed,
are largely determined by the standard of living of those people in the
middle. Then, if we consider two
societies in which the bottom segments, say the bottom quintiles, have the same
level of income, poverty will be greater in the society where income is more
unequally distributed. In the more
unequal society, the bottom quintile will be further from the middle and thus
further from meeting the standards of that society; the greater the inequality,
the less the group at the bottom will be able to meet society’s socially determined
needs and thus the more will the members of this group be in poverty.
All this is very well, but even in this
relative concept of poverty, people’s condition, their poverty, is defined as a
relation between people and things (the quantity of things represented by the
level of income). Yet implicit in the
relative concept of poverty is that poverty is a social condition, a relation
among people – as stated in the quotation above from Marshall Sahlins. In making his point, Sahlins (1974, p. 37) argues,
“The world’s most primitive people have few possessions, but they are not
poor.” When a whole society –
hunter-gatherer societies, are the case in point – has few possessions, there
is no segment of that society that is considered poor. It is only when these peoples are
incorporated into larger societies, conceptually and practically, that they
become “poor” – failing to meet the standards of basic needs in that larger
society. Thus it is their social status,
their relation to others in society, that places them in poverty.
The
point here is not that people’s absolute deprivation is irrelevant to their
material well-being. The point is simply
that people’s relative position is also not irrelevant to their material
well-being. We cannot eliminate poverty
while the distribution of income remains highly unequal.
Justice, Fairness and Inequality
The Intrinsic Value of Equality
“Why is equality a value?... the basic reason it matters to us is
because we believe that there is something valuable about human relationships
that are – in certain crucial respects at least – unstructured by differences
of rank, power, or status.”—Samuel Scheffler (2005, p. 17)
Material
equality, or at least the absence of extreme inequality, has intrinsic value
and is in some sense a human right.
There is a variety of rationales behind this assertion. One follows directly from the observation
that basic needs are socially contingent (as argued in the previous
section). Andrei Marmor (2003), for
example, argues from the assumption that people have a fundamental right to
meet their basic needs and that basic needs are socially determined. Therefore
with greater inequality the larger will be the group of people who cannot meet
those needs, who are being denied by the economic structure this fundamental
right. Then, since there is intrinsic
value in people having their fundamental rights and, in particular, this right
of meeting their basic needs, material equality (at least a good degree of
material equality) becomes of intrinsic value.
Within
the realm of modern philosophy, it is perhaps the ideas of John Rawls (1971)
that are most strongly associated with the concept that a just or fair society
is one of relative equality. Rawls
argues that reasonable people choosing a social order from behind a “veil of
ignorance” – that is, ignorance about where they themselves would be situated
in that society – would choose a society with a high degree of material
equality. From his basic postulates
about fairness, justice, human behavior and needs, he defines his “difference
principle” as the guide for judging social policy and social change: “The
intuitive idea [of the difference principle] is that the social order is not to
establish and secure the more attractive prospects of those better off unless
dong so is to the advantage of those less fortunate.”(p. 75).
Yet
Rawls is not arguing for equality of outcome (or condition) but stays within
the realm of advocating equality of opportunity. He avows (p. 100): “…in order to treat all
persons equally, to provide genuine equal opportunity, society must give more
attention to those with fewer native assets and to those born into the less
favorable social positions.” And Rawls takes a relatively broad view of “native
assets,” arguing that there is no good reason why people with less natural
skills, intelligence, or innate characteristics of personality that would often
(in most circumstance of the real world) contribute to economic success should
be consigned to a lower economic condition because of these traits. He argues that society should provide redress
for these traits, and thus rejects the idea of what he calls a “callous
meritocratic society.” In this sense,
the thing of intrinsic value for Rawls is not so much equality itself as
fairness or equality of opportunity. Yet
the outcome, given his rejection of “callous” meritocracy, would be relative
equality of outcome.
There
are several other philosophers whose work is associated with valuing equality
who develop their argument from postulating the intrinsic value of equality of
opportunity – for example, Ronald Dworkin (1981), G.A. Cohen (1989) and John
Roemer (1998). These authors, and Rawls,
have various outlooks on what constitutes “native assets,” some adopting a broader
view (e.g., including tastes or personality traits) and some adopting a
narrower view (e.g., rejecting the idea that tastes or personality traits are
part of an individual’s “native assets”).
Nonetheless, they – and many other liberal egalitarians – argue from the position that equality of
opportunity means that inequalities of outcome are not legitimate if they arise
from characteristics for which people themselves are not responsible. Indeed, one might go so far as to argue that
conservatives, who give greater emphasis to the difference between equality of
opportunity and equality of outcome, differ from the liberals largely in terms
of what they view as the individual’s responsibility.
Conservatives (at least modern conservatives)
would tend to include only such characteristics as race, ethnicity and gender
as traits for which the individual is not responsible. Conservatives, however, would tend not to
advocate redress for these characteristics, but simply advocate that society
not use them as a basis for discrimination.
The issue of the connection between equality of opportunity and equality
of outcome will be given more attention shortly.
The
argument, however, that equality of outcome – or, at least, the absence of
extreme inequalities – derives from the intrinsic value of equality of
opportunity is not the same as claiming that equality of outcome itself has
intrinsic value. Fairness as embodied in
equal opportunity is good, but it is not all that is good in relation to
economic equality. Even leaving aside
the argument (noted above) that follows from defining economic well-being and
basic needs in relative terms, there are strong reasons to view equality of
outcome as having intrinsic value.
This
intrinsic value of equality of outcome is well captured in the Sheffler
quotation above, that “there is something valuable about human relationships
that are …unstructured by differences of rank, power, or status.” Sheffler is not directly addressing differences
of income and wealth. Yet, while it is
conceptually possible to have differences of income and wealth that are not
accompanied by differences of “rank, power, or status,” this seems highly
unlikely, to say the least, in the real world.
A similar idea
is expressed by Erik Olin Wright (2000, p. 145): “…income inequality …
fractures community, generates envy and resentment, and makes social solidarity
more precarious.” The pernicious impacts
of income inequality that concern Wright depend at least in part on the origins
and degree of the inequality. If, for
example, the inequality is largely based on race or ethnicity or gender, as is
so often the case, then it will be generally perceived as unfair (except,
perhaps, by those at top) and generate considerable resentment. Similarly, when inequalities are seen as
arising from family privilege, they will tend to be viewed by many people as
illegitimate and unfair. Income
inequalities that are seen as arising from differences in skills or efforts are
less likely to be viewed as illegitimate (the views of Rawls and some other
liberal egalitarians notwithstanding).
Nonetheless, if inequality is large as it is in much of the world today,
it is likely to be viewed as unfair – and thereby undermine social solidarity –
because few people would view legitimate bases of inequality (e.g., differences
in effort) as generating large inequalities.
Thus
the intrinsic value of relative economic equality (of outcome) exists because
it is a foundation for the type of social relations that we consider desirable
– relations of solidarity, trust, and amiability. In this sense, the value of relative equality
can be seen in terms of its role in creating and being part of a democratic
social order. The connection between
relative equality and the social relations of a democratic social order is so
intimate that the equality is really part of those relations, not an instrument
that generates their existence. (As we
shall see, however, equality and the social relations that go with it are an
important instrument for a set of positive social outcomes. Also, but beyond my scope here, they are an
instrument as well for the effective operation of political democracy.)
Equality of Opportunity and Equality of Outcome
“…more effort should be directed specifically towards exploring the
hypothesis that, within the class structure of industrial societies, inequality
of opportunity will be the greater, the greater the inequality of condition –
as a derivative, that is, of the argument that members of more advantaged and
powerful classes will seek to use their superior resources to preserve their
own and their families’ positions.”—Robert Erikson and John Goldthorpe
(1992, p. 396)
“A society with highly unequal results is, more of
less inevitably, a society with highly unequal opportunity, too”—Paul Krugman (2007, p. 249)
Yet
there remains the continuing dispute over whether we should value equality of
opportunity or equality of outcome.
Having finally recognized that equity is an issue, the World Bank (2006)
has been adamant in arguing (p. 3) that the focus in economic development
should be on equality of opportunity and that “the policy aim is not equality
in outcomes.” The Bank does
include in its concept of equity, along with equal opportunity, “that
individuals should…be spared from extreme deprivation in outcomes.” (p. 2) Yet this seems a very limited qualification of
its rejection of equality of outcomes and is far from a push towards economic
equality. The problem is that equality
of opportunity for one generation is to a large degree dependent on equality of
condition (outcome) in the previous generation.
That
is, there are strong reasons to believe that there is a large degree of
dependence of equal opportunity for generation X on the equality of condition
for generation X-1, which is to say that equal opportunity within generation X
depends largely on the conditions under which members of generation X spend
their childhood. The point can be stated
in the most narrow terms of human capital formation. Children’s schooling and their healthcare in
virtually all societies are highly dependent on the social position and income
level of their families. This dependence
is somewhat attenuated by the spread of public education and by the existence
of national healthcare programs in many advanced industrial countries. But public schools are highly unequal in a
way that is associated with income inequality, and, where public schools are
less unequal, the upper classes tend to send their children to private
schools. Moreover, neither school
outcomes nor healthcare outcomes are determined simply by the formal systems of
education and healthcare, but also by a broad array of social conditions – inside
and outside the family – that are more advantageous for the progeny of the
wealthy than for those of the poor.
Yet if there is not equality in the formation
of these basic aspects of human capital, there can hardly be equality of
opportunity. And we might well stretch
the argument to point out that economically important aspects of personality –
most notably self-confidence and expectations – are affected to a significant
extent by one’s childhood social status and thus reinforce the dependence of
opportunity upon condition.
Jonathan
Schwabish et al (2004) have examined the way these processes operate in the
connection between income inequality and social expenditures in a set of
fourteen relatively high-income countries (including observations on several of
those countries at different times).
They work from the hypothesis “that high levels of income inequality
reduce public support for redistributive social spending” and summarize their
findings as follows: “The results suggest that as the ‘rich’ become more
distant from the middle and lower classes, they find it easier to opt out of
public programs and to either self insure or to buy substitutes in the private
market… The conclusion is that higher economic inequality produces lower levels
of those publicly shared goods which foster greater equality of opportunity,
income insurance and greater upward mobility.” (pp. 32-33).
The power of those with high incomes,
they suggest, works through the political process to undermine mobility (very
much in accord with the hypothesis suggested by Erikson and Goldthorpe in the
quotation above).
To
the extent that income inequality (inequality of outcome) is in conflict with
equality of opportunity, we would expect a positive association between
relative equality in the distribution of income and a higher degree of social
or economic mobility, which would tend to indicate a higher degree of equality
of opportunity. While the data on these
issues are sparse and contested and are even less available for low-income
countries than for high income countries, they tend to be consistent with these
expectations. For example, Robert
Erikson and John Goldthorpe (1992, ch. 11) present results of a multivariate
analysis of social mobility across class groupings for a dozen “industrialized
countries” showing a significant role for income inequality in reducing
mobility. They are, however, cautious
about the significance of their results, and (as the quotation above indicates)
see the need for more examination of the issue.
Jo
Blanden et al (2005, Table 2) report intergenerational partial correlations for
eight European and North American countries (Britain, Canada, Denmark, Finland,
Norway, Sweden, West Germany, and the United States). Their data cover fathers’ and sons’ earnings,
with data on sons born between 1958 and 1970 (depending on the country). Combining these data with Gini coefficients
from the World Bank (2006, Table A2), we obtain the results shown in Figure 1 –
that is, a clear simple correlation between mobility and equality. These
results, of course, must be taken as only suggestive, as there are many
problems with the cross-country compatibility of the data, the number of
observations is very small, and the figure shows only the simple
correlation.
Data
for the U.S. at different points of time tend to support the same
conclusion. Daniel Aaronson and Bhashkar
Mazumder (2005/2007) have calculated the relationship between adult men’s log
annual earnings and log of annual family income in the previous
generation. Their regression coefficients,
or intergenerational elasticities (IGEs), describe how much economic
differences between families persists.
They report (their Table 1) the IGE for forty year olds at the beginning
of each decade from 1950 to 2000. These
IGE’s show the same pattern as do the Gini coefficients for family income for
these years – i.e., a decline from 1950 into the 1970s and then a upward
movement to 2000. The two sets of data
are shown in Figure 2. While the
patterns are not identical, they are certainly suggestive of the positive
relationship between equality and mobility.
Using a different set of data and different
methodology, Katherine Bradbury and Jane Katz (2002) obtain similar
results. They present calculations
(their Appendix Table A1) showing a notable reduction in mobility across income
quintiles for families from the 1970s through the 1990s. For example, they report that in the 1970s
49.4 percent of families in the bottom income quintile were still in the bottom
quintile in 1979. For the 1980s and
1990s, the comparable figures were 50.4 percent and 53.3 percent
respectively. On the other extreme,
while 49.1 percent of those families in the top quintile remained in the top
quintile over the 1970s, 50.9 percent remained there in the 1980s and 53.2
percent remained there during the 1990s.
The 1970s through the 1990s were of course a period of rising income inequality
in the United States, suggesting the inequality-immobility connection. As noted, however, these findings of an
equality-mobility connection are not uncontested.
There
is one study of a set of African countries that yields some support for the
equality-mobility connection. Denis Cogneau and Sandrine Mesplé-Somps (2008) examine equal
opportunity in terms of social and economic mobility in Ivory Coast,
Ghana (at two points in time), Guinea, Madagascar and Uganda. While the results are not strong, the authors
conclude (p. 17): “Inequality of opportunity for income seems to correlate with
overall income inequality more than with national average income…” These results, however, are confounded by
numerous factors, including, for example, substantial regional differences
within countries and the difference associated with differences in colonial
history. Nonetheless, as with the
results noted above for high-income countries, this information is suggestive.
It
would be reassuring to have more extensive data that would allow a meaningful
test of the hypothesis of an equality-mobility connection and thereby support
or undermine the argument that equality of opportunity is dependent on equality
of outcome/condition. However, given the
implications of the data we do have and the character of the argument for such
a connection, there is good basis to reject the idea that we can separate
economic of opportunity from equality of outcome.
Relative Equality as a Positive Instrument
“Using income inequality as an indicator and determinant of the scale
of socioeconomic stratification in a society, we show that many problems
associated with relative deprivation are more prevalent in more unequal
societies. We summarise previously
published evidence suggesting that this may be true of morbidity and mortality,
obesity, teenage birth rates, mental illness, homicide, low social capital,
hostility, and racism. To these we add
new analyses which suggest that this is also true of poor educational
performance among school children, the proportion of the population imprisoned,
drug overdose mortality and low social mobility.”—Richard Wilkinson and
Kate E. Pickett (2007, p. 1965)
Beyond
questions of definition and beyond philosophic disputes over the value of
relative equality, the distribution of income appears to play some important
roles in affecting various social outcomes that are widely valued. In particular, for example, a more equal
distribution of income appears to be a causal factor bringing about better
health outcomes and a reduction in violent crime. More precisely, a more equal distribution of
income is an indicator (a “marker”) for and a part of a set of social relations
that tend to generate these favorable outcomes.
In this sense, income equality has instrumental value as can be shown
using the health and crime examples.
Equality and Health Outcomes
No one
disputes that absolute poverty is bad for one’s health. “Better to be rich and healthy than poor and
sick,” as the sardonic statement puts the matter. Whether one examines the data within a
particular society or across various societies, the correlation between the
level of income of an individual or a society and health outcomes of the
individual or society (e.g., morbidity or mortality) is fairly clear. In both cases, however, the impact of income
on health outcomes appears to be much stronger at lower than at higher levels of
income – that is, at low levels of income a small increase of income is
associated with a large improvement of health outcomes, but at high levels of
income an increase of income has little impact on health outcomes.
Yet
it is also true that if we look across societies (leaving aside for the moment
how we define “societies,” which turns out to be an important issue), there is
a negative correlation between the degree of income inequality and health
outcomes. More unequal societies tend to
have worse health outcomes. This is a
controversial statement, as recognized even by its proponents (e.g., Wilkinson
and Pickett, 2006, and Subramanian and Kawachi, 2004), and some aspects of the
controversy will be taken up shortly.
Before I do so, however, it will be useful to consider the reasons why
inequality may cause poor health.
First,
there is the phenomenon that a change of income makes more difference for
health outcomes at low levels of income than at high levels of income. Thus in
two societies with the same average level of income we would expect the more
equal one to have better health outcomes on average, but only at the (small)
expense in terms of health outcomes of those at the top; overall – that is, the
health outcomes of the more equal society would not be better at every level.
Second,
as noted above, more unequal societies appear to spend less on social programs
than do more equal societies. Accordingly, we would expect public health
services and the provision of health care for the low-income part of the
populace to be smaller in the more unequal societies. Thus, again we would expect a more equal
society to have better health outcomes on average, but health outcomes would
not necessarily be better for those at the upper income levels – or, at least,
the impacts would be small at the upper income levels.
Third, more
unequal societies tend to generate greater stress levels, and stress can work
through psychosocial pathways to generate poor health. Income inequality “pollutes” the social
environment (to use Subramanian and Kawachi’s term), creating divisions,
resentments, and worries at all levels.
Those people in subordinate positions tend to be in a chronic state of
tension, as they are unable to attain the material standards of the society;
those people higher up tend to worry that they may not be able to maintain
their position. Fear, it has sometimes
been noted, is a powerful motivator; it is also a powerful generator of stress. Stress, it is well recognized, is a factor in
a great variety of health outcomes.
Perhaps the most important implication of the psychosocial explanation
is that it would explain the finding of some studies that health outcomes at
all levels are better in more equal societies (e.g., Banks et al, 2006)
In many ways the
psychosocial explanation of the role of inequality in affecting health is the
most compelling, but it is also difficult to establish and controversial (e.g.,
Lynch et al, 2000). Indeed, the entire argument
that health outcomes are significantly affected by income distribution is
controversial. In an extensive review,
Angus Deaton (2003) maintains that income distribution itself is not a major
determinant of population health. When
controlled for several other social variables, the relation between income
distribution and health, Deaton argues, drops from sight. But it seems that Deaton does not recognize
the point that income distribution is a “marker” for a whole set of measures of
social-economic differentiation.
Controlling for other measures of this differentiation will reduce, if
not eliminate the significance of income distribution itself, but the basic
connection between the differentiation (for which income distribution is
marker) will not be refuted.
Another source
of dispute over the role of income distribution in affecting health outcomes
arises from the way “society” is defined in various studies. In general, studies that focus on larger
social units – countries, states or provinces, and large metropolitan areas – find
more support for the connection between inequality and ill-health than do
studies where the units of observations are small – e.g., towns or
counties. Yet it would seem that the
comparisons of hierarchy and status that would affect stress tend to be derived
from the larger society in which people live.
Social differences measured within the smaller units are less likely,
according to the psychosocial argument at least, to have a great impact on
health outcomes.
Although
the equality-health connection remains controversial, the evidence from a great
many studies provides substantial support for the argument that inequality
(measured by income distribution or some other indicators of social position)
is a significant factor effecting negative health outcomes. The points made by critics, while relevant,
are not convincing. At the same time, it
is important to keep in mind that income level is still an important factor
affecting positive health. This is
especially the case in low-income countries, where rising per capita income is
strongly associated with improved health outcomes. This does not mean, however, that income
distribution is irrelevant for health outcomes in low-income countries. Not only does it appear to have some direct
effect outside the high-income countries (e.g., Subramanian et al, 2003), but,
in addition, patterns of inequality once established tend to persist. As low-income countries experience economic
growth, the impact of inequalities already well-established will tend to have a
greater role in health conditions.
Equality and Crime
It
seems likely that inequality would increase crime. With a high degree of inequality, people at
the bottom would tend to see themselves as especially deprived and also see
their position as unfair. They would
then be more likely to rationalize and engage in burglary and theft, crimes
against property. Moreover, the narrowly
economic theories of crime, which see crime as a decision based on a
calculation of potential gains relative to potential costs (deriving from Gary
Becker, 1968), postulate a positive relation between income inequality and
crime based on the larger wealth differences between the rich and the poor –
and therefore the greater potential gain.
Yet,
it is the connection between inequality and crimes of violence that is found to
be strong in various studies. For
example, Morgan Kelly (2000, p. 530) in a study based on data for U.S. counties
and cities, finds that, “The behavior of property and violent crime are quite
different. Inequality has no effect on
property crime but a strong and robust impact on violent crime…By contrast,
[absolute] poverty and police activity have significant effects on property
crime, but little on violent crime.” In
a cross-country study of inequality and violent crime, Daniel Lederman et al
(2002), using data from 39 countries, more than half of which are low- or
moderate-income countries, find a positive causal connection between inequality
and violent crime rates. (Both the
studies by Kelly and by Lederman et al control for a variety of related
variables and use a variety of statistical tests.) Gabriel Demombynes and Berk Ozler (2002)
examine the crime-inequality connection in South Africa, focusing on local
areas. They find a positive association
between inequality and crime for both violent crime and crimes against
property.
While
the argument based in the narrow economics approach pioneered by Becker may
have some relevance to the explanation of the inequality-crime connection, it
fails to come to grips with the strong relation between inequality and violent
crime. Explanations of the role of
income inequality in effecting violent crime tend to focus on the social impact
of inequality, the impact of inequality on social solidarity referred to
earlier. In a 1982 article that has been
a reference point for the crime-distribution connection, Judith Blau and Peter
Blau, examining the issue in the United States, find a strong connection
between violent crime and racial and economic inequality. They offer as an explanation: “In a society
founded on the principle ‘that all men are created equal,’ economic
inequalities rooted in ascribed positions violate the spirit of democracy and
are likely to create alienation, despair, and conflict.” (Blau and Blau, 1982,
p. 126). This argument overlaps with the
explanation, offered above, regarding the intrinsic value of economic equality.
Conclusion
Many of the particular arguments I have made may be widely
accepted. Yet this does not
automatically lead to an acceptance of my general proposition that
economists and economic policy makers should focus much greater attention on
inequality as measured by the distribution of income (and wealth). While relative equality is a desirable
social goal, it is not the only social goal.
When other social goals – such as liberty or economic growth – come into
conflict with greater equality, many people would choose to meet these other
goals rather than the goal of greater equality.
There is
no denying the potential for conflict among social goals, and there is no
general way to resolve such conflicts prior to their appearance. When policy makers are faced with a conflict,
the only legitimate means of resolution is through a democratic process (though
of course this may be a problem when democracy itself is undermined by
inequality). However, to a large degree
the conflict between equality and other social goals is often exaggerated.
Such
exaggeration – indeed, actual incorrect characterization – has been the case
with the possible conflict between economic growth and a relatively equal
distribution of income. For generations
and across the ideological spectrum, it was widely accepted that such a
conflict existed. In recent decades,
however, as the empirical evidence has been examined, it has become clear that
there is no such general conflict. While
one cannot conclude that equality automatically yields more repid growth,
neither can one claim that a conflict necessarily exists. Many countries with more equal income
distributions have grown more rapidly than have other countries with more
inequality. It appears to depend on the
way economic growth is organized, the way an economy is structured in terms of
the types of institutions and policies that are established. Thus the evidence suggests that instead of
being presented with the challenge of a choice between relative equality and
growth, societies are presented with the challenge of structuring their
economies so as to promote both goals.
As to
the assertion that relative equality undermines liberty, here too there is no
necessary conflict. The establishment of
more extensive social programs that would raise the well-being of the poor, tax
the rich more heavily, and generate greater equality does not amount to some
incursion on the liberty of the rich.
Even extensive land confiscations can hardly be seen as violations of
liberty if those lands were obtained, as has sometimes been the case, through
some illicit means. The view that any
effort at reallocation is an encroachment on liberty is based on the assumption
that the existing distribution of income has been created by completely
legitimate means, an assumption that would defy credulity. None of this is to say that any reallocation
or confiscation is acceptable. It is
simply to say that a good deal of economic reorganization in the direction of
greater equality is possible without doing offense to liberty. Moreover, one could easily argue that the
only way to promote the liberty of those at the bottom of societies’
hierarchies is to establish a greater degree of equality.
Ultimately,
the matter may come down to a very practical issue, which may outweigh both
these arguments about conflicts of goals and the arguments I have developed in
this essay. If we want to something
about the condition of the poor, we had better pay attention to income
distribution. This practical matter lies
in arithmetic and has been summed up by Azizur Rahman Khan (2005, p. 8) with
the observation:
“A crude
estimation of the elasticities of headcount rate poverty … shows that the
partial elasticity with respect to the Gini ratio of expenditure is higher than
the absolute value of the partial elasticity with respect to PPP$ income.”
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Global
Wealth Report 2019: Global wealth rises by 2.6% driven by US & China,
despite trade tensions
Credit Suisse Research
Institute
publishes its tenth edition of the Global Wealth Report, the most
comprehensive and up-to-date source of information on global household wealth.
21.10.2019
Global wealth grew during the past year by 2.6% to
USD 360tn and wealth per adult reached a new record high of USD 70,850, 1.2%
above the level of mid-2018. US, China and Europe contributed the most towards
global wealth growth with USD 3.8tn, USD 1.9tn and USD 1.1tn respectively...
DAVID B. GRUSKY
In advanced industrial societies, much rhetoric and social
policy have been directed against economic and social inequality, yet despite
such efforts the brute facts of poverty and massive inequality are still
everywhere with us. The human condition has so far been a fundamentally unequal
one; indeed, all known societies have been characterized by inequalities of
some kind, with the most privileged individuals or families enjoying a
disproportionate share of power, prestige, and other valued resources. The task
of contemporary stratification research is to describe the contours and
distribution of inequality and to explain its persistence despite modern
egalitarian or anti-stratification values.
The term stratification system refers to the complex of
social institutions that generate observed inequalities of this sort. The key
components of such systems are (1) the institutional processes that define
certain types of goods as valuable and desirable, (2) the rules of allocation
that distribute these goods across various positions or occupations in the
division of labor (e.g., doctor, farmer, "housewife"), and (3) the
mobility mechanisms that link individuals to occupations and thereby generate
unequal control over valued resources. It follows that inequality is produced
by two types of matching processes: The social roles in society are first
matched to "reward packages" of unequal value, and individual members
of society are then allocated to the positions so defined and rewarded.' In all
societies, there is a constant flux of occupational incumbents as newcomers
enter the labor force and replace dying, retiring, or outmigrating workers, yet
the positions themselves and the reward packages attached to them typically
change only gradually. As Schumpeter (1953, 171) puts it, the occupational
structure can be seen as "a hotel . . . which is always occupied, but
always by different persons."
The contents of these
reward packages may well differ across modern societies, but the range of
variability appears not to be great. We have listed in Table 1 the various
goods and assets that have been socially valued in past or present societies
(for related listings, see Kerbo 2000, 43-44; Rothman 1999, 2-4; Gilbert 1998, 11-14;
Duncan 1968, 686-90; Runciman 1968; Svalastoga 1965,70).2 In constructing this
table, we have followed the usual objective of including all those goods that
are valuable in their own right (i.e., consumption goods) while excluding any
"second-order goods" (i.e., investments) that are deemed valuable
only insofar as they provide access to other intrinsically desirable goods. The
resulting list nonetheless includes resources and assets that serve some
investment functions. (continue:
http://homepage.ntu.edu.tw/~khsu/mobile/sup2.pdf
)
Ironically, poverty became an issue
in the United States before it became a central issue for development
economics. With the publication of
Michael Harrington’s The Other America
(1962) and the subsequent “War On Poverty,” economists began to give attention
to poverty as an issue separate from economic growth per se. It was more than a decade later, with the
formulation of the basic needs concept, that the economics of low-income
countries began a re-orientation towards poverty alleviation as not simply a
concomitant of economic growth. Also,
during the era in which growth was the focus of development economics not only
was poverty an issue of subsidiary focus, but income inequality, insofar as it
was an issue, was usually seen as a basis for more rapid growth and thus, at
least to a degree, desirable.
Adam
Smith, for example, saw the capability to appear in public without shame as a
basic need, the lack of which placed a person in poverty. Smith saw the possession of a linen shirt as
a requirement for meeting this need. Referring
to Smith’s linen shirt example, Sen points out that the capability to appear in
public without shame is an absolute capability, but the need for a linen shirt
in order to fulfill this capability is a socially determined, relative
need. (Sen 1983, p. 161)
The approach of seeing poverty as a
social status is not peculiar to Sahlins, but is more generally the approach of
anthropology. See, for example, Green
(2006, p. 1109), who comments, “Anthropological perspectives on poverty
prioritise poverty not as an absolute measurable condition but as a qualitative
social relation. Anthropological accounts of poverty examine how the groups
categorised as poor come to be so classified and by whom.”
Aside from the question of the
intrinsic value of equality, the resentment, envy and lack of social solidarity
that can come with inequality might generate social conflict, a phenomenon that
is sometimes cited as an explanation for why income inequality may retard
economic growth. (Alesina and Rodrik, 1994, and Persson and Tabellini, 1995)
Schwabish et al also find,
however, find that inequality between the middle and the poor (as measured by the 50/10 percentile ratio) has a positive,
though small, impact on social spending.
However, Deon Filmer and Lant Pritchett (1997) in a cross-sectional analysis of
104 countries, while finding a significant impact of income inequality on child
mortality, also find that public spending on health had relatively little
impact. Filmer and Pritchett’s study demonstrates
that most of the variation in child mortality is accounted for by the average income
levels of the countries.
In this connection, Wilkinson and
Pickett (2006, p. 1774) note: “The broad impression is that social class
stratification establishes itself primarily as a national social structure,
though there are perhaps also some more local civic hierarchies—for instance
within cities and US states. But it should go without saying that classes are
defined in relation to each other: one is higher because the other is lower,
and vice versa. The lower class identity of people in a poor neighbourhood is
inevitably defined in relation to a hierarchy which includes a knowledge of the
existence of superior classes who may live in other areas some distance away.”
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