Osvaldo Pérez Camacho | Internacionalista BUAP
La voz del articulista
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When it comes to poverty and income inequality, we barely think of countries from the so-called “First World”; we rather think of the Third World nations: Asians, Africans, Latin Americans and even some eastern Europeans. Does the world ever think about the status of these subjects in non-developing or non-underdeveloped lands? Yes, they do exist.
The Oxford English Dictionary defines poverty as “the condition of having little or no wealth or few material possessions, indigence, destitution”[2]. Given that each country sets its own poverty line, it is worth mentioning that First World’s poverty lines and percentages of the populations falling below them are not at the same level than Third World’s since “wealthy nations” generally employ more generous standards of poverty compared to other nations.
This paper does not aim to deny or refute the actual poverty status in underdeveloped and/or developing countries (the accuracy of data would though be a joint topic to put into questions); it aims to expose the data and places we rarely hear when hearing from this type of subjects in order to mesmerize the myth of poverty and inequality as two sole Third World countries’ labels, being then a kind of a story half told.
The Gini index: The Key.
The Gini coefficient measures the degree of inequality in the distribution of family income in a country and ranges from zero, where everybody has identical incomes, to 1, where all income goes to only one person. In sum, the more nearly equal a country’s income distribution, the lower its Gini index.
According to the last study from the Organisation for Economic Co-operation and Development (OECD), the gap between rich and poor is at its highest level in most of its member countries in 30 years. This paper, meanwhile, will list the seven wealthiest developed members only: France, Germany, Italy, the United Kingdom, Japan, the United States and Canada, which compose the G-7 and usually rank on top of well-being statistics.
Long-term rise of income inequality
The OECD’s working paper —titled “Focus on Inequality and Growth. Does income inequality hurt economic growth?”[3] — released on December 2014, highlights that there is widespread concern that economic growth has not been fairly shared for the last three decades, being that the richest 10% of the population in the OECD area earn 9.5 times more than the poorest 10%.
The income inequality is evident in all the nations of the G-7, which have gradually seen an increase since 1985 and that could represent a setback in those economies. The figure 1 shows the rank of the seven nations in the mid-1980s and the changes through the last 26 years, demonstrating that there is no positive changes in developed countries.
The chart 1, on the other hand, assess the Gini index increase, which has soared 0.042 in Germany; 0.023 in Canada; 0.030 in Italy; 0.032 in Japan; 0.035 in the United Kingdom; 0.049 in the United States and 0.009 in France. Thus, the OECD also provides room for the concern about economic inequality in the US, the highest amongst developed nations.
The United States: The none-is-getting-their-fair-share land
On January 8, 1964, President Lyndon Johnson declared an unconditional war on poverty; paradoxically, the U.S. income inequality has become the highest one between the First World nations[4]. The official poverty rate for 2012 stood at 15%, a full 4 percentage points higher than it was during the early 1970s. Moreover, the poverty rate was only 4 percentage points lower than the 19 percent rate of 1964. The OECD has provided a comparison of the Gini indexes of Germany, France, Canada, the United Kingdom and the U.S. (the latter being the highest, as mentioned) in the figure 2.
In addition, on 2014, the OCDE also showed that during 31 years (from 1976 to 2007) around 55% of the total American income growth was captured by less than 1% of the population, whilst Denmark, by contrast, has shared its wealth with the bottom 90% of its population as seen in the figure 4.
But, where do poverty and income inequality concentrate in the U.S? A recent study published by the Time magazine[5] in 2014 provides a top five with the most income inequality American states. It is as follows: 1. Alaska (most unequal), 2. Nevada, 3. Wyoming, 4. Michigan and 5. Arizona.
We could mention multiple causes linked to growing inequalities —such as globalisation, technological change, changes in redistribution, policy fashion, among others—; however, it is more important to discuss about the actions of policymakers for tacking this unfair situation for the next years.
The OECD is supposed to be an international forum in which governments can work together to share experiences and seek solutions to common problems. Although, even if the 34 members have a common problem, each of them also have individual factors which will claim for partially different solutions. Treating the globe with a general rule is a huge mistake on policymaking.
Therefore, each country needs an economic model adapted to its reality, being the OECD a microeconomics-results based guide, and having its peoples’ welfare as goal. This way we would avoid to have Failed States driven by their very reach percentage of their populations as well as eventual multifactorial problems.
[2] Oxford English Dictionary. Available at http://www.oed.com/view/Entry/149126?redirectedFrom=poverty&
[3] “Focus on Inequality and Growth. Does income inequality hurt economic growth?” OECD. December, 2014 Available at http://www.oecd.org/social/Focus-Inequality-and-Growth-2014.pdf
[4] “Tackling high inequalities”. OECD, 2014. Available at http://www.oecd.org/unitedstates/Tackling-high-inequalities.pdf
[5] “10 States where income inequality has soared”. February, 28th, 2014. Time Magazine. http://time.com/10684/10-states-where-income-inequality-has-soared/