Inequality Redux

A reader sent me the message below. It makes a very good point and I felt it deserved to have its own post. The reader has asked to remain anonymous.

[As someone born in a poor foreign country] I dream of a world where Indians and Africans can confront obesity, involuntary leisure via partially insured unemployment, and dull service-sector drone work as their chief nemeses.

The inequality that therefore most concerns me, and that I would strongly suggest should most concern you and your readers, is emphatically not inequality between Americans, but inequality between Americans and their counterparts pretty much everywhere but Western Europe and the few other “rich” nations.

As many of us know, the gaps in any standard of well-being between these groups are simply astonishing. The conditions in India, Africa, and elsewhere dwarf the complaints of almost anyone I can find in the American poor. The overall lack of agency of people in their lives, their daily struggle for drinking water and space to even relieve themselves privately (for women in particular) would make inter-American concerns a dreamlike problem for several billion people on the planet. 

You might argue that this is a false choice: that one can assist both Americans and the world’s poor. But as an economist, you know that to a large extent that the answer is ‘either/or’, not ‘both.’

One might also argue that the problems outside our borders are more intractable, and lie beyond our reach as they involve institutional problems that would defeat any effort we might try. Yet, essentially every argument leveled against retaining a broader perspective on inequality and deprivation can be leveled against efforts attempting to equalize within the U.S. borders. For example, U.S. inequality has been very intractable to say the least. Intergenerational mobility is stubbornly low within rich countries as well, etc. Institutional racism and sexism have been plausibly advanced as serious impediments to achieving equality of outcomes, and opportunities alike.

Personally, I hope American movements to end inequality will approach the issue more globally, and that they will become less insistent in their promotion of what is, ironically for US-based progressives, a version of American exceptionalism: that our poverty must be seen as more urgent than that afflicting nameless strangers in foreign lands.

Why not allow people refundable credits to donate to globally-oriented charities, until it amounted to the total amount of social insurance transfers that occur at present within our borders? Or offer people a choice to either pay taxes (perhaps after they pay a minimum to fund defense), or transfer an equivalent amount to the Gates foundation, or some similar cross-national entity which is decisively worldwide in its mission and reach?

On a more positive note, maybe there is room for dealing with both American and global deprivation simultaneously: what I can offer the poor here is my leisure time, while what I can offer Africa is my money. We might exhort people to work hard, earn as much as they can, use their spare time to mentor/volunteer here, and give their money away to the third world.

Americans, at present, are strongly encouraged to transfer to other Americans. While I can see why I must contribute to national defense, I see less obvious social justice in preferring transfers to these other strangers who, by all accounts, are themselves rich in comparison to the huge mass of people who lie beyond our borders. (Two clear exceptions to this, for me personally, are African-American and Native American populations, both of whom I regard as having a hugely legitimate beef with their lot in our society, and whose conditions—especially taking into account the daily risk of violence they face–can be legitimately viewed as Third World. )

People in the U.S. would benefit from more direct encounters with conditions prevailing in much of the world, to see firsthand just how deprived people in the developing world are. It will inevitably help them decide how to prioritize any assistance they elect to give.. If widely screened, The Real Housewives of Somalia would embarrass everyone in the U.S. The former won’t have taps in the house, or even a toilet.

In the end, the focus on American inequality and poverty is, to my taste, like urging prompt action because among the ten people in business class, one is super rich. What about the 200, not even in coach, but hanging off the wings?

My comments:

The reader makes an excellent point. The differences in relative well-being between typical members of the richest nations (and the U.S. is one of the richest) and their counterparts in the poorest nations is staggering. Growth economists have in the past talked about a difference that is on the order of a factor of 30 or 40 – meaning that per capita income in the U.S. is roughly 30 or 40 times greater than average per capita income in say Ghana, Chad or the Sudan. While it is true that some of this difference can be attributed to mismeasured output (e.g., home farming or other types of home production) the true difference in well-being must be on the order of 15 or 20 even after such adjustments. These differences are simply unimaginable for most Americans. Speaking only for myself, I have never been to a developing country and so I haven’t seen firsthand the kind of poverty and desperation the reader alludes to. I am aware of it as an academic issue but that’s it.

Let me make two comments on a somewhat hopeful note:

First, while income inequality across nations is unbelievably extreme, and income inequality within countries has been increasing (for some countries quite dramatically), global income inequality has been falling overall due, essentially, to dramatic increases in well-being in China and India (though both China and India remain far behind U.S. living standards).

Second, the reader says:

You might argue that this is a false choice: that one can assist both Americans and the world’s poor. But as an economist, you know that to a large extent that the answer is ‘either/or’, not ‘both.’

I actually don’t agree with this entirely. My guess is that many of the problems which cause extreme poverty in the world are actually closely connected to “obvious” problems which could be solved without entailing substantial welfare losses for developed countries. The most severe problem facing many of these nations is civil war. Now it may be quite difficult to put an end to such conflicts but if it could be done we would greatly alleviate world suffering without transferring goods from the West. Socialism also presents a huge problem for many nations. If we could get North Korea to abandon its system of government and instead try to emulate South Korea, we could again achieve tremendous improvements without transfers.

This last point obviously also bears on the limitations of Western influence. The West has no direct authority in any developing country.  We can make suggestions and we can make donations but making progress on some of the most important problems requires structural change within these countries. If we want to improve the lives of Somalis we would need to take over the country and remove the warlords who are running things. Similarly if we want to improve the lives of North Koreans, we would have to remove the Communist government. The right path is clear and there are large gains to be had but taking this path is difficult. 

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3 thoughts on “Inequality Redux

  1. “Why not allow people refundable credits to donate to globally-oriented charities, until it amounted to the total amount of social insurance transfers that occur at present within our borders? Or offer people a choice to either pay taxes (perhaps after they pay a minimum to fund defense), or transfer an equivalent amount to the Gates foundation, or some similar cross-national entity which is decisively worldwide in its mission and reach?”

    Charity as a substitute for the welfare state is a conservative’s wet dream and utter nonsense.

    “While I can see why I must contribute to national defense, I see less obvious social justice in preferring transfers to these other strangers who, by all accounts, are themselves rich in comparison to the huge mass of people who lie beyond our borders. ”

    ‘National defense good, healthcare bad’ is more conservative ideology instead of proper economics. Vietnam, Iraq has this anonymous fellow ever taken a look at how the American military rapes third world countries?

    “If we want to improve the lives of Somalis we would need to take over the country and remove the warlords who are running things.”

    How about next time not stealing their fish and dumping our toxic waste into their waters?

    About what First World countries could concretely do to help the Third World: establish a fair trade system via abolishing agricultural subsidies and allowing Third World countries mild protectionism while they industrialize (of course some countries go directly from agriculture to services and skip the conventional industrialization phase), don’t invade these countries, reduce carbon emissions massively, pay for the coming climate change damage (which will most likely be asymmetrically distributed, hurting poor countries more than rich countries) as the West is responsible for the largest fraction of the stock of CO2 in the atmosphere.

    Ample of stuff do that is absolutely not in conflict with fighting against the form of authoritarian oligarchy that slowly emerges in the West (this is the real cause of the problem, rising inequality is just a symptom).

  2. On a second though this guest post basically aims to re-channel “sympathies” from poor insiders to even poorer outsiders. The aim is obvious, let’s deflect attention away from the the group which is not mentioned at all: the superrich (we all read our Sayek and Piketty, it is the 0.1%, i.e. managers and not well-trained professionals, whose incomes have risen). This is a neat right-wing hack trick, let’s make the middle class go after the under class for seemingly noble reasons …but as I already pointed out it does not work.

    About the conservative charity thingy Zizek’s “The Liberal Communists of Porto Davos” offers slightly polemical but precise analysis.

  3. The two poverties have two entirely different solutions. Unfortunately, the American one requires creativity and innovation. Zero summing is a recipe for war. Unfortunately, zero summing is the way American managers decided to play the globalism game.

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