This essay, by Bertie Low OS, was the winner of the Rhodes Prize, 2020.
We first have to establish what is meant by the term “inequalities”. According to the UN, inequality is: “the state of not being equal, especially in status, rights, and opportunities”[1]. But we must also observe that it is plural. Therefore, we must look at the different kinds of inequality. There are two over-riding categories of inequality. The first is inequality of outcomes and the second is inequality of opportunity. The former focuses mainly upon economic inequality and how that affects living standards and well-being. However, the latter is orientated around how the circumstances of one’s birth influence the outcomes of one’s life. This includes education and differing rights. We must also look at the meaning of the term development. Development is defined as: “the progress of a country in terms of economic growth … and human welfare”[2]. Development is measured using HDI – a composite index taking into account life expectancy, education and economic growth. Human welfare is defined as the “health, prosperity, and/or happiness of an individual or group of people”[3].
Economic inequality is defined as the disparity of wealth between the poorest and richest in society. The effects of this will be my focus for much of the essay. While it is true that some economic inequality encourages growth, too much can actually be detrimental to the economy. China, for me, exemplifies this perfectly. During the 1980s, China experienced a rapid economic expansion. In 1979, China’s economy was growing at a rate of roughly 5%. However, by 1984, this growth rate had more than tripled to over 15%. Moreover, according to the New York Times, this was “among the most egalitarian developments in history”[4]. This demonstrates the point that inequality can drive economic development, but, for the maximum benefit to be felt, this should be minimised. Another example is the USA’s economic boom prior to the 2008 financial crash. This time of economic expansion coincided with one of increased levels of economic inequality. Economic inequality can drive growth mainly because of incentive. People in low-income jobs are incentivised to work harder in order to be selected for more senior and lucrative positions. Entrepreneurs are also encouraged to set up their own businesses often because they aspire to end up with wealth comparable to the most successful entrepreneurs. These activities are good for the economy as they increase productivity and tax revenues, and decrease unemployment. Economic growth is clearly pivotal to development as it is one of the discriminators used for HDI.
Before I continue, it is important to note that the following consequences of economic inequality are only really noticeable when inequality becomes especially large. We must observe that the two most unequal countries on the planet are South Africa and Namibia[5]. Last September, South Africa entered a recession and since has experienced slow economic growth. Likewise, the Namibian economy shrunk by 2.9% year-on-year in the second quarter of 2019. This shows a clear correlation between large amounts of economic inequality and sluggish economic growth, or even economic decline.
Economic inequality can also have adverse effects on crime. An example of how crime rates have increased as a result of increasing inequality is in Mexico. Despite a period of sustained economic growth as well as a reduction in inequality, violent crimes went up there. This seems not to support my point. However, this observation was explained when researchers looked at individual regions. This showed that areas with lower levels of economic inequality actually experienced a reduction in crime rates. There is a theory that when the Gini Coefficient[6] becomes larger than 0.42, murder rates go through the roof, which fits the trend very well. According to a survey, inequality is “the single factor most closely and consistently related to crime”[7]. Thus, the smaller the inequality, the lower the crime rates tend to be. There are many reasons for this, but I believe that Patricia Gallan, a very senior Metropolitan Police chief, put it very succinctly when she said that inequality drives people to commit crimes as they feel like “they do not have a stake in society”[8]. Figure 1 (insert) shows a clear trend between economic inequality and number of people in prison, directly related to crime rates.
Also, civil unrest can originate from inequality. An on-going example of this is the rioting in Chile. Though it was sparked by an increase in subway fares, it has since morphed into a rebellion against increasing inequality – Chile is one of the most unequal societies on the planet. Crime has a direct negative impact upon human welfare – one the two discriminators for development stated in the introduction.
Health is also damaged by economic inequality. “Food Deserts” are a feature unique to economically unequal societies. These are areas where there is a lack of readily accessible and healthy food. These have been experienced in several industrialised nations, such as Canada, the UK and Australia. In fact, in 2009, 2.2% of all households in the USA were located in such areas. Also, the Guardian reported that 1.2 million people in the UK live in food deserts[9]. This can have devastating effects upon a population, leading to increased levels of diabetes and obesity, as people are forced to buy cheap, readily available, processed foods, often with a high sugar content. Economically unequal societies are especially hit by food deserts because large supermarkets tend to set up in areas where there is more abundant wealth, rather than poorer areas. This means that poor communities are disproportionately affected. This is one example of how health is adversely affected by wealth inequality.
There also appears to be a strong correlation between heart failure rates and economic inequality. For example, South Africa, Brazil, Chile, Costa Rica, Columbia and Guatemala, all of which are in the top twenty most unequal countries on earth, are a part of the 14 countries with the highest recorded rates of heart failure. Development is compromised by this decreased standard of health – one of the three discriminators for HDI is life expectancy, which is a measure of the quality of health of a nation.
Wealth inequality also increases inequality of education and leads to reduced levels of education. Educational inequality is defined as the unequal distribution of academic resources[10]. There has been a direct link observed between economic inequality and educational inequality in the USA. In the 1970s, the education gap in the USA started to widen decidedly. This coincided with a time of increasing levels of economic inequality which continued into the next decades. So too did the disparity in educational standards. As countries become more economically unequal, the average educational standards tend to decrease. For example, in Finland – the 10th most economically equal country on the planet – almost 70% of people attend university, whereas, in South Africa only 6.4% do so. This is a staggering difference and is mainly explained by comparative levels of investment in education. Owing to increases levels of corruption, which I will explain later, more economically unequal countries tend to spend less on education than less unequal countries. Figure 2 shows that this observation is not a “one-off”, but there is a clear trend.
However, we must note that even a small change in the Gini Coefficient can have a massive impact upon educational standards. In the UK, around 27% of people in 2018 entered university, compared to the 70% in Finland – a large difference. However, the difference in the Gini Coefficient of these two is small. This means that a small decrease in the level of economic inequality can lead to great improvements in the standard of education. Educational inequality and decreased levels of education directly detriment human welfare and thus compromise development. Education is a factor in determining the HDI of a country, so reduced standards would detriment a country’s development.
Political inequality is when certain individuals or groups have greater influence over political decision-making and benefit from unequal outcomes through those decisions, despite procedural equality in the democratic process[11]. This can be affected by economic inequality. In societies with large inequality, the wealthy inhabitants have far more political influence than poorer residents. For example, the New York Times reported that “the rich have about three times as much influence as the poor on votes in the United States Senate”[12]. However, it can also have an adverse effect on the economy. This is for a variety of reasons, including civil unrest which can originate from political inequality. A live example of this is the rioting in Lebanon, which have claims of government corruption at their heart. Investors will be anxious about investing in a country where there is such unrest. Also, Lebanon is facing financial ruin: “things seem to be going from bad to worse for Lebanon’s economy”[13].
Political inequality increases economic inequality. South Africa is a prime example of this. In South Africa there was an apartheid regime, under which black people did not have the same rights as white people. This has led to staggering levels of inequality – throughout this regime, non-white people were discriminated against, both politically and economically. This inequality has led to a subsequent stagnation of the economy and all the other negative impacts explored above. Figure 3 shows a strong correlation between GDP per capita and corruption. This shows that politically unequal and corrupt societies do not develop well economically. Thus, development is stunted by political inequality.
Inequality of education can have a negative impact upon the economy. On average, those who drop out of school or have a lower standard of education will earn less. This means that there is less revenue from taxation. Also, those who have a higher standard of education will earn more, which increases inequality. This then becomes a vicious loop – as educational inequality continues, economic inequality increases, leading to all the negative effects outlined above, including stagnation of the economy. Also, a child’s happiness is affected by his standard of education. As educational inequality increases, the average standard of education decreases, as explored earlier. This means that human well-being is impacted adversely. Thus, educational inequality compromises development in these ways.
While researching for this essay, I came to the simple conclusion that inequalities of opportunity are toxic to development and inequalities of outcomes are necessary, but only in small amounts. Throughout this essay I have focused mainly upon the negative effects of inequalities, of which there are many. However, these are only especially noticeable when these inequalities become particularly distinguished. Therefore, inequalities of outcomes only compromise development when large, whereas, inequalities of opportunities always stunt development.
[1] Visit: https://www.un.org/en/development/desa/policy/wess/wess_dev_issues/dsp_policy_01.pdf
[2] John Widdowson et al., AQA GCSE (9-1) Geography (London, 2016), page 292.
[3] Visit: https://www.tradergroup.org/what-is-human-welfare/
[4] Visit: https://www.nytimes.com/2014/07/20/upshot/income-inequality-is-not-rising-globally-its-falling-.html
[6]According to https://www.indexmundi.com/facts/indicators/SI.POV.GINI, the Gini Coefficient “measures the extent to which the distribution of income (or, in some cases, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution”.
[7] Visit: https://sevenpillarsinstitute.org/consequences-economic-inequality/
[10] Visit: https://en.wikipedia.org/wiki/Educational_inequality
[11] Visit: https://ippr.org/read/political-inequality-why-british-democracy-must-be-reformed-and-revitalised#
[12] According to Larry Bartels. Visit: https://www.nytimes.com/2014/07/25/upshot/why-voters-arent-angrier-about-economic-inequality.html
[13] Visit: https://www.mei.edu/publications/it-too-late-save-lebanon-financial-collapse
(Featured Image: © Ted Eytan)
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