We have arrived at the point where we know that in order to see the full picture of the country's prosperity, we not only need to take into account the average level of income but also measure the inequality of income across the households and people within the country we are interested in.
So how do we do that?
There are multiple ways to measure the inequality of income within the country but the one I would like to focus on today is the GINI Coefficient. The general assumption behind this method is that 0 means perfect quality (everybody has the same income), whereas 1 means complete inequality (such that one person in the country owns everything). Both of the extremes are of course unrealistic and all of the countries find themselves somewhere in between.GINI Coefficientis used to measure the distribution of an income or wealth within a country but is not a measurement of an absolute wealth of a country.
Closest to 0 and thus the lowest inequality level tends to be in Western Europe and especially in Scandinavia (around 0.25). Countries like Sweden, Norway and Denmark have relatively equal income distribution and therefore a broad middle class. There are relatively little devastating differences within the society like super rich and very poor. USA on the other hand is quite unequal in income distribution when we compare it to Canada or Western Europe and especially countries in Scandinavia. Here we have many billionaires compared to a lot of very poor people so the gap between them is really vast. Of course the poverty levels in US are not extreme, to the extent like we see in developing countries, but if we compare it to the top 20%, the difference is devastating.
As it was perfectly put by Professor Jeffrey Sachs from the University of Columbia in New York 'Getting richer doesn't mean necessarily becoming more equal'. We can see it very clearly if we compare the map of GDP and GINI Coefficient distribution in the world. According to Professor Sachs there is no one pathway for development. He concluded that Northern Europe has chosen a pathway of becoming wealthier with a lot of social equality which is indeed true for Scandinavia but the same cannot does not apply to Poland for example. Right on the other side of the ocean, in the United States, the path of rising incomes alongside rising inequality is prevailing and the gap between very rich and very very poor widening.
Where do these inequalities come from?
Why is education so important in closing the gap of social inequality?
The answer to this has many layers and you will find them in many of my posts depending which aspect of social justice or gender equality we will be currently discussing. For now however, we need to remind ourselves that attaining higher education almost alway translates to higher income which in turn to the successful contribution to the modern economy. Young people who have the chance to attain it either by means of their own hard work or family's support and material situation will play important role in country's economic development in the future. Those who are less lucky are often stuck in their own communities, with no access to adequate training and in turn balancing at the very low income level employment.
There are other inequalities of course such as race, gender, religion etc. All of them lead to massive discrimination in the labor market and has an adverse effect on the country's economy. The origin and consequences of the above however will be discussed in more detail in future posts as they are complex and extremely important to understand in order to find the way to fight them and finally achieve the complete social inclusion without which sustainable development will not be possible.
We need to remember that although GDP helps us to categorize countries when it comes to economic performance, it does show us only the average for these countries with the omission of any extremes that can be found within their boundaries. If we are interested in a more detailed picture of country's prosperity, we need to look into countries' variation and even more so - their inequalities.
And for that we need a little journey in time...
Before the industrial revolution which marked the beginning of an era of modern economic growth, virtually the entire word was equal - equal in poverty. Most people lived in rural areas, almost 90% of world population worked in farming trying to make the ends meet within the boundaries of their own households. They grew food for themselves, their families and, if there was any surplus, for the local marketplace.
As the world had become more and more urbanized, the lives of these people have changed in fundamental ways leading to inequalities and differences within countries as well. Some people stayed in farms while others decided to move to urban areas in pursuit of a better life, income and opportunities. The widening gap led to more and more inequalities across the world leaving many people behind.
Though there is no clear definition of what 'urban area' stands for, we can agree that an urban area is a settlement where a few thousand people live in a relatively densely settled area with a threshold of about 2,000 to 5,000 people. Understanding the basic differences between these two groups allows us to realize the very nature of the inequalities within the countries and the consequences of these inequalities on the economic growth. The main differences between urban and rural settings are:
Everywhere in the world, urbanization is proceeding rapidly. It is the natural course of human history and the condition that needs to be fulfilled for the countries to grow and to gain economic power. As part of this process, a gross domestic product per capita is rising and so is the proportion of population working in the industry. Please take a look at this beautiful, interactive map of the world's urban population by UNICEF below which I encourage you to explore and hover over HERE.
When we look at urban population growth rates (HERE) we can see that urbanization in Africa is moving fast forward, especially in Sub-Saharan Africa. Many countries are in transition phase from moving from rural to urban area. First map to the right shows us the urban population distribution in the world. Interestingly, this map looks very much like the map of income per person with both North and South American highly urbanized and Africa still very rural. The general conclusion is that richer parts of the world tend to be more urban while poorer more rural. What is interesting however is that the urban population growth rates are the highest in Africa, sometime reaching over 5% annual increase (Uganda 5.4% in 2016).
We will see later on to what do we owe this increase but for now let's summarize with a simple conclusion - urbanization is happening and it is happening fast. Countries previously left behind are catching up. The world's urban population is estimated to rise from a current proportion of half and half to even 50% and 70% by 2030. The countryside is transforming too. New technologies are implemented and more industrial way of farming is adopted by increasing number of farmers. What does it mean for the environment? Can it be a win win situation or is it or a challenge for a sustainable development? We will try to answer these questions.