KOFI ANNAN'S ASTONISHING FACTS!

[Ed Weick]

I refer to the piece posted by Mike Gurstein, part of which reads:
>
>THE HAVES  The richest fifth of the world's people consumes 86%
>of all goods and services while the poorest fifth consumes just
>1.3%.  Indeed, the richest fifth consumes 45% of all meat and
>fish, 58% of all energy used and 84% of all paper, has 74% of
>all telephone lines and owns 87% of all vehicles.

 

It's very difficult to gauge the significance of the kinds of statistics that the UN generates.  What in terms of global well-being do they really mean?  According to UN data, it would appear that the global distribution of income is becoming less equal between rich nations and poor.  In 1985, high income economies received 78.9% of that income.  By 1995, this had increase to 81.2%.  However, the distribution of income in poor countries has remained quite significantly less equal that that of rich countries.  In Brazil, for example, the richest quintile consistently received about 60% of the nation's income between 1960 and 1990, whereas in Canada, the same quintile consistently received about 40% during approximately the same period.  The lowest-income quintile in Brazil received about 2% of national income, whereas in Canada it received about 7%.  In Nigeria, the distribution of income is also far less equal than in Canada, yet the average income of the richest Nigerian quintile is minuscule in comparison with that of Canada, and even the average for the richest Brazilian quintile is less than half that of the average of the richest Canadian quintile.

 

In making international comparisons, what distribution of income between rich lands and poor should, in some ethical or normative sense, be considered appropriate?  If the current distribution of approximately 81:19 is not "right", what ratio should we aim for?  Would 75:25 be better?  50:50?  In what sense would some other distribution than the prevailing one be better?  And what might happen to the global economy as the ratio changed in the direction of greater equality.?

 

Let's take the extreme case, that of income equality.  What if some international superbody - God perhaps - ruled that global income must be distributed equally among rich and poor nations.  If that were the case, the currently rich would receive approximately 16% of such income, and the currently poor approximately 84%.  In 1995, all of us - every man, woman and child alive that year -  would on average have received just under $5,000 worth of global income.

What  might happen under such a radical change in circumstances?  It would seem that, on average, citizens of the current rich world, receiving only some 20% of the income to which they were accustomed, would be plunged into devastating poverty.  Most would not be able to meet their consumption needs, would not be able to save or invest, and would not be able to pay taxes.  Industries and governments would fail, resulting in massive unemployment.  It seems probable that the current rich world, now suddenly impoverished, would plummet into an unimaginable chaos.  In reality, because of international economic relations, it would probably take much of the world with it, but let us ignore this for the time being.

In the poor world, per capita incomes would rise approximately five-fold.  People would experience a bonanza. But what would they do with their new found wealth? Would they spend it on consumption?  Would they invest it in productive capital?  Would they use it as a means of enlarging their families, resulting in a population boom?  We cannot know.  There are many possibilities, including a terrible uncertainty.

Of course, the scenario I have posed is absurd. A massive shift of income will not happen. Nevertheless, the scenario does raise the question of what might occur if there were even a relatively modest redistribution of global income in the direction of the have-knots.  What might result in terms of global savings, investment, population growth, and other income dependent variables if the ratio between rich and poor countries declined from its present value of 81:19 to something like 75:25 or 70:30?  At what value of possible ratios might we enter into scenarios of downward spiral and terrible uncertainty?

I've ignored interdependence between the rich and poor world so far, but let's now look at it.  A portion of the income generated in rich countries moves to poor countries in the form of public or private capital investment.  It creates income in poor countries.  If there were a significant shift in the rich/poor income ratio, say to 75:25, would capital flows of considerable magnitude still be possible?  Granted, with an increase in their proportion of global income, poor countries might be able provide more of their own capital, but is it likely that such capital would be sufficient to make the standard of living rise significantly?  Could it lift populations out of poverty or even maintain them in relatively decent poverty?  Like it or not, as long as there are a considerable number of super-rich in the world, income far in excess of consumption needs can be generated and can be invested where it may be profitable.  To a considerable degree, progress in poor countries depends on the ability of rich countries to finance their development and to buy the products that they can then produce. (Please note that I recognize that capital flows from the rich world to the poor are a mixed blessing.  We have seen plenty of evidence of that recently!)

But let's bring God back into the picture.  What if He (or She) ordained that the rich can get no richer until the poor have caught up, and thus also have a per capita income of approximately $20,000 US per year.  Of course, God need not ordain that, since the neo-liberals already have.  This is the rosy picture of the world that has sustained us over the past few decades, but which is now coming apart in large chunks.  Impose an American style economy and democracy on Southeast Asia and everyone will drive two cars.  Do the same for Russia, and everyone will drive at least one.  Sorry, but it does not seem to have worked that way.

Ed Weick