* Nigeria is not a poor country yet millions are living in hunger *The combined wealth of Nigeria’s five richest men - $29.9 billion - could end extreme poverty at a national level yet 5 million face hunger
Upfront, a disclaimer-referencing Wikipedia’s note that: "The rich get richer and the poor get poorer" is an aphorism due to Percy Bysshe Shelley. In A Defence of Poetry published in 1840, Shelley remarked that the promoters of utility had exemplified the saying, "To him that hath, more shall be given; and from him that hath not, the little that he hath shall be taken away. The rich have become richer, and the poor have become poorer; and the vessel of the State is driven between the Scylla and Charybdis of anarchy and despotism."This is topped with the quoted remark of an early writer who projected ominously, that: "You will always be poor, if you are poor. Now, money is given to none except the rich." Thus, the essence of out chosen theme is income distribution.
In economics, income distribution covers how a country's total income called Gross Domestic Product (GDP) is distributed amongst its population. Economic theory and economic policy have long seen income and its distribution as a central concern, with discussions framed in terms of the degree of inequality across groups, classes and nations of the world.
Basically, income inequality is defined as the difference in how income is distributed among individuals and/or populations; it is also described as the gap between rich and poor, wealth disparity, wealth and income differences, or the wealth gap. In general, how unequal the profile of income distribution assumes in a country or globally has rightly become an issue of academic and political interest for important reasons, including its implication for poverty. Here, we explore the consequences of heavily skewed distribution by objective reference to two criteria or considerations: social justice and economic efficiency.
For starters, we recall the World Economic Forum’s Global Risks Survey which shows that inequality is associated with a range of health and social problems including mental illness and violent crime. Therefore, the wider the gap between the rich and the poor in a country and in the world, the more insecure and unhealthy the society becomes. As rightly acknowledged on a platform of the Organisation for Economic Cooperation and Development (OECD), OECD Insights, by Brian Keeley in the article, “Income Inequality: The Gap between Rich and Poor”, published in 2015:
Inequality affects economies and societies, with growing evidence that excessive inequality may be bad for growth. There are also concerns that inequality may dampen educational opportunities and social mobility. The poorest members of society suffer immediately from inequality, but in the longer term, the whole economy is also damaged.
Of course, well-meaning activists and organizations have not kept mute in the face of the observed incidences of widening gap between the rich and the poor along with its associated accentuation of poverty. Going beyond criticisms, such concerned individuals and institutions have explored and shared perspectives on the subject, extended to remedial measures. As the former minister of finance in Greece, Yanis Varoufakis, in an entirely different but connected context, once asserted dialectically: Every crisis is pregnant with a recovery.
Oxfam International’s abiding concern
Oxfam, a British-originated non-governmental organization with international tentacles in operations, has long been concerned about the unwholesomeness of the widening gap between the rich and the poor nationally and globally-coming to the empirically tested conclusion of it being unjust, as it kills. With especial focus on the trend since the pandemic, the Socialist Website in its January 19, 2022 edition, through the pen of Kevin Reed, writing on: “Oxfam report reveals malignant dependency of the pandemic on capitalist inequality”, commented on the organization’s reaction to the growing divide between the rich and the poor, faithfully summarizing how:
The Oxfam report depicts the worldwide inequality in the starkest terms. “A new billionaire has been created every 26 hours since the pandemic began. The world’s 10 richest men have doubled their fortunes, while over 160 million people are projected to have been pushed into poverty. Meanwhile, an estimated 17 million people have died from COVID-19—a scale of loss not seen since the Second World War. Oxfam says, “The world’s small elite of 2,755 billionaires has seen its fortunes grow more during COVID-19 than they have in the whole of the last fourteen years—fourteen years that themselves were a bonanza for billionaire wealth . . . Since 1995, the top 1% have captured nearly 20 times more of global wealth than the bottom 50% of humanity.
The Website concluded on the indicting note that, “What the Oxfam report proves is this: the pandemic has been massively profitable for the ruling elite . . . As COVID-19 spread, central banks injected trillions into economies worldwide, aiming to keep the world economy afloat. Much of that stimulus has gone into financial markets, and from there into the net worth of billionaires. Governments have pumped $16 trillion into the global economy since the start of the pandemic, and in large consequence, billionaires have seen their wealth increase by $5 trillion, rising from $8.6 trillion to $13.8 trillion since March 2021, as government intervention has driven up stock prices. I dare to add that this is how, historically, the rich profit from the misery of the poor. To bring the matter close to the reader, what the Oxfam study demonstrates-in figures- translate to the following statistics:
• Every day inequality contributes to the death of at least 21, 300 people-meaning one person every four seconds;
• The wealth of the 10 richest men has doubled, while the income of 99% of humanity are worse off, because of COVID-A19
• Hunger kills over 2.1 million people each year at a minimum
• An estimated 5.6 million people die every year for lack of access to healthcare in poor countries.
It is pertinent to note the fact that Oxfam has not restricted itself to the generalized global scene but has indeed cascaded its initiatives on inequality down to the national level, Nigeria being a concrete example. In its publication, Nigeria: extreme inequality in numbers, Oxfam made the following points:
Nigeria is not a poor country yet millions are living in hunger
Economic inequality in Nigeria has reached extreme levels, despite being the largest economy in Africa. The combined wealth of Nigeria’s five richest men - $29.9 billion - could end extreme poverty at a national level yet 5 million face hunger.
More than 112 million people are living in poverty in Nigeria, yet the country’s richest man would have to spend $1 million a day for 42 years to exhaust his fortune.
Women represent between 60 and 79 percent of Nigeria's rural labor force but are five times less likely to own their own land than men. Women are also less likely to have had a decent education. Over three-quarters of the poorest women in Nigeria have never been to school and 94% of them are illiterate.
Personally, I find these statistics disturbing and one wonders how the reader feels especially given the concrete manifestations of the data –as witnessed on the streets.
The economic leg of the unhealthy combination
There are various numerical indices for measuring economic inequality, but the most commonly used measure for the purposes of comparison is the Gini coefficient (also known as the Gini index or Gini ratio, named after the Italian statistician and sociologist, Corrado Gini). It measures the dispersal of wealth or income among a chosen population. A Gini coefficient of zero indicates that there is perfect equality—assets are equally divided between all people in the group; a Gini coefficient of one indicates that all of a group’s wealth is held by one individual. In reality, most countries fall toward the middle of this range.
Our theme falls squarely within the bracket of the branch of economics tagged Welfare Economics, the definition of which on June 06, 2022, Michael L. Boyle and Suzanne Kvilhaug using the platform of Investopedia, rendered aptly as “the study of how the allocation of resources and goods affects social welfare”. As clarified by Douglas Curtis and Ian Irvine, in their voluminous 444-page text, Principles of Microeconomics: Welfare economics assesses how well the economy allocates its scarce resources in accordance with the goals of efficiency and equity. Equity deals with how society's goods and rewards are, and should be, distributed among its different members, and how the associated costs should be apportioned. It is also concerned with how different generations share an economy's productive capabilities: more investment today makes for a more productive economy tomorrow, but more greenhouse gases today will reduce environmental quality tomorrow; these are inter-generational questions. This relates directly to the study of economic efficiency and income distribution, as well as how these two factors affect the overall well-being of people in the economy. The duo then proceeded to make an instructive footnote to the effect that: welfare economists seek to provide tools to guide public policy to achieve beneficial social and economic outcomes for all of society. However, welfare economics is a subjective study that depends heavily on chosen assumptions regarding how welfare can be defined, measured, and compared for individuals and society as a whole.
The extended footnote above carries a hugely important message concerning the values that individual economists uphold and which inevitably determine the kind of policies they recommend and even the issues they choose to focus on or to ignore. Beyond the obviously ideological essence of the economist’s mindset-conscious or otherwise, there is a black box in the welfare economics vehicle designed to hide the true character of its task: it is called Pareto Efficiency-seen as the ideal outcome or position for an economy. In other words, the goal of economic policy would be to try to move the economy toward a Pareto efficient state. Its message is far-reaching, as it reads: when the economy is in a state of Pareto efficiency, social welfare is maximized in the sense that no resources can be reallocated to make one individual better off without making at least one individual worse off. I implore the reader to go over and reflect on the statement until thoroughly understood as essentially being a strange model of cost-benefit analysis. In a society where some get enriched at the expense of others, the perpetuation of such a status quo is clearly in the interest of the beneficiaries while the sufferers endure loss; is there any way a necessary redistribution of income would not lead to a loss on the part of a party and a gain by the other? It’s perhaps fruitless to go full blast into this debate as our personal values are bound to intrude; so, it is better to go through the safer route of isolating the specific factors at work.
Forces at work-locally and globally: ideology and institutions
In modern mixed economies, markets and governments together determine the output produced and also who benefits from that output. In other words, government interventions can increase or decrease the level of inequality in a society. As posed by Douglas Curtis and Ian Irvine in their extract, “Equity and Efficiency”, even if market forces drive efficiency, are they a good way to allocate scarce resources in view of the fact that they not only give rise to inequality and poverty, but also fail to capture the impacts of productive activity on non-market participants? The analysis of markets in this larger sense involves not just economic efficiency; public policy additionally has a normative content because policies can impact the various participants in different ways and to different degrees. Welfare economics, therefore, deals with both normative and positive issues. Efficiency addresses the question of how well the economy's resources are used and allocated; the alleged trade-off between efficiency and equity is unfounded or perhaps, misplaced, because, the real issue lies elsewhere: the structure of the economy with its imperfect markets. This in the sense that when a market is inequitable, it can result in unequal access to wealth and income, a basic and equal minimum of income, and goods and services.
The key point of their relationship is that while efficiency addresses the question of how well the economy's resources are used and allocated, equity deals with how society's goods and rewards are, and should be, distributed among its different members, and how the associated costs should be apportioned. No conflict and therefore trade-off necessarily needs to arise. After all, an improvement in efficiency should generally make the economy better off; therefore, there is no reason why improved efficiency has to lead to inequality. Rather, it is indeed compatible to improve both efficiency and equity within society
There are many reasons for economic inequality within societies, and they are often interrelated. Acknowledged factors that impact economic inequality include, but are not limited to: inequality in wages and salaries; income gap between highly skilled workers and low-skilled or no-skills workers; wealth concentration in the hands of a few individuals or institutions; labour markets; globalization; policy reforms; taxes; education; computerization and growing technology; gender; and innate ability. It is appropriate to enter a footnote on at least one of these factors-namely: computerization and growing technology-because it is wrongly isolated as being the major contributor to inequality, citing the dominance of ICT leaders in the billionaires’ league, notably: Elon Musk of Twitter- net worth: $175 billion; Bill Gates, the co-founder of Microsoft, with a net worth of 114 billion U.S. dollars; Jeff Bezos of Amazon-with $112 billion; and Larry Ellison-of Oracle-with $93.1 billion, to cite the leading lights.
The main point to take along with the foregoing is that studies have shown as recalled in the 2021 article, “Causes and Consequences of Income Inequality – An Overview”, by Matthew Polacko, how inequality has largely been driven by a multitude of political choices. More broadly at the super structural ideological level, the embrace of neoliberalism since the 1980s has provided the key catalyst for political and policy changes in the realms of union regulation, executive pay, the welfare state and tax manipulation, which have been the key drivers of inequality. These amenable causes have led to demonstrable harmful outcomes that go beyond purely material deprivation. Most important, the studies also show that inequality is directly linked on the economic front with reduced growth, investment and innovation, and on the social front with reduced health and social mobility, and greater violent crime
In a review article published on March 30, 2022, Toby Walters posed a posed a pertinent question: What Is Economic Justice? His explanatory answer is no less relevant, which is that: Economic justice is a component of social justice and welfare economics. It is a set of moral and ethical principles for building economic institutions, where the ultimate goal is to create an opportunity for each person to establish a sufficient material foundation upon which to have a dignified, productive, and creative life. Thus, to Walters, whose offering enjoys our endorsement, the concept of economic justice intersects with the idea of overall economic prosperity. The linkage is that creating more opportunities for all members of society to earn viable wages will contribute to sustained economic growth. When more citizens are able to provide for themselves and maintain stable discretionary income, they are more likely to spend their earnings on goods, which in turn drives demand in the economy. Anybody with some knowledge of Keynesian economics can see easily the source of this reasoning and its logic.
Moving to the desired scenario
Even the militantly conservative International Monetary Fund (IMF) acknowledges the fact that, “irrespective of ideology, culture, and religion, people care about inequality” The reader may wish to read the Fund’s June 205 Staff Discussion Note on: “Causes and Consequences of Income Inequality: A Global Perspective”. In the effort of Toby Walters cited earlier, emphasis is placed on the fact that achieving economic justice can include addressing wage gaps and other deficiencies in individual earnings. For instance, there are members of the workforce employed in jobs that do not make full use of their skills-euphemistically referred to as underemployment. This typically leads to workers earning wages that do not reflect the full potential of their abilities. As a result, they do not have the highest income they are capable of earning. Such loss of possible wages creates an inefficiency in the economy because those workers will not have the income to participate to their fullest in it. If this inefficiency reaches significant magnitude—wherein large portions of the population are not purchasing goods and services they might have otherwise spent their earnings on—it can slow down the economy.
Apart from market-driven factors that affect wage inequality, government sponsored initiatives can also increase or decrease inequality. Social scientists and policy makers debate the relative merits and effectiveness of each approach to regulating inequality; typical government initiatives along this line include:
• Public education: Increasing the supply of skilled labour and reducing income inequality due to education differentials.
• Progressive taxation: The rich are taxed proportionally more than the poor, reducing the amount of income inequality in society.
• Minimum wage legislation: Raising the income of the poorest workers
• Nationalization or subsidization of products: Providing goods and services that everyone needs cheaply or freely (such as food, healthcare, and housing), governments can effectively raise the purchasing power of the poorer members of society.
As acknowledged by the IMF in the Staff Paper cited earlier-albeit drawing its examples from regions outside Africa to the effect that governments in advanced economies have historically mitigated inequality through public policy—primarily through progressive taxes and social transfers such as public retirement benefits. However, the relatively weak state of the remedial measures in place in most underdeveloped economies-who owe their unenviable condition to their role within the international division of labour-underscores the complexity and urgency of redress especially in Africa.
It must be put on record that all the remedial measures suggested above are essentially tokenistic and incapable of getting to the roots of the unjust and inefficient system of our focus. In this vein, permit me to invoke Harry Magdoff and Paul M. Sweezy who, way back in 1995 while writing on: “The Political Tragedy of Capitalist Rule”, righteously fumed over how “through their own profligacy, the ruling classes have lost their capacity for political rule; the way forward is an organized, militant struggle and with victory necessarily leading to the overthrow” of this unjust and inefficient system. I come in peace, please.