Saturday, April 5, 2008

Looking at income inequality in the developing world

One of the things discussed is the growing income inequality in China, despite it being a Communist state. This certainly dovetails with my recent experience in Guangzhou. In the south of China, there are really no noticeable vestiges of Communism whatsoever. I saw way more Nationalist memorials (Sun Yat-Sen) than Mao.

Recently, I've been looking at Gini Coefficients, per a discussion we had in a seminar that compares the economies China and India that I'm taking.
I won't bother you with the details of how to calculate a Gini Coefficient. But the basic idea is that a low Gini coefficient means more equal wealth distribution. A high Gini coefficient means greater inequality in the distribution of wealth.

China is at 46.9, the United States is at 45. This means that Communist China has greater income disparity than the United States by at least one measure. The half-decent (albeit somewhat inefficient) welfare programs in the US mean that even the poor can have a sniff of decent consumer products and foodstuffs. In China, those who are poor are devastatingly poor. There is no evidence of the Iron Rice Bowl.

Overall, looking down the list of Gini coefficients is pretty interesting. They're low in Western Europe and extremely high in Africa. The European Union as a whole is at 30.7. Sweden and Denmark, both extremely wealthy countries compared to the rest of the world, are at 23 and 24 respectively.

At the other end are places like Lesotho, Namibia and Botswana. Closest to home here in the US is Haiti at 59.2, 7th from the bottom. The Economist made some good observations about Haiti this month. It's in bad shape and only getting worse - 21% of its GDP is remittances from the now slumping US. It imports its oil and food, which is terrible with these prices rising through the roof.

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