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“Breaking News: 85 People Own Half the World….”

By Den­nis Shaughnessy 

The lat­est story of global inequal­ity comes from Oxfam Inter­na­tional this week: 85 peo­ple own as much of the world’s wealth has the 3.5 bil­lion poor­est peo­ple, or the bot­tom half of the planet. As for inequal­ity in the US:  95% of the income gaps in recent years have gone to the top 1% of the pop­u­la­tion, with one out of every five Amer­i­can chil­dren now liv­ing in poverty. A par­tic­u­larly telling exam­ple of inequal­ity in the US is the fact that the six heirs to the Wal­mart for­tune now own as much as the bot­tom one-sixth of Amer­i­cans, or nearly 50 mil­lion peo­ple, while at the same time a small but grow­ing num­ber of Wal­mart employ­ees requir­ing Sup­ple­men­tal Nutri­tion Assis­tance Pro­gram (SNAP), more com­monly known as food stamps to feed their families.

Doubt­less there will be polit­i­cal bat­tles in the com­ing years over whether and how to address grow­ing inequal­ity. If nearly every­one agrees that every life has equal value, then why are so many peo­ple liv­ing lives that sug­gest the contrary?

Cer­tainly pol­icy deci­sions on things like more effec­tive ways to cre­ate oppor­tu­nity, to edu­cate chil­dren at early ages, and to rethink tax pol­icy will all be con­sid­ered in the com­ing months and years. It will be chal­leng­ing for our polit­i­cal lead­ers to pur­sue new pol­icy paths given the intense divi­sion among the elec­torate on issues of tax­a­tion and spending. 

In this con­text, we have one small but very use­ful tool that we can use as edu­ca­tors of col­lege stu­dents, and par­tic­u­larly of busi­ness stu­dents, to focus the dis­cus­sion on inequal­ity.  It’s called the Gini coef­fi­cient, a method of mea­sur­ing with some pre­ci­sion the unequal nature of life around the world.  While eco­nom­ics stu­dents may know this topic and tool well, my expe­ri­ence in teach­ing busi­ness stu­dents sug­gests we can do more to bring pre­ci­sion to dif­fi­cult pol­icy debates as well as busi­ness decision-making. In other words, we must try to shed light rather than heat on the topic of inequality.

The Gini coef­fi­cient mea­sures national income equal­ity, or inequal­ity.  His­tor­i­cal data allows us to exam­ine trends in the dis­tri­b­u­tion of income within a coun­try.  Here’s how: a score of 1.00, or 100 depend­ing on the method cho­sen, would sug­gest that one per­son owns all of that fic­tional country’s income.  On the other hand, a score of 0.00 means wealth would be evenly dis­trib­uted among each citizen. 

So, using the Gini mea­sure, where do lead­ing coun­tries per­form?  The most equal coun­tries typ­i­cally come from North­ern Europe – Den­mark, Nor­way, and other Scan­di­na­vian countries.  Most would sug­gest this is the result of both high income and strong gov­ern­ment redis­tri­b­u­tion poli­cies favor­ing free or highly sub­si­dized edu­ca­tion, health­care and trans­porta­tion.  On the oppo­site side of the spectrum, South Africa typ­i­cally leads as one of the most inequitable coun­tries, even after the end of apartheid and the lead­er­ship of Nel­son Mandela. Many of the world’s most unequal coun­tries are as you might expect devel­op­ing coun­tries, with poverty as an intractable social prob­lem along­side economies based on extrac­tion (for exam­ple in the case of South Africa, min­ing) and low-cost labor.

What of the US and the Gini coef­fi­cient?  First, the US is on the “good” side of the Gini mea­sure of income inequal­ity, with a score of 0.41 and a rank of 96th out of 152 coun­tries exam­ined by the World Bank.  How­ever, the trend is toward a higher level of inequal­ity, most notably over the years since the “great reces­sion” of 2008-09.  The Gini data show that the US is or is becom­ing much more unequal gen­er­ally, and the uplift­ing idea of the “Amer­i­can dream” becom­ing more dif­fi­cult to con­vert into a real­ity for peo­ple start­ing at or near the bot­tom of income dis­tri­b­u­tions. Com­par­a­tively, Den­mark is ranked first as the most equi­table coun­try in the world with a score of 0.25, whereas South Africa’s Gini coef­fi­cient of 0.63 earns it a rank of 152 of 155; there are just three coun­tries that are more unequal dis­tri­b­u­tion of wealth.  

What can busi­ness do, both glob­ally and in the US? Busi­ness lead­ers need to begin to con­sider how their enter­prise can dimin­ish esca­lat­ing inequal­ity.  Of course, each indus­try will have dif­fer­ent oppor­tu­ni­ties and chal­lenges, but adopt­ing a busi­ness mind­set and strat­egy that have a pos­i­tive impact on inequal­ity and the social jus­tice prob­lems that arise from it is a good first step; it all begins with the invest­ment in peo­ple, com­mu­ni­ties and mar­kets that have tra­di­tion­ally been ignored or underrepresented.

As for social entre­pre­neurs, a focus on devel­op­ing new busi­ness mod­els and inno­v­a­tive financ­ing meth­ods that are designed to make a social impact and reduce inequal­ity, espe­cially among the poor and within poor com­mu­ni­ties and nations.

The rich­est, begin­ning with those 85 bil­lion­aires that own half the world must, and have started to take action against grow­ing inequity.  Bill Gates and War­ren Buf­fett, two of the world’s wealth­i­est peo­ple, cre­ated “The Giv­ing Pledge” in 2010.  Under the pledge, bil­lion­aires com­mit, in writ­ing, to giv­ing at least half of their wealth to char­i­ta­ble or phil­an­thropic pur­poses.  The list is long and grow­ing and includes peo­ple like Face­book founder Mark Zucker­berg and Patrice Mostepe, South Africa’s first black bil­lion­aire busi­ness­man.  How­ever, data on phil­an­thropy sug­gests that most giv­ing, espe­cially by the wealthy, tends to go to insti­tu­tions that do not have as their cen­tral pur­pose a mis­sion to cre­ate oppor­tu­nity for the poor or to reduce inequal­ity, like uni­ver­si­ties, muse­ums, churches and hospitals.  

Let’s encour­age a change in the “giv­ing” of these bil­lion­aires rich­est few, to focus their giv­ing on orga­ni­za­tions that cre­ate oppor­tu­nity and reduce inequal­ity and to “invest” in social enter­prises through the emerg­ing field of “social impact invest­ing”.  High-performing  social enter­prises sup­ported by impact investors have the unique oppor­tu­nity to cre­ate oppor­tu­nity for peo­ple tra­di­tion­ally excluded from the “upside” of eco­nomic growth. As social entre­pre­neurs strive to enter mar­kets with the high­est need, we are con­fi­dent that their actions will grad­u­ally and sus­tain­ably lead to greater equality. 

Sources 

 http://givingpledge.org/

http://www.oxfam.org/en/policy/working-for-the-few-economic-inequality

http://wdi.worldbank.org/table/2.9#