The Income Distribution Facts We Can't Escape: Increasing Inequality

Go to the OECD website OECD Statistics on Income Inequality and you will find a handy-dandy form for looking up income distribution information about countries of the world.

A particularly useful statistic is the Geni Coefficient.

Gini coefficient The Gini coefficient is defined as the area between the Lorenz curve (which plots cumulative shares of the population, from the poorest to the richest, against the cumulative share of income that they receive) and the 45° line, taken as a ratio of the whole triangle. The values of the Gini coefficient range between 0, in the case of "perfect equality" (i.e. each share of the population gets the same share of income), and 1, in the case of "perfect inequality" (i.e. all income goes to the individual with the highest income).

Put simply: A lower Gini coefficient means a more equal society; a higher Gini coefficient means more inequality.

Check out a few countries to see relative Gini coefficients before taxes and transfers and after.  I looked at Norway, Portugal and the US.  (Portugal is one of the poorest countries in Europe.  Norway is a wealthy country that has low social inequality.)  Here's the way the Gini coefficient has been moving over time in these three countries.  (You can click on the graph to see it in larger format.)  Notice how similar the US is to Portugal in terms of inequality.  In equality has been going up for all three countries over time, however.

Now look at this table:

OECD Countries, From Greatest to Least Inequality
Country		Gini Coefficient, after taxes and transfers mid-2000s
Mexico			0.47
Turkey			0.43
Portugal			0.38
United States			0.38
Poland			0.37
Italy			0.35
New Zealand			0.34
United Kingdom			0.34
Ireland			0.33
Canada			0.32
Greece			0.32
Japan			0.32
Spain			0.32
Korea			0.31
Australia			0.3
Germany			0.3
Hungary			0.29
France			0.28
Iceland			0.28
Norway			0.28
Switzerland			0.28
Austria			0.27
Belgium			0.27
Czech Republic			0.27
Finland			0.27
Netherlands			0.27
Slovak Republic			0.27
Luxembourg			0.26
Denmark			0.23
Sweden			0.23
OECD Total			0.31

This is a list you don't want to be on the top of.  The US is up there in terms of inequality with Mexico, Turkey, Portugal, and Poland.

These are the issues of Occupy Wall Street.  Not only is income inequality increasing globally, the US is particularly bad.  Our policies favor the rich, allowing them to get richer at the expense of the poor and increasingly the middle class.

When inequality is great, democracy fails.  When the rich can simply use dollars to out-vote the middle class and the poor, the fundamental tenet of democracy, that adult citizens are equal and their votes are of equal value, falls apart.

Ibn Khaldun, the 14th century Arab social theorist, wrote that "group feeling" was required to make a state great.  The loss of group feeling signaled the loss of greatness.  In my view, we are faced with a serious loss of group feeling.  The few at the top at the economic heap reap huge benefits and do not care, for the most part (Buffett is a notable exception!) that they are benefiting at the expense of others.  The end of group feeling -- the end of caring for the well-being of the community as a whole -- marks our country's decline.

A part of me is simply sad.  But a larger part of me is angry, especially at the distortions of economic theory that are spouted by those who choose to continue pushing the Gini coefficient higher and higher (inequality getting worse and worse).

That's why I am proud that disgruntled Americans have been exercising their American rights of free speech in the Occupy movement.  We cannot compete with those who seek greater inequality by spending more money; our opponents have more money.  We can compete with voice.  Sensible people raising their voices loud enough and persuasively enough with these simple facts can -- I hope, I hope! -- make a difference.