Friday, 26 January 2018

“Some inequality needed” | The Age

Your readers, and indeed leader writers, seem uniformly to believe: income inequality, bad; income equality, good. Allow me to dissent. China of the 1970s cured me of this absolutist view. When I first went to live there (1975), it was a very equal economy. From top leaders to factory workers, all earned pretty much the same – about $50 per month. This gave it a low (that is, "good") Gini index of 0.24.
Since then, China has opened up its economy and boomed. According to the World Bank, more than 500million people were lifted out of extreme poverty as its poverty rate fell from 88per cent in 1981 to 6.5per cent in 2012. But as this happened, inequality increased to give China a higher (that is, a "bad") Gini index of 0.46.
Someone has noted that inequality in an economy is much like water for plants. Water is needed, but too much and the plant drowns. And so for our economy. Unless we want the stultification of communism, some inequality is needed. Just not too much. Therein is the rub. But what seems certain is that it is not an absolute all or nothing.
Peter Forsythe, (former general manager for Austrade East Asia), Hong Kong