Friday, 10 November 2017

When inequality is better than equality

My notional chart: not real figures; illustrative only
(but roughly correct!)
Lest people think from my previous post that I'm anti-equality or that I'm pro-inequality, let me state: of course I'm pro-equality.  Who is not?
The problem is that darned thing: actual experience.
Which tells me: there are times and situations in which inequality is better than equality.
China, in the chart above, is an example.
NOTE: this chart is created by me on Excel using purely notional figures.  I haven't gone off to Google to find that actual info, partly because I'm too lazy and partly because I know the basic story.
I lived it. 
I arrived in China in 1976, towards the end of those "years of equality" (in chart above), observed and reported on China and its economy (for the Australian government, then for business clients) for decades, and still do so, from time to time, from my eyrie here in Hong Kong, now an inaliable part of our dear mother country, China.
So that's why there's no label on the Y-axis. I wouldn't want anyone to think that it's based on actual figures or indices.  It's not. It just illustrates a principle. It just tells a story.
And here's the quick story:
Mao and his communists took control of China on October 1, 1949.
After a short quiet period, Mao began movements to instill communism, that is the equal treatment of all, in fact the punishment of rich people and anti-revolutionaries: The Anti-Rightist Movement, The Great Leap Forward, The Great Proletarian Cultural Revolution.
That's all summarised on the left-hand side of the chart above.
  • The rich, or sometimes merely "rich" became poorer.
  • The poor also became poorer.
In short:

Everyone got poorer.  Until equality was achieved. Hurrah!

That was the time I arrived in China as a student of the Chinese language.  (This period became known as "the final years of the Cultural Revolution").
When I arrived in China, a factory worker earned 100 yuan a month.  A teacher 105 yuan a month. A Minister of State 110 yuan a month. (all worth, on average, about $US10 a month).
Pretty equal, right?
But you couldn't buy consumer goods, and everyday stuff like rice, cotton, meat and even bicycles were all rationed.  I still have my ration book from my time as a student there.
Then came the resurgence of Deng Xiaoping, the Four Modernisations (started in 1979), and the rest is history. Have a walk down any Chinese street and ponder: this is what capitalism, the free market, has done (known in China, for political reasons, as "Socialism with Chinese characteristics").
In short:

Everyone got wealthier. But inequality resulted.  Booh!

Inequality "resulted" not "was achieved" because it's not the aim of capitalism to create inequality.  But it does seem to be a result, rather all too often.
Still: according to the  World Bank, 500 Million Chinese were lifted out of poverty, in the period from 1980 to 2010.
So: which would you prefer?
  • Poverty with equality?    Or...
  • Wealth with inequality?
Of course, we want both: wealth and equality. But if it's a choice? Would you rather be on the left-hand side of the chart above, or on the right-hand side?
Also, it strikes me that understanding this might lead to different questions about how to tackle inequality.
The standard answer from the Left is to squeeze the rich. "Redistribution".  Like the Institute of Policy Studies, in my previous post.
Another answer would come from asking: how can we make the poor richer? How did the rich become rich and how can the poor learn from that?

****************
[NOTE: Here I'm looking at income.  The earlier post on a report from the Institute of Policy Studies was based on wealth.  Yes, I'm clear on the difference, but would make the point that one is a proxy for the other.  In China, for example, as incomes have increased, so has wealth.  This morning's BBC reported that China now has 95,000 millionaires (wealth) a result of the increase in the gap in incomes]