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No Free Lunch

Life is unfair

/ 05:28 AM November 24, 2017

The rich get richer, and the poor get children,” Nancy Birdsall once wrote tongue in cheek in an article on inequality, “Life is Unfair,” in the journal Foreign Policy. She noted rising income inequality in the United States, not just because of gains at the top, but more disturbingly, because of losses at the bottom. Evidence of this was the 15-percent fall in average wages of white male high school graduates from 1973 to 1993, and the growing number of men aged 25 to 54 years earning less than $10,000 a year.

She further noted: “The ratio of average income in the world’s richest country to that in the poorest has risen from about 9 to 1 at the end of the nineteenth century to at least 60 to 1 today. That is, the average family in the United States is 60 times richer than the average family in Ethiopia. Since 1950, the portion of the world’s population living in poor countries grew by about 250 percent, while in rich countries the population increased by less than 50 percent. Today, 80 percent of the world’s population lives in countries that generate only 20 percent of the world’s total income.”

Closer to home, income inequality in the Philippines is worse than in most of our neighbors. The ratio of income of the richest one-fifth Filipinos to that of the poorest one-fifth (known as the quintile ratio) is 8.4 times, against 6.8 times in Vietnam, 6.6 in Indonesia, 6.5 in Thailand, 6.3 in Laos, and 4.4 in Cambodia. If it’s any consolation, Malaysia’s is 11.4 times.

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Some widely lamented unfair realities include how: 1) small farmers in poor developing countries are hurt by the policy environment both in developed countries (such as massive agricultural subsidies) and in their own (e.g., heavier taxation on farm inputs and products); 2) the poor have no access to good quality education, and thereby get left even farther behind by the well-educated rich; 3) small borrowers who need cheap credit the most find it hardest and costliest to access bank financing, 4) the rich can easily afford to take full advantage of the benefits of information and communication technology and use it as an instrument for creating and amassing more wealth, while the technology-starved poor are left behind in the so-called digital divide; and 5) tax systems impose the heaviest burden on the poor and the middle class, while the rich pay the smallest taxes as a percentage of their income. All together, the result is an ever-widening gap between rich and poor.

But such perverse realities need not be inevitable. Neither are inequalities necessarily undesirable. Birdsall noted that within limits, inequality could be economically justifiable, particularly because inequality helps encourage innovation and hard work. The Asian Development Bank points out that there are bad inequalities and good inequalities. Those arising from lopsided opportunities are bad inequalities that society must collectively address. But inequalities that arise from differences in human attitude, effort and initiative, where opportunities are otherwise equitable, are deemed to be “good” (or acceptable) inequalities.

One could well argue that people who lack initiative should not reap the same rewards as those who work hard and maximize use of their talents and capabilities. I’ve heard it said many times, mostly by poor people themselves, that many of the poor “deserve” their fate because they are “lazy” and have low aspirations in life. Some call it a “culture of poverty.” Improved equality is better pursued, then, by ensuring equitable opportunities, not by redistributing wealth. This means bridging the gap in access to quality education and health services between rich and poor; correcting historically or politically lopsided access to land and natural resources; addressing inequitable access to credit by small and large borrowers; providing a justice system blind to people’s social and economic status; and a competition policy that makes sure that big and small enterprises alike play on a level playing field.

These are the unfair things in real life that need correcting. That way, we can ensure that any inequalities that persist are only good inequalities.

cielito.habito@gmail.com

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TAGS: education, foreign policy, inequality, Poor, rich
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