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Haves vs Have-Nots | Here’s Why it Isn’t Healthy
It’s a bit paradoxical because it’s in a human being’s nature to be selfish. If you could have $2 million instead of $1 million, you would, wouldn’t you? Despite whether you needed it or not, the rational choice would be to take the $2 million.
At the same time, the pursuit of equality is intrinsic to human nature. People instinctively try to avoid scenarios where a few have the deeds to all the resources we need to live.
We can see this throughout history. The French Revolution taught us a great deal, where the French people overturned their monarchy. ‘Liberty, equality, fraternity or death’. The Russian Revolution is another example.
Equality is something that we all naturally want; indeed, inequality is unhealthy for the economy.
Why is inequality bad?
1. Leads to social and political unrest
2. This can deter a country’s inward investment
3. An example of this is Austria and Somalia. Both similar populations, but Somalia received $100 million in investment funds in 2011. Austria received 100x as much ($10 billion).
4. Inequality impedes social mobility – individuals find it more difficult to climb the social ladder. For example, a good education, a prosperous job and privately owned housing
Economists measure inequality using the Gini coefficient. It measure the degree to how equal/unequal a society is. The value of the Gini coefficient is always between 0 and 1. 1 is the definition of absolute poverty for many people, and 0 is the definition of absolute equality, where everything is shared equally.
Most developed countries have Gini coefficients between 0.3 and 0.5 (such as Italy and the United States.
So, in the real world there is a great degree of inequality remaining. Is some inequality a good thing. Perhaps, but it is really up for debate. Inequality is inherently outlined in the capitalist ideology, where people are rewarded more for working harder and innovation is rewarded.
On the other hand, inequality to the extremes we see today, where we have a group of billionaires that have the same amount of wealth as a small country, is quite difficult to stomach.
Communism, on the other hand, says that resources and production should be completely governed and organised by the state, and these should be distributed equally. However, while it sounds good on paper, throughout history we have seen this not to play out as well as we might have hoped.
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