The Republic of East Vancouver
Thursday August 22, 2002  •  Vol 2 No 45

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Poor get richer

That's the unmistakable conclusion according to an economist, and anti-globalizers need to respond

by Kevin Potvin
The Republic

photo:Dorothea Lange

Numbers lie. Or rather, people torture numbers into saying what they want them to say. And sometimes, they do it for the best of intentions.

It is by now an unquestioned commonplace in the anti-globalization movement, for example, that over the last three decades of globalization, the rich have gotten richer, and the poor, poorer. This widening gap in global incomes, it is widely understood, is creating destabilizing forces–namely, widespread bitterness and resentment. The scenario presented by spokespeople for the anti-globalization movement envisions a growing army of the wandering poor ranging against a thinning cadre of barricaded rich. The appearance of an American Airlines jet on the 88th floor of World Trade Center Tower 2 was, to many, globalization brought home.

But is it all true? No doubt, the rich have gotten richer, but have the poor gotten poorer? An economist at Columbia University, Xavier Sala-i-Martin, says numbers supporting this key anti-globalization argument are all wrong. His thesis deserves attention, not only because it goes to the heart of the anti-globalization movement, but also because he sounds correct.

Most data suggesting a widening gap of income, Sala-i-Martin says, use country-by-country figures. Thus, two countries with vastly different populations, like Ghana and China, for example, are weighted equally. If the average resident of China has experienced a rise in income, and the average resident of Ghana a decline, they would cancel each other out, despite the fact there are 12,000 Chinese to every one Ghanian. The populations of the 48 countries of Africa combined add up to about half the population of China.

When Sala-i-Martin corrected for this oversight in the 1999 United Nations Human Development Report, he found startlingly different conclusions. Rather than compare countries to each other, he compared individuals. What he found was that, while in 1970, the largest global income bracket earned about $1,500 in today's dollars, today, the largest income bracket earns about $12,000–a figure roughly equivalent to the average income in Portugal.

"That's what I call a new world middle class," says Sala-i-Martin.

The biggest influence on this statistic is found in China and India, whose two economies have expanded immensely, and whose populations account for over a third of humanity.

Another problem with typical statements about incomes around the world is their failure to account for varying local costs of living. While a dollar-a-day income is admittedly low, it goes far further in Addis Ababa than in Vancouver. For income numbers to have any relevance, they need to be converted into a typical basket of goods necessary to living, at local prices. A dollar in Vancouver buys a slice of pizza. In Ethiopia, it can buy a whole family a day's worth of good meals. A common scale needs to be established before comparisons of local average incomes offer any useful information. No such scale has been widely adopted.

Nevertheless, there still remains a widening gap between the rich and poor. While the poor may be getting richer, the rich are getting richer too, and faster. Sala-i-Martin argues that it may be necessary to more quickly enrich the rich in order to also enrich the poor: "If our indexes say that inequality rises, then rising inequality must be good, and we should not worry about it."

But a growing body of literature suggests that, when it comes to social stability and happiness, income is not as important as equality. Widespread bitterness and resentment can occur where most people are well-off, if a portion of the population is excessively wealthier. And where populations are in poverty, there can exist relative peace and contentment if the rich among those populations are not too many times more wealthy than the poor.

If this is true, then local inequalities, not absolute measures of income, should be the socially responsible target.

That may be a trickier cause to champion. Part of the globalization process has included mass communication technologies. Now that television, cell phones, and the internet are available virtually everywhere, the foreign has become local too. Even if a generally poor society were to achieve a stable level of local equality, a vast and destabilizing inequality would be everyday apparent over the channels of modern mass communication. But the alternative–cutting off access to images of wealth for relatively poorer people–is patronizing and, anyway, impossible.

Sala-i-Martin may think that as long as the poor get richer, inequality is nothing to worry about; and anti-globalizers may go on thinking the poor are getting poorer. Both are wrong.

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