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INEQUALITY IS NOT A GOOD BUSINESS

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness..” 

U.S. Declaration of Independence

One of the main challenges of the 21st century will be the fight against inequality. Sometimes we forget, but today we live in a version of the world that boasts levels of prosperity never seen before. It does not matter which indicator is used: Per capita income. Life expectancy. Child mortality. Caloric intake. Unemployment. Access to education. Religious freedom. Military conflicts. In every way, today’s world is better than the world of 100, 200 or 300 years ago. However, despite the great scientific and technological advances, there are large sectors of the population in all countries that have been systematically marginalized from such enormous prosperity. According to the World Bank, approximately 1 billion people in the world survive on income of less than one dollar a day.

The problem of our generation will not be so much how to generate wealth, but how to ensure that such wealth is evenly distributed. It is true that the capitalist model encourages by its own nature the disproportionate concentration of wealth. Karl Marx told us that 150 years ago. And recently Thomas Piketty has given us a very good observation: Historically the rate of return on equity has been two or three times higher than the GDP growth rate and the growth rate of wages, therefore the owners of capital create and accumulate wealth faster than those who only have their workforce to offer.

The first step to solve the problem of inequality is to know how to measure it and for that we need to talk about the Gini coefficient. What can we say about its author? Corrado Gini was born in Motta di Livenza, Italy, in 1884. Son of a relatively wealthy family, from childhood he showed aptitude for mathematics and was accepted ast a young age at the University of Bologna, where he studied law and mathematics, graduating when we has 20 years old with a thesis about sex and statistics. In 1912, at 28 years of age, he published an article called “Variability and Mutability”, where he discussed the foundations of the metric that to date carries his name. The Gini coefficient is a statistical dispersion metric that seeks to measure income inequality or wealth inequality within a nation or within any other group of people. A Gini coefficient of zero expresses perfect equality, where all people have exactly the same income or same wealth, while a coefficient of one represents maximum inequality, where only one person has all the income or all the wealth and the rest have nothing.

An interesting parenthesis about the person of Corrado Gini: In the 1920s he was a supporter and defender of Italian fascism. In fact, he had a very close friendship with Mussolini. In 1926 he was appointed President of the Central Statistical Institute of Rome. In 1927 he published a text on “The scientific basis of fascism.” In 1929, he founded the Italian Committee for the Study of Population Problems which, two years later, would organize the first Population Congress in Rome. In 1932 he resigned from his post within the Italian government. In 1944, already towards the end of the Second World War, he founded together with the Calabrian activist Santi Paladino and the researcher Ugo Damiani the Italian Unionist Movement, a political party that proposed that the United States annex Italy and all the other free and democratic nations of the world, transforming itself into a kind of world government that would guarantee a lasting peace.

Countries with a Gini coefficient greater than 50 are considered as countries with high inequality. Among them we find South Africa, Namibia, Zambia, Lesotho, Honduras and Brazil. Countries with a Gini coefficient between 30 and 50 are considered to be of medium inequality and this includes Mexico, the United States, Argentina, Russia and Uruguay. Countries with a coefficient lower than 30 are considered of low inequality and in this category are Austria, Denmark, Norway, Holland, Slovenia, Sweden and Ukraine.

In the case of Mexico, according to official data from Coneval, between 2008 and 2016 the Gini coefficient remained practically immobile, stagnating between 0.505 to 0.498. However, in 2018 it fell to 0.469, which represented a significant advance in the fight against inequality. What were the causes? Hard to know for sure. Perhaps years of actions and initiatives were finally starting to show some results. Even so, inequality in Mexico remains the highest in the OECD and a pending task for the government and for society.

What are the factors that most influence the fight against inequality? Economists have different points of view, but many agree on economic stability, access to education, efficient tax systems, direct transfers to vulnerable sectors, progressive increases to the minimum wage, and functional social security institutions, among others. Without doubt, this century we will have to explore other concepts that until a few years ago would have seemed ridiculous, such as universal basic income or maximum per capita income. As business leaders, we have to take a more active role in solving this enormous challenge. Less inequality means new consumers, better workers, greater political and social stability, and the construction of a sustainable future for our companies.

One thought on “INEQUALITY IS NOT A GOOD BUSINESS

  1. Armando, soy Dennis Bermúdez en Chicago.

    Espero te encuentres muy bien en lo personal y en lo que cubre el aspecto, profesional, es evidente que tu éxito ha sido extraordinario, por lo cual te felicito.

    Te participo que desde hace más de 18 meses he tratado de comunicarme con vos utilizando diferentes medios, incluyendo llamadas telefónicas durante mi última visita a la capital mexicana en mayo del año pasado, pero lamentablemente ha sido en vano.

    Me encantaría, y me urge, comunicarme con vos. Mi móvil (773-844-7510) sigue siendo el mismo, inclusive el citado número lo uso en WhatsApp, cuando nos conocimos hace más de nueve años.

    Espero con mucha ansiedad tu llamada.

    Te saludo cordialmente,

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