Income Inequality is Good?!
Looks like Steven Hayward spent part of his Sunday trying to convince his readers that income inequality is good! He points to an article in the Washington Post which correlates low income inequality in Greece with it’s economic problems.
Income inequality has increased in this country and in practically every European nation in recent decades. The best measure of that change is the Gini index, named after the Italian statistician Corrado Gini, who designed it in 1912. The index values vary between zero, when everyone has exactly the same income, and 1, when one person has all of the income and everybody else has none. In mid-1970s America, the index was 0.316, but it had reached 0.378 by the late 2000s. One of the few nations to see its Gini value fall was Greece, which went from 0.413 in the 1970s to 0.307 in the late 2000s. So Greece seems to be reducing income inequality — but with little to buy, riots in the streets and economic opportunity largely limited to those partaking in corruption, the nation is hardly a model for anyone’s economy.
Hayward then follows with the comment:
Oh goody: Greece is the only nation that the Occupy Wall Street crowd probably approves of right now. That’s working out real well for everybody.
Well, there you have it! Greece is a basket case because it has a less income inequality! But I wonder if there are any other countries that have an even lower Gini index than Greece? Surely they must also be basket cases!
Let’s take a look at the latest Legatum Prosperity Index. The US ranks pretty high at number 10, while Greece is a distant 40. So far, so good. But lets look at the Gini indexes of the nine countries that were rated more prosperous than the US. It turns out that all nine have a lower Gini value than the US, and all but one (New Zealand) have a lower value than Greece! As Rick Perry would say… “Oops”!
But what about Hayward’s contention that “Greece is the only nation that the Occupy Wall Street crowd probably approves of right now“? In addition to the 9 countries more prosperous than the US, there are actually about another 90 countries that also have less inequality than the US. Oops again!