April 15

About 55-60 years ago, when I was studying and teaching economics, I objected  to the focus on Gross National Product as a measure of a country’s wellbeing. At that time, it may have been a good indicator in the US, but it missed the mark in Latin America. There, growing GNP didn’t seem to do much for most citizens. Classical economic assumptions led people readily to GNP as a measure…The economy was self-regulating….everyone is rewarded for hard work…people’s choices will allocate resources properly and efficiently. People who weren’t doing well economically must not be working hard enough. Consistent with this thinking was the “trickle down” approach. Making wealthy people wealthier was a good thing; they would use their wealth efficiently…investing and creating jobs….and the benefits would trickle down to everyone. But, observing Latin America, it didn’t seem to work. Despite growing economies, there were still huge disparities in income distribution.

Since that time….and I had moved on from teaching….someone invented the Gini coefficient. The Gini coefficient is a number between 0 and 1 that measures income disparities in countries.. Zero is perfectly equal distribution. One is a situation where one person has all the income. For those interested in more equal income distribution, a lower number is desirable. The “best” numbers are in the 25-30 range….countries like the Czech Republic, Ukraine, Iceland and Canada.  In the middle range…around 40 ….are countries like Burkina Faso, Saudi Arabia, Bulgaria, Bolivia and the United States.

The highest Gini coefficients are South Africa (63), Namibia (59) and Angola, Mozambique,and Zimbabwe … each around 50. I raise this point as it is consistent with our observations on this trip. We visited African countries that had experienced Colonialism and continue to have the greatest wealth disparities. Well-meaning helpers who want to improve the economies of these countries frequently focus on increasing Gross National Product, but that does little for most citizens. In Angola, the GNP is growing at a good rate. It’s based primarily on oil and diamond exports. Guess who would benefit from doubling the production of oil and diamonds…I bet the Gini coefficient would change very little.

South Africa gets attention because it implemented Apartheid and made conditions very explicit. The other countries we visited appeared to have similar conditions….lots of poverty and unemployment, townships with informal housing. little optimism about the future and struggling governments. It’s hard to imagine things changing soon. The US approach of scrapping foreign aid will not help.