Just a few years ago the notorious “G word” — globalization — was constantly on the minds and lips of the chattering classes. But globalization, so yesterday, has increasingly been replaced by the “I word” — inequality — which now flows mellifluously from the mouths and pens of today’s bien pensants. Indeed, in the year of Thomas Piketty, discussions of inequality, often punctuated by the introduction of another G word, Ginis (as in coefficients), have become de rigueur in (almost) all analyses of the world’s economic ills.
If one manifestation of concern over inequality, the OWS (Occupy Wall Street) movement in the United States, faded out after its Warholian fifteen minutes of fame, a concept it popularized — “the one percent” — is alive and well. Seldom a day goes by, it seems, without numerous (frequently censorious) pieces in the mainstream media pointing out how unequally distributed income is in Country X and wealth is in County Y, with the simplified assumption that inequality anywhere always means the same thing.
Although it would be a mistake to downplay the often-deleterious consequences of egregious income and wealth inequality, sometimes questions about inequality are thornier than they appear on the surface. To invoke the title of the 2009 film starring Meryl Streep, “It’s Complicated” to talk about inequality. For example, although income inequality appears to have grown within individual countries in recent decades, Branko Milanovic and others have demonstrated that global income inequality across countries (and calculated on the basis of individuals regardless of country) has fallen over time.
Moreover, the aggregated data we typically rely on can cause us to miss interesting and important points regarding the differences between and among countries with more or less the same levels of inequality. One such comparison involving the United States, one of the most unequal countries in the world in terms of income- and wealth-holding patterns, provides a case in point.
In terms of GDP per capita, the U.S. is one of the richest countries in the world —certainly, the richest large country in the world. According to IMF estimates for 2013, the U.S., with a mean figure of $53,001, ranks ninth in the world in nominal terms, and tenth when measured in terms of purchasing power parity. Recently released estimates for 2014 raise the U.S. average in to $54,678 in nominal terms, which, once comparable estimates are compiled for other countries, should keep the U.S. in more or less the same place in international league tables.
The U.S. is not only a rich country, but also a very unequal one, whether measured in terms of income or wealth. This can be seen by employing the measurement referred to above, the Gini coefficient. This numerical measure varies between zero and one, depending on the degree of inequality in a given distribution — in this case income in individual countries. If everyone in a given country had the same income, the Gini would be zero; if all of the income in a given country was garnered by one individual, the Gini would be one. In the real world countries fall somewhere in between.
Income in less- developed countries is generally more unequally distributed than is the case in developed countries. According to data compiled by the World Bank, most EU countries today have Ginis between the mid-twenties at the low end to the upper thirties at the high end. Income inequality in the U.S. is much higher (.48 in 2011) which places it at the highest (or most unequal) level among developed economies, beside Singapore (.481) and a little behind Hong Kong (.533).
Gini coefficients for wealth holding are generally higher for both less -developed countries and developed countries but, even so, the U.S. (with a coefficient of over .80) is very high for a developed country. In contrast, the wealth Gini for Canada is .688, for France .73, Germany .667, the UK .697, and Japan .547.
Okay, so the U.S. is a very unequal place. Everyone knows that, right? Isn’t that what the OWSers were talking about? Well, yes, but while the U.S. is unequal, income and wealth-holding patterns are quite complex. A brief look at Swaziland, an under-the-radar LDC (less- developed country), will attest to that.
Swaziland is tiny, absolutist and poor. Its population is generally estimated at somewhere between 1.25 and 1.42 million, it is ruled by a hegemonic monarch, and its GDP per capita in 2013, according to the IMF, was $3473 in nominal terms and $7646 (114th in the world) when measured by PPP (purchasing power parity). Given such considerations, it is hardly surprising that the country is marked by high levels of income and wealth inequality, with Ginis of .51 for income and .78 for wealth. In both cases these coefficients approximate those of the U.S.
If we stopped here, however, we would miss a lot of interesting issues regarding inequality in the U.S. and Swaziland — especially wealth inequality. Although it is difficult for researchers to obtain good data on the wealth of individuals, Forbes magazine collects useful information on the world’s richest people. If these estimates are reasonably accurate — and periodic estimates by Bloomberg Businessweek are often pretty close — they can be used to demonstrate just how different «similarly» unequal countries such as the U.S. and Swaziland really are.
Every year Forbes compiles data on America’s wealthiest people, the world’s wealthiest people, the world’s billionaires, etc. From these compilations information can be gleaned about the wealthiest slice of the «one percent.» In its 2014 compilation of the 400 wealthiest individuals in the U.S. — a list topped by Bill Gates ($81.6 billion), Warren Buffett ($68.7 billion) and Larry Ellison ($49.4 billion) —Forbes put the combined wealth of those on the list at $2.29 trillion, a staggering figure, suggestive of the massive, perhaps even unsurpassed, economic power of such individuals in and on their national economy. Right? Well, maybe. Read on.
In another Forbes’ compilation — its 2014 listing on the world’s billionaires (which is updated in real time) — we find, most surprisingly (at least to me), a citizen of Swaziland: Nathan Kirsh. Currently, Kirsh’s wealth is estimated at $3.7 billion, placing him # 434 on the list of the world’s “ten-figure billionaires.” Although he was born in South Africa in 1932 and now spends much of his time in the U.K., the U.S. and Israel, Kirsh has been a citizen of Swaziland since the mid-1980s and made his first fortune there in the late ’50s after establishing a corn-milling business in the country. His wealth is based on a diverse international business portfolio including real estate, retail/food distribution, agribusiness and security companies (in which the most prominent is Jetro Holdings, a wholesale food distributor in the New York City area), but he retains lots of business and property interests in Swaziland, where he is also a major philanthropist.
If we consider him a citizen of Swaziland — his preference, despite possessing residency status in the U.K. and the U.S. — his wealth level is staggering in relation to the size of the economy of his home country. A little comparative exercise involving the U.S. and Swaziland will give readers a sense of just what I mean. GDP falls into a category economists refer to as a flow, measuring a quantity over a fixed period of time (typically a year), while wealth is generally conceived of as a stock concept, measuring something at one fixed time. Yet for analytical purposes, stocks and flows are often brought together into measurable ratios of one type or another such as capital/output ratios and wealth/income ratios. If we do the same and compare the ratios between the wealth held by the richest individuals in the U.S. and Swaziland and each country’s respective GDP, we can see just how different these two countries, purportedly with similar levels of inequality, really are.
First, the U.S. In this massive, wealthy, unequal country, the $2.29 trillion in wealth held by the 400 richest Americans is equal to 13.65% of the country’s 2013 GDP ($16,768 trillion). In the teensy, unequal, poor country of Swaziland, Kirsh’s $3.7 billion (down a $100 million or so this year) is slightly greater than Swaziland’s entire GDP in 2013 ($3.62 billion) when measured in nominal terms, and about 44% of the country’s GDP ($8.4 billion) when measured in terms of purchasing power parity. Measured in this way, Kirsh’s wealth, relatively speaking, is far greater than that of the 400 richest Americans.
None of this is to suggest that Kirsh plays the same economic role in (and for) Swaziland that Gates, Buffett, Ellison et al. play in (and for) the U.S. Moreover, because the protocols for handling global portfolios of wealthy individuals are different in different countries, it is unclear precisely how Kirsh’s wealth is treated by government accountants and just what his billionaire status actually means for Swaziland. All these considerations serve to underscore the fact that inequality is a complicated business, with lots of uncertainties, ironies, paradoxes and contradictions, as the ongoing discussions of Thomas Piketty’s monumental work demonstrate.
Let me end with some wealth data regarding France. According to Forbes, the ten richest «people» in France, as I write, have combined wealth-holdings of $147.1 billion. In five of the ten cases, however, their estimated wealth holdings are for families, while in the case of the U.S. four different members of the Walton family (heirs to the Wal-Mart fortune) appear among the listing of the ten richest Americans (only one of whom is listed “with family”). Are we, then, comparing apples and oranges, pommes et oranges? As I said at the outset, commenting on inequality is complicated.
Peter A. Coclanis is Albert R. Newsome Distinguished Professor of History and Director of the Global Research Institute at the University of North Carolina, Chapel Hill (US).
This article appears in the excellent Le Monde Diplomatique, whose English language edition can be found at mondediplo.com. This full text appears by agreement with Le Monde Diplomatique. CounterPunch features two or three articles from LMD every month.