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Goodwin – What is inequality?

[From: Chapter 11 Section 1.1 of Goodwin, N. R., M., H. J., Nelson, J. A., Roach, B., & Torras, M. (2014) Principles of Economics in Context. Armonk, New York: M.E. Sharpe]

Much is said about income and wealth inequality. However, inequality is a broad concept that extends beyond the realm of money.

Let us consider a few examples. Public health is an area in which vast inequality exists. Preventable or treatable diseases (such as malaria, measles, and tuberculosis) cause average life expectancy to be significantly shorter in numerous tropical countries than in the United States or in other rich countries. There is also significant health inequality within many countries. Increasingly, access to adequate medical care can make a difference in terms of whether one can obtain effective treatment for a particular ailment. This is generally not much of a problem in advanced industrialized countries that have a “single payer” system, but in countries that lack universal health insurance one’s health condition can be dictated by whether one can reliably see a doctor, which often depends on whether one has adequate insurance coverage.

There is also a considerable imbalance in education, both nationally and internationally. The majority of adults in the United States lack a college education, which today is regarded as almost indispensable to economic success. However, most Americans do have a high school degree. Although this is true in other rich countries, it is not the case in most others. Primary and secondary education are not a priority in many parts of the world, where poverty and hunger are widespread—not to mention violence or civil war, as well as gender discrimination, which makes it especially hard for girls to go to school in some countries. Even where families want to send their children to school, national governments often lack the funds to support basic education. Without a proper education, many millions are inadequately prepared for competing in today’s global economy.

Related to both health and education is what Nobel laureate Amartya Sen has famously referred to as “capabilities.” By his reckoning, money is only one dimension—albeit an important one—of an individual’s “capability” to function in his or her economic environment. To Sen, what matters most is that people possess the necessary tools—for example, money, health, education, friends, social connections—to provide them with realistic economic choices. As Sen has pointed out, there is considerable inequality of capabilities in the world, not just in the poor countries.

Inequality is also manifest in certain environmental outcomes. Proponents of “environmental justice,” generally studying the United States, point out that polluting industries and toxic waste disposal sites tend to be located disproportionately near poor and minority communities. This effect is even more pronounced in countries like Ecuador and Brazil. Tribal residents in Ecuador confront widespread pollution from petroleum extraction in the remote areas where they live as well as extensive harm to their local habitat. Native Brazilians suffer from the environmental toxicity of the gold-mining process as well as from the alteration of their landscape resulting from deforestation. These effects are generally associated with inequality—not of income but of land ownership or property rights. People who reside in these areas often lack the legal power to keep the miners or timber companies out.

One also sees considerable inequality when confronting the issue of climate change. Countries with sizable portions of land near sea level—for example, Egypt and Bangladesh—are likely to be affected by climate change in the coming decades more adversely than, say, the mountain kingdom of Bhutan. Some of the most northern countries, like Canada and Russia, may actually benefit, at least in the short term, from climate change, in that warmer global temperatures would lengthen the agricultural season and potentially allow these countries to produce crops that they formerly could not. In addition to these specific effects, however, a critical fact about climate change, as well as other environmental damage, is that the rich can protect themselves much better than the poor can.

Commentary added, 4 December 2015

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