Small Actions and the Big Zero

According to Nobel winning economist Paul Krugman, the last decade in the USA, amounted to no job creation, no gains for homeowners and no gains in the stock market. In economic terms, the decade was a Big Zero.

What Krugman failed to say in his NY Times Op-Ed, but has emphasized on earlier occasions (watch the video for details), is that the fatal weakness in the USA economy, for decades, has been income inequality. Lack of income means lack of purchasing power, and it’s the purchasing power that creates the markets that keep the economy going. It’s been the chronic substitution of credit/debt for fair earning that has eroded our economy, and brought on the Great Recession.

Well, as it turns out, research done by epidemiologists Richard Wilkinson and Kate Pickett show that inequality is also a fatal weakness in societies.

Using the Gini index as a measure for inequality - a Gini of 100 equates to 1 person having all the income and everyone else having none - a Gini of 0 equates to everyone having the same income, Wilkinson and Pickett have found that countries with higher inequality (Gini) all do worse across many societal vital signs. Ginis for some selected countries are as follows: France = 28, India = 36.8, China = 46.9, Brazil = 56.7. You can check the level of inequality for your country on Wikipedia.

Rising inequality worsens Life Expectancy, Math and Literacy, Infant Mortality, Homicides, Imprisonment, Teenage Births, Trust, Obesity, Mental Illness (including drug abuse) and Social Mobility. With a Gini of 46.6, the US scores poorly and, in some cases, off the charts in all of these areas.  Think of the resulting transformation, if a portion of all the money diluted attacking these as separate problems at the end, was instead focused on the single purpose of reducing inequality at the beginning!  We’re working on opening pay to help with that. Watch the video below to see how Wilkinson and Pickett break it down.

If you want more, and will be in the USA in January, they’ll be on book tour for The Spirit Level: Why Greater Equality Makes Societies Stronger in Atlanta, SF, Seattle, Chicago, NY and DC.

So, let’s see, if reducing inequality - while balancing incentives - gives us both a stronger society and a stronger economy, maybe - like our carbon footprint - it can serve as a simple and powerful guide for deciding what actions to take; what to buy, what public policy to call for, and what institutions to support. As Krugman notes in the video above, “Once you create institutions and norms of a relatively equal society, it tends to persist.” The take away is that your small act of consideration of the inequality implications of what you do - taken together - can create momentum for a Big Plus for all of us in the years ahead. Have a Prosperous Year!