My Crash Course in Economics, Part II: Why Inequality Should Piss You Off
“An imbalance between rich and poor is the oldest and most fatal
ailment of all republics.”
The Gini Coefficient
The Gini Coefficient operates on a 0–1.0 (think 100) scale. At 0, everybody is equal. At 100, the entire country’s income is earned by a single person. Much of this was figured out between 1905, when Max Lorenz charted economic inequality, and 1915, when Italian mathematician Corrado Gini took it a step further, by adding some nuance to the idea that income always fell along a consistent 80–20 distribution, where the top 20% had 80% of the good stuff.
To Gini, it was all about income distribution — ratios between the rich and poor. From there, comparisons are made to other countries. Along the way, Gini coefficients raise questions about the connection between growth and inequality and both the characteristics and movement of a “developed” or “developing” country. Gini Coefficients are a prevalent, widely-used measure of a country’s well-being. The lower the number, the more equality. The higher the number, the more inequality. Think Wall Street, Main Street, and those folks living under the bridge.
But you already knew that rich people help other rich people get richer. Admit it, you’re not the Joneses—you’re not as rich, your grass not as green, and the Joneses take twice as many vacations.
The Gini Coefficient has its detractors. Economists claim that the utility of the measurement itself is questionable when, for instance, some countries have low-income inequality and high conflict, while others have high inequality and low conflict. They claim that the coefficient gets wobbly at the extremes. In short, it could be wrong.
It is also hard to tell if the criteria for comparisons are a symptom of a larger disease, treatable with a policy intervention or injection of cash, an outcome of a predictable pattern, a syndrome of a larger disease with multiple indicators, or a full-blown disease itself. Overly theoretical and unrealistic? Perhaps.
Besides, the origins of the Gini Coefficient are downright creepy. In a National Public Radio “Marketplace” segment: “Gini: the measure of inequality” (from which I paraphrase liberally), Krissy Clark notes that Corrado Gini was a pretty dismal guy himself — in fact, a card-carrying fascist. He believed it was essential to ensure that rich people maintain their lifestyle, and poor people…well…who cares about poor people? If society had a high level of equality, he whined, the poor wouldn’t be able to handle social differences or know what to do with their money. It would be better, then, that they remain poor, silent, obedient worker bees. Admittedly, he did not appreciate a society of lazy trust-fund babies. For the most part, however, he insisted on the importance of maintaining the status quo, mostly to keep the big cigars on top. Definitely creepy.
Human Opportunity Index (HOI)
The Human Opportunity Index (HOI) was launched in 2008 to examine and measure access to water, sanitation, and electricity (considered basic services) through an inequality lens. The HOI also includes two education indices: the completion of sixth grade on time and school enrollment at ages 10–14. It attempts to zero in on children and the challenges they face.
The HOI examines what contributes to inequality, how opportunities are distributed, and access to a level playing field. From there, one can compare the measurements of opportunity in one country versus another.
Keep in mind, however, that the HOI does not dig into factors that might be considered out of the control of an individual and that may change over time. Natural or national disasters come to mind. The HOI does not include Gini Coefficient data on national and personal incomes.
The World Bank’s interactive website makes it possible to compare countries by opportunities: those who have finished primary school, have electricity, sanitation, and water. Inequality contributors can be filtered by gender, presence of relatives, population density, the educational level of the head of household, wealth, and area of residence. Coverage maps include other criteria to filter, such as the age of the household head, wealth quintile, and the number of children in the family.
The Human Development Index (HDI)
The Human Development Index (HDI) is a big picture calculation that evaluates the quality of life as determined by health (life expectancy at birth and the relative health of one’s life); education (mostly literacy, along with the mean years of schooling for adults aged 25 years and more and the expected years of schooling for children entering the education system); and standard of living (the gross national product, per capita). Every year, the United Nations Development Programme releases a global index that ranks countries.
The HDI was developed by game theorist, former Pakistani Finance Minister, and World Bank policymaker Mahbub ul Haq with Amartya Sen, the Bengali Nobel Prize winner in Economics Sciences known for his scholarship in philosophy, welfare, social justice, voting, and an economic theory of famine, in which he argues that famine is not simply the lack of food, but a basic inequality in food distribution.
Sen knows from whence he speaks, having witnessed Bengal’s 1943 famine. He legitimized the value of social indicators that indicate whether a society has made it possible for human beings to act and take charge of their fate. His most famous book, “Development as Freedom,” is a primer on the importance of removing barriers in order to ensure economic, social, and political freedom, transparency, and protective security. For Sen, social reforms like education and public health reform cannot be separated from economic justice.
Educational Inequality and Economics
After all that, start weaving in indices in education itself: adult literacy rates, children out of school (female or male, primary or secondary), expenditures on education as a percentage of total government expenditures, education expenditures per student, enrollment ratios (female or male, primary or secondary), population, completion rates, pupil-teacher ratios, survival rates to the last grade of primary education (female or male). UNESCO and the Global Education Monitoring Report have made available a World Inequality Database on Education.
Educational inequalities and inequities are infuriating. Fancy private schools and poor public schools. Overcrowding for some, no place to play for others. Early-childhood support to fill gaps in a child’s education and no access whatsoever to preschool. They creep in on the silent cat feet of low expectations at very early grades and cut deeper every year a child attempts to advance through the educational system. It corrodes a will to strive and passes down from generation to generation like a cruel inheritance.
Many countries claim that their growth-centric agenda is the magic bullet to overall development. Emphasize wealth, they say, and education productivity will follow. Research has shown that economic development has contributed to an increase in school enrollments, innovation, and social equality. However, trickle-down development rarely reaches the masses at scale. Countries that do not invest in education cannot keep pace with the global marketplace; even worse, they can reverse the course of development. Insufficient or half-hearted support for a wide range of key educational initiatives has exacerbated economic vulnerabilities. A few new token schools here and there may very well stand empty. Newer textbooks do not translate into better teaching if there is no investment in teacher professional development.
Unbalanced attention to economic, over educational, growth has been correlated with higher dropout rates. In Latin America and the Caribbean, for example, an aggregate drop-out rate of 15- to 19-year olds averages up to 30%, and nearly half of these students leave the system prior to entering secondary school—unable to gain the knowledge and skills necessary for minimal employment, no less to pursue a satisfactory career path.
Education failure (largely measured through grade repetition, re-enrollment, drop-out rates) generates unnecessary costs for the system to “produce” a graduate since more years are needed than had been planned or supported with the current budget. In several regions of the world, costs resulting from grade repetition can grow to three times the cost of universal coverage. While multi-age classrooms for the newly enrolled or repeaters have attempted to provide a viable solution to the expense of building schools, older students have reported feeling alienated and humiliated. Some have experienced bullying by younger classmates. In short, they feel unequal, and for good reason.
In the absence of targeted and accountable interventions during childhood, educational inequality worsens and the odds of compensating for a poor education become almost insurmountable.
An unequal education is also a public health issue. Students not well enough to learn will not learn well enough. Reversing this cycle requires an accurate assessment of who is attending our schools and who is not, as well as targeted and accessible and public-health education programs, teacher training, and community engagement. An inadequate education shortens the length and quality of life. Efforts to address issues of obesity, mental health, and alcohol abuse have been shown to lower state-sponsored medical expense, increase health habits, and lower incidents of sexually transmitted diseases. What one does to one side of an equation affects the other.
Development, by nature, interdisciplinary. Education is inextricably bound with economics, public health, power, policy, gender, and historical legacy. What we do on one side of the equation affects the other. Success in any society is both vertical and horizontal. Shareholders need stakeholders. Enterprises need enterprising people.
Teachers can do both because they are multipliers and the key tipping point in addressing inequality. They are our society’s early warning system. They are the ones who can make the course corrections we need to ensure a trajectory for growth. They are the kind of investment that brings about the greatest returns because they generate a child’s interest.
My crash course on economics has helped teach by asking myself key questions about whether my actions strengthen equality or weaken it, who might be winners and losers, noticed or ignored, powerful and powerless. Economics may be labeled a “dismal science” because it shows us the data. The least we educators can do is derive a few lessons about equality and inequality from the field itself by simplifying operations enough to recognize when and how we may be wrong, unrealistic, or shady.
Otherwise, the joke is on us. Just do the numbers.