The Outrageous Village
The world is a village – or so it’s sometimes said in today’s digital age. But, if it were, it would be a very peculiar one. On one hand, the village would have undergone rapid advances – indeed it would have changed completely in just two generations. For example, the village’s population would have grown from 58 inhabitants forty years ago to 100 today. Of the original 58 inhabitants, 25 would have been starving. Fast forward to today, and that proportion would be cut by 75%. What a success! But, on the other hand, it would still be an extremely unjust village community - of the 100 villagers today, ten would still be starving. And, whether a person lived in abject poverty, or in luxury, would hardly depend on whether they were talented, educated or industrious, but, rather, almost exclusively on which part of the village they were born. Furthermore, half of the wealth of the entire village would belong to a single person. And, together with their nine richest friends, they would own as much as 85 percent of the village’s wealth and would account for around half of the entire village’s income - about 500 times as much as the poorest ten put together.
Although thinking about inequality in this microcosm is insightful, it remains true that economic inequality is an extremely complex issue, and one that is often highly emotional, and politically, charged. Clearly, it will also look very different depending on where one resides in the village. Here, we want to examine the topic of economic inequality from three different angles: from an analytical perspective, from a growth perspective and from an ethical perspective. The first perspective is taken in this paper. Here we lay the foundations. This includes the definition of economic inequality, its measurement, and the most important global trends.
In a second paper, we will deal with the two other perspectives. First, we will look at the key relationship between inequality and growth. Why? Because, put simply, too much inequality, just like too much redistribution, hinders growth. Second, inequality will also be critical for investors who think about ESG criteria. Inequality is wholly embedded in the Societal aspects of ESG. For example, according to the tenth of the United Nations' seventeen Sustainable Development Goals (SDGs), the global community should "reduce inequality within and among countries." For investors wishing to better align themselves with the SDGs, allocating less of their capital in countries that are lagging in this regard and are not making serious efforts to address these problems, may be of interest.
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