Focus on fighting poverty, rather than inequality

Let me ask you a trick question: What do you care most about: the well-being of poor people around you, or income inequalities between these poor people and the rich? And let’s assume, for the purpose of that mind game, that you are not allowed to answer: “both, equally”.

Be careful how you answer. Because if income inequalities are what worry you most, it could mean that you (and your family) might prefer leaving Canada to go live in a country like… Bangladesh. Where incomes are slightly more evenly distributed than in Canada.

It's even worse if you're a U.S. citizen, and an egalitarian at heart. According to the CIA World Factbook's most recent data, our southern neighbours have a Gini coefficient — the most widely used indicator for measuring income inequality within a society — of 45. (A lower number indicates a more equal income distribution.) Bangladesh, according to the World Bank, has a Gini coefficient of 32.1.

Now, any (reasonable) person would conclude that it is preferable to live in the U.S. rather than in Bangladesh. Or in Ethiopia, for that matter, which has a Gini coefficient of 33.6. Ethiopia’s GDP per person, you see, adjusted for purchasing power, was $1,109 in 2011 according to the World Bank. Per capita GDP in the United States was $48,112. Furthermore, 29% of Ethiopians live under the national poverty line, while in the United States only 15% do. Furthermore, the poor in the U.S. are of course much less poor (objectively speaking) than the poor of Ethiopia.

To put it simply: More equality does not result in higher welfare. In many poor countries, income inequality is low … because almost everyone is miserable.

To be fair, there are prosperous societies that are fairly egalitarian as well, as judged by their Gini coefficients — even more so than Canada. Sweden is a good example, as are most of the Scandinavian countries. My point is simply that, if forced to choose between an egalitarian society that is very poor and a fairly unequal society that is prosperous, most rational people would choose the latter.

I, personally, prefer an unequal society where the poor are better off over a society that is more equal but where the poor are poorer. As long as everyone gets a fair chance in the marketplace.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.
* This column appears in Sun Media newspapers, published both in several of Canada's key urban markets (Toronto, Ottawa, Calgary, Edmonton, Winnipeg and London) and in its 28 community dailies.

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