Capitalism is killing less fortunate citizens. We will never understand how if we continue to reduce discussion about the economic gap to a single—and flawed—statisticby Angus Deaton and Anne Case / January 27, 2020 / Leave a comment
Concern about inequality is growing—at least among those who don’t count themselves as economists. It has been cited as a reason for Brexit and the election of Donald Trump, while it has also played a central part in the political campaigns of Bernie Sanders and Elizabeth Warren in the US as well as the Labour Party in the UK. Many economists, especially on the right, argue that inequality is nothing to worry about. Why? Look at the Gini coefficient, they say. While it is true that this headline inequality measure rose quite quickly in Britain when Margaret Thatcher was prime minister, it has actually been pretty flat or even falling for 30 years. The US, they acknowledge, is a good deal more unequal than Britain, but even there the Gini has hardly moved since the financial crisis, and so—these economists say—it can hardly be blamed for the arrival of President Trump.
But these economists are making an error—they are fixating narrowly on measuring only one thing, the spread of incomes, and doing so with a gauge that is flawed. The very fact that many concerned citizens—and no doubt Prospect readers—have heard of the “Gini coefficient” bears testimony to just how much anxiety about inequality there is. In the early days of the 21st century, it was merely one of several measures of statistical dispersion that specialist researchers would use, among other things, to gauge the gaps between incomes. But after the financial crisis this single number suddenly loomed large in blockbuster state-of-society books, such as The Spirit Level, and in seminars in the Obama White House, where it was used to show that America’s problem with social mobility was matched by its problem with inequality.
What really, though, is the Gini coefficient, where does it come from? Corrado Gini was a creative and wide-ranging sociologist, demographer and statistician—but not the sort of human being who is remembered fondly. An eminent Italian economist told one of us that in some circles, no one speaks his name, instead referring to him as “Dr G,” because it is supposedly unlucky to utter his name. Rather like performers who are spooked by Macbeth and will only refer to…