Markkula Center of Applied Ethics

Addressing Disparities in Income and Wealth

By William Sundstrom

As I was preparing for this talk earlier this week, I was pleased to discover that the New York Times was helping me do my job. Permit me to read three brief excerpts. On Sunday, an article entitled, "Wal-Mart, Driving Workers and Supermarkets Crazy," told of how competition from low-price Wal-Mart supercenters has helped bankrupt conventional grocery chains in many communities around the country. In explaining Wal-Mart's low prices, the article noted:

"Another big factor is Wal-Mart's relatively low wages. Its sales clerks average about $8.50 an hour, or about $14,000 a year, while the poverty line for a family of three is $15,060. In California, the unionized stockers and clerks average $17.90 an hour after two years on the job" (Wal-Mart, Driving Workers and Supermarkets Crazy, NYT 10/19/03).

The very next day there appeared a news story entitled, "Despite Widespread Poverty, a Consumer Class Emerges in India." Here's a quote:

"Much of India is still mired in poverty, but just over a decade after the Indian economy began shaking off its statist shackles and opening to the outside world, it is booming.... The growth of the past decade has put more money in the pockets of an expanding middle class, 250 million to 300 million strong, and more choices in front of them" (Despite Widespread Poverty, a Consumer Class Emerges in India, NYT 10/20/03).

And finally, the very next day, in an article with the (to me) rather paradoxical title, "Hope Glimmering as War Retreats From Congo," the following:

"Congo's economy remains at a virtual halt. Most people eke out a living not on $1 a day, which is considered desperate poverty, but on 25 cents. The idea that Congo is mineral rich, full of diamonds, platinum, cobalt and other valuable minerals, is an abstraction to most of the populace" (Hope Glimmering as War Retreats From Congo, NYT 10/21/03).

These vignettes tell us much about the state of economic inequality in the world today. The picture is mixed, and complex. On the one hand, when we focus our attention at home, we find that the gap between rich and poor within the United States has widened substantially since the 1970s. Two aspects of this trend stand out. At the bottom of the income distribution, the wages of low-skilled workers, the "working poor," have been stagnant or falling through much of the past three decades. And at the very top, the share of income going to the richest 1 percent of Americans has nearly doubled from about 8 percent in the late '70s to about 15 percent today—not counting capital gains!

Sam Walton should not receive all the blame for this. Economists continue to wrestle with understanding the causes of these trends, and there are in all likelihood multiple causes, from labor saving technologies, to the decline of trade unionism, to global market forces.

As we extend our gaze to the rest of the world, we find a remarkable diversity of experience over the same period. My quotes from India and the Congo are instructive. In terms of poverty, Asia is the great success story. The fraction of the Asian population living on an income of under $1 per day has fallen from more than 20 percent in 1970 to virtually zero today. Economic growth in China and more recently India has not lifted all boats, but it has lifted a vast number. Inequality within those countries has increased; although this should not be downplayed, neither should it surprise us: a rise in inequality during the early phase of economic modernization is such a common historical experience that it even has a name, the Kuznets Curve, after the great 20th century economist Simon Kuznets.

Africa, on the other hand, is the great economic and humanitarian tragedy of our time. In 1970 the poverty rate in Africa was virtually identical to Asia's. Today the percentage of Africans living on less than a dollar a day has nearly doubled, to about 40 percent. In terms of numbers of people, this is comparable in magnitude to the entire population of the United States.

I don't feel any hesitation in asserting that the downward spiral of much of Africa is the overwhelmingly important ethical problem of our day. The destitution, sickness, and misery of millions of Africans, through little or no fault of their own, simply dwarfs other social justice problems. I should add that I am not advocating that we ignore the pockets of severe poverty that exist elsewhere in the world, such as Honduras or Bangladesh.

Nor do I wish to trivialize problems of inequality and economic justice in our own community. The fact that even the poorest Americans live on incomes many, many times the incomes of average Africans or Indians should put our poverty in perspective, but it must also be borne in mind that the individual impact of poverty is partly a matter of relative deprivation. Being poor really means not having the economic means to maintain basic dignity and participate in one's own culture. By this definition I think we can say that poverty remains a serious problem here, especially for children, who are more likely than adults to be poor.

The tremendous concentration of income and wealth at the top of the income distribution poses a number of ethical challenges as well. For instance, in a society in which money buys political power and access, we must fear and actively resist the rise of an entrenched plutocracy.

As someone who has read fairly widely in the philosophical and economic literature on economic justice, I find it tempting to devote my remaining minute or two to offering a compelling argument for why the degree of inequality we observe in our world is indeed unjust and unconscionable. But I suspect that you already agree with me; or if you don't, no well-crafted argument from John Rawls or Amartya Sen will win you over.

Rather, I would stress that our challenge is now a practical one: How best to reduce the suffering of the poorest of the world's citizens, and how to mitigate the ill effects of large disparities in income and wealth within our own country.

In this regard, let me finish by returning to two of my opening vignettes: the rising Indian middle class, and the declining American middle class. Is it possible that these two phenomena are connected? It's tempting to think that the troubles of America's low-paid workers are not just the consequence of a plot by avaricious Wal-Mart executives, but partly related to globalization of capital, labor, and product markets: that is, outsourcing, immigration, and cheap imports. A simple economic argument suggests that globalization will overall be good for the poor in poor countries, but bad for the poor in rich countries. The income trends in India versus the United States provide casual empirical support.

If the naive economic argument is true, the egalitarian faces a serious dilemma. For America's working poor, globalization may well end up being bad news. Yet globalization, for all its flaws, is on the whole a positive development for large numbers of the world's most destitute people. My days as a young Marxist undergrad at the University of Massachusetts are far behind me now, but I still think of myself as a "person of the left." And it pains me to see that much of the left, in embracing anti-globalization as its cause célèbre, has gone badly astray.

In place of economic isolationism, we who are concerned about economic justice must press for domestic policies that will improve the life prospects of the Wal-Mart checkout clerk in America, without diminishing the prospects of the world's poorest people. The experience of the Scandinavian countries suggests that it is possible to provide a generous social safety net without sacrificing economic openness or growth.

Finally, although the pursuit of distributive justice is often thought to require a political or collective response, we should not allow this to let us off the hook when it comes to personal morality. Each of us could probably afford to give much more to private, charitable efforts to alleviate poverty and suffering in Africa and elsewhere. Indeed, given the failure of our political leaders to provide anywhere near an adequate response, private action has become indispensable.

October 23, 2003

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