Mobility : a solution to inequality ?

A large por­tion of the world’s popu­la­tion has been lif­ted out of pover­ty by the com­bi­ned effect of advan­ce­ments in know­ledge, and the growth and glo­ba­li­sa­tion of trade. Accor­ding to the World Bank, in 1981 close to 40% of the world’s popu­la­tion was living under the pover­ty line (on less than a dol­lar a day). By 2008, this figure had fal­len to 14%. While in 1988, 40% of India’s urban popu­la­tion was living in pover­ty, the num­ber drop­ped to 12% just ele­ven years later, due to rapid growth, with the ave­rage annual growth rate rising from 0.77% in the 1970s to 3.9% in the 1980s.

The glo­bal reduc­tion in inequa­li­ty is not only a mat­ter of income, but also health. Bet­ween 1940 and 1980, the ave­rage life expec­tan­cy in deve­lo­ping coun­tries rose by near­ly 20 years, from 44.5 to 64.3 years of age. In deve­lo­ped coun­tries, this figure rose by just nine years over the same period.

Since the ear­ly 1980s, rapid eco­no­mic growth in Chi­na and India has enabled over two bil­lion people to escape pover­ty. At the same time, this growth has gene­ra­ted new inequa­li­ties bet­ween these coun­tries and other eco­no­mies, par­ti­cu­lar­ly those in Afri­can states, which have not expe­rien­ced the same growth. Last­ly, growth in India and Chi­na has increa­sed inter­nal inequa­li­ties : only limi­ted sec­tions of the Indian and Chi­nese popu­la­tions have become pros­pe­rous, or rich, even though pover­ty rates have drop­ped shar­ply in both coun­tries since the 1970s.

The same phe­no­me­non of gro­wing “intra-coun­try” inequa­li­ty can also be obser­ved in other coun­tries. In the Wes­tern world, there are those who have inno­va­ted and adap­ted to best take advan­tage of tech­no­lo­gi­cal revo­lu­tions (ITC, AI, etc.), and those who have been left behind. Should we be concer­ned about rising inequa­li­ties within our borders ?

Growth in India and Chi­na has increa­sed inter­nal inequa­li­ties in these countries.

Inequa­li­ty can be mea­su­red in seve­ral ways. We could look at the top richest 1% within a country’s income ; at a more glo­bal mea­sure of inequa­li­ty, such as the Gini coef­fi­cient, which mea­sures the dis­tance from per­fect equa­li­ty for the entire popu­la­tion ; or at social mobi­li­ty mea­sures and the pover­ty traps that hin­der social mobility.

In my view, if we want to encou­rage growth through inno­va­tion while limi­ting inequa­li­ty, we must fight pover­ty and increase social mobi­li­ty. Inter­es­tin­gly, grea­ter social mobi­li­ty tends to be asso­cia­ted with lower ove­rall inequa­li­ty (a phe­no­me­non known as the Great Gats­by curve). By focu­sing on social mobi­li­ty, we could kill two birds with one stone.

In that case, must we sim­ply ignore the richest 1 or 0.1%? The ans­wer is no, since the rich can use their resources to block new inno­va­tions and reforms aimed at ope­ning up access to edu­ca­tion and health : those who suc­cee­ded yes­ter­day may wish to stop others from doing the same today, and thus prevent competition.

The­re­fore, in order to pro­mote tru­ly inclu­sive growth through inno­va­tion, we must esta­blish an eco­no­mic and social model that : (1) sti­mu­lates social mobi­li­ty through high qua­li­ty edu­ca­tion, trai­ning and health for all ; (2) pro­tects people and pre­vents them from fal­ling into pover­ty by shiel­ding them against the risks asso­cia­ted with job loss and career change ; (3) encou­rages tech­no­lo­gi­cal advan­ce­ments and inno­va­tion as sources of wealth crea­tion, while esta­bli­shing safe­guards (rela­ting to taxes, com­pe­ti­tion, cor­rup­tion laws, etc.) to prevent yesterday’s inno­va­tors from blo­cking the paths of others to pros­pe­ri­ty and freedom.

This column is the repost of an article that was ori­gi­nal­ly publi­shed in the Paris Inno­va­tion Review on 02/01/2018.