The Haves and the Have-Nots summary

Inequality is a hot-button issue for good reason, as it affects everyone by directly impacting a country’s economic growth.

In fact, one way to determine whether inequality is “good” or “bad” is to see how much inequality encourages or discourages economic growth.

If inequality as an element of society is so influential, it’s necessary to have a way to measure its effects.

Let’s investigate some of the methods in place to do so.

Let’s say you’re doing a research project and need to compare China’s income in 1850 with that of France in 2000. Luckily, there are methods that enable such comparisons, though the math won’t necessarily be easy!

To make this comparison, we convert the currency of the different countries into an imaginary standard currency, based on the US dollar. This currency is called the PPP, or purchase power parity, and it has the same purchasing power everywhere – so $1 PPP buys the same basket of goods in Japan as it does in Spain.

It’s no shock to discover that a socialist system creates more equality than does a capitalist system.

Socialism is commonly positioned as the egalitarian alternative to capitalism. But, as we can see from models in pre-World War II Europe, as well as in the Soviet sphere, socialism’s alluring ideals of equality can also cause serious problems.

Countries like Brazil and India are noticeably poorer than the United States or Great Britain. Just as we see inequality among individuals, inequality also exists among nations, which can be measured by comparing average incomes per capita.

Such intercountry inequality became an issue only after the Industrial Revolution. Of course, it did exist before then – the Roman Empire at its peak, for instance, was much richer than its neighbors. But income disparity was relatively limited because most nations were still operating at the subsistence level.

When Karl Marx published his economic analysis of society in the late 1800s, his ideas that explored how income inequality was driven by class were largely true.

In modern times, however, inequality is almost entirely based on place of birth.

It’s common for people to draw cultural comparisons between the United States and Europe. In this blink we’ll see that it’s interesting to contrast the different causes of inequality between them, too.

In 2007, the United States and the European Union shared roughly the same Gini coefficient, just above 0.4.