Poverty is not the same as inequality

To the Expositor:

Following the US Democratic debates featuring Bernie (free stuff for everyone) Sanders and Hillary (what emails) Clinton, the inequality issue has been front and center in the media. One would have to think that the Ontario Liberals will be beating the drum going forward and in particular as the provincial election draws near. They desperately need an issue to divert attention from the record they have accumulated. I suppose the criminal record as well as the economic record are the two most concerning for the government. The current action by Kathleen Wynne to prorogue the legislature is likely an attempt to reset the record. Will she do something to address the outrage brewing over soaring energy costs? Will she mention inequality?

When the term is mentioned in the media, what exactly are they referring to? Is all inequality bad? Can it be good? Might it be indifferent? Can it be all of these? Here are a few local examples that might help to clarify the matter somewhat.

Example A: A student of modest means graduates from MSS and enters an engineering program at Queens. She meets a young man in the same academic stream, they graduate and enter the work force. 8 to 10 years later, family income is north of $250K placing them well above the Canadian average.

*They are contributing to inequality. Is this a problem? Is it a bad thing? Is there a problem here in need of government attention?

Example B: A farmer owns an operation here on the Island. He has always been a keen student of agricultural science. He constantly talks to and learns from the experienced farmers around him and applies what he has learned to his operation. In addition to the knowledge he has accumulated, this farmer is also driven to expand and improve yields and has enlarged acreage by purchasing adjacent properties. A second farmer takes a different approach to his profession. He enjoys more leisure time and is content to work a smaller operation with less emphasis on yield. The income of the first farmer is three times that of the second.

*Is inequality an issue here?

Example C: An entrepreneur has an idea for a consumer product and has the capital and management skills to start a manufacturing business here on the Island. Fifty well paid and interesting jobs for local people are the result. The employees are happy with the compensation and the jobs seem to be locked in over the long term. The owner of the business draws a salary that is ten times the national average.

*It would seem that everyone comes out a winner here. The local tax base is increased, employees are satisfied. There is inequality again but is it a problem?

Example D: Another MSS student drops out during eleventh grade. She has a boyfriend. She has a baby the following year after he has fled the scene. She has few marketable skills. The baby introduces additional financial stress to an already desperate scene.

*Most would agree that there is a problem here.

*Is inequality the correct label to hang on the problem?

I would suggest that poverty is a more appropriate label for example D. Poverty in any form is an issue for all of us and we have a collective responsibility to help. Helping must include the understanding that poverty is not the same as inequality. A trip to Cuba will help to illustrate the point. The political elite aside, all Cubans are equal! Everyone has the same capital base–zero! Everyone is in the same economic class–poor! By definition then, there is no inequality but hardly a desirable state.

To focus on equality and not on poverty and the ability for individuals to be economically mobile will result in bad policy and the stifling of economic growth and initiative.

A number of weeks ago, an article discussing inequality appeared in this newspaper. Mention was made of Thomas Piketty and the work he has done researching the subject. Here is what Piketty has to say regarding merit. “Our democratic societies rest on a meritocratic world view, or at any rate a meritocratic hope…a belief in a society in which inequality is based more on merit and effort than on kinship and rents.”

Piketty is recognized for the work he has done identifying inequality and in describing trends in the modern economy. Where the wheels start to fall off of the Piketty wagon is when he shifts to policy. For example, in spite of his recognition of the importance of merit and effort, his suggestion to tax wealth worldwide regardless of how the wealth came to be does not pass the fairness test. Secondly, he knows that such a policy is a pipe dream with no chance of gaining traction. It is therefore unrealistic.

To anyone wanting to explore the inequality issue in a little more depth, I recommend The Inequality Trap by William Watson. Watson is a McGill University economist.

Shane Desjardins

Mindemoya