Martins Hile, Editor, Financial Nigeria magazine
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Bill Gates decries inequality. He knows what he is talking about. 11 Oct 2019
No one in modern times is a better poster child for exponential accumulation of wealth than Bill Gates. The co-founder of the Bill and Melinda Gates Foundation became the richest man in the world in 1995 at the age of 39 when his net worth rose to $12.9 billion on Forbes list billionaires. As at the end of September 2019, his estimated net worth was $105.3 billion, making him the second-richest person in the world, behind Jeff Bezos, founder and CEO of Amazon.
Gates is also a philanthropist par excellence. According to Forbes, he has donated $35.8 billion of his wealth to the Gates Foundation, which he co-founded with his wife, Melinda. If not for his philanthropic giving, it’s safe to say he would still be the world’s richest person.
Today, Gates has thrust himself at the forefront of the debate on wealth and inequality. The Goalkeepers 2019 Report, published by the Gates Foundation, makes sobering conclusions about the factors driving global inequality and makes a clarion call for the need to address the inequality that separates the lucky from the unlucky.
Without mincing words, Gates considers himself to be lucky, thereby dispelling the meritocratic narrative perpetuated by the rich. Many people in the middle class and the well-heeled in society consider the poor as ‘those people’ who don’t work hard enough and make bad decisions. But the latest Goalkeepers Report and several other studies being churned out in recent years have shown that the meritocratic explanation for wealth accumulation doesn’t always hold true.
While progress has been made worldwide in reducing extreme poverty – which deals with deprivation – economic inequality, which relates to unequal distribution of incomes and opportunities between different groups, is on the rise. Suffice to say here that in Nigeria, poverty is actually on the ascendant. The number of people living in extreme poverty has risen from 78 million three years ago to 94.4 million in 2019.
Income inequality in Nigeria, as measured by the Gini coefficient, is among the highest in the world, reaching 43.0 in 2017, according to the UNDP Human Development Indices and Indicators: 2018 Statistical Update. (A value of 0 represents absolute equality, while a value of 100 is absolute inequality.)
Incidentally, China is also among the most unequal countries in the world today, despite achieving the most rapid poverty reduction in history, and being on the verge of eradicating extreme poverty. China has lifted over 800 million of its citizens out of extreme poverty in the last four decades. However, during this same period of Chinese economic liberalization, the International Monetary Fund and other researchers – including French economist, Thomas Piketty – have found that inequality has risen in China. Piketty and his colleagues found that while the Chinese people are generally better off today than they were in 1978, the top 1% of income earners are taking the larger share of all income. The country also faces considerable inequality of opportunities, driven by disparities in educational attainment
Economic inequality in the United States is the highest among developed countries. A report released last month by the U.S. Census Bureau shows that income inequality in the country has reached its highest level in more than five decades. Like China, this has happened despite the fact that U.S. poverty rate is at a historic low. Little wonder inequality is a central topic among the Democratic Party candidates for the 2020 presidential race.
Not only in the U.S., persistently rising inequality is on the front burner of policy debates in other parts of the world. It is what is fueling antiglobalization. The phenomenon of rightwing populism in different parts of the world and the Brexit conundrum in the United Kingdom have their roots in the discontents caused by growing inequality.
The Gates Foundation report says the major drivers of inequality in the world are geography (meaning where a person is born), gender, race, age, religion, levels of education and income, access to services, effects of climate change, fallouts of conflict and natural disasters. In fact, "where you are born is more predictive of your future than any other factor," the report says.
Gates noted that by virtue of he and his wife being born in a wealthy country to white and affluent parents who were able to send them to excellent schools, the deck was stacked in their favour. These factors and many others gave them a head start and placed them in a great position to be successful. By inference, those on the other side of the dividing lines would struggle to find opportunities, achieve very little, and have low quality of life.
Discussing the pervasive inequality within countries, data from the report shows the average person in Ado-Ekiti in Ekiti State, Nigeria, has more than 12 years of education. Whereas, the average person in Garki Local Government Area of Jigawa State has only five years of schooling. The report acknowledges that although inequality between countries has narrowed, it remains large. For example, more people die every single day in Chad than the number of people who die in Finland in an entire year. Average life expectancy in Finland is 81.78 years, compared to 52.90 years in the African country.
The main conclusions in the Goalkeepers Report align with the central thesis of Piketty’s 2013 seminal book, “Capital in the Twenty-First Century,” in which the French economist argues that when the rate of return on capital exceeds the rate of economic growth, inequality tends to increase. According to Piketty, since 1975, income from assets (such as property and others) has surpassed income earned from working. While the vast majority of people rely on wage income, this can’t keep pace with the profit earned from owning assets. In fact, he said the advantage of owning things is that one can continue to consume and accumulate without having to work.
The reality for those at the bottom of the income distribution is that they are in a state of economic fragility, meaning they are one medical emergency or job loss away from falling into poverty.
Fiscal policies geared towards addressing inequality have huge significance in reducing all forms of poverty, especially because of the redistributive effects of such policies. The IMF says inclusivity and equity can be enhanced in China through the instrumentality of fiscal policy reforms, especially on the tax and expenditure side.
Unfortunately, progressivity in the tax system alone would be ineffective in Nigeria, especially with the high level of corruption in tax administration, in particular, and the public service in general. To eradicate poverty and inequality in Nigeria, corruption has to be substantially reduced for fiscal policies and economic incentives to have any impact, and for democracy to help empower, rather than disempower the citizenry.
Gates argues that a truly meritocratic system – where a person's future isn’t predicted by random factors such as where you are born or your race or gender – is desirable. Such a system would provide everyone with equal opportunity to lead a healthy and productive life.
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