The gini index measures the degree of inequality in the distribution of family income in a country. The index is calculated from the Lorenz curve, in which cumulative family income is plotted against the number of families arranged from the poorest to the richest. The index is the ratio of (a) the area between a country's Lorenz curve and the 45 degree helping line to (b) the entire triangular area under the 45 degree line. The more nearly equal a country's income distribution, the closer its Lorenz curve to the 45 degree line and the lower its Gini index, e.g., a Scandinavian country with an index of 25. The more unequal a country's income distribution, the farther its Lorenz curve from the 45 degree line and the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality, the Lorenz curve would coincide with the 45 degree line and the index would be zero; if income were distributed with perfect inequality, the Lorenz curve would coincide with the horizontal axis and the right vertical axis and the index would be 100.
Saturday, October 8, 2011
How Comfortable Will Americans be in our Newly Third World Country?
The gini index measures the degree of inequality in the distribution of family income in a country. Because it can have an effect on political stability, income inequality is one of the economic indicators tracked worldwide by the Central Intelligence Agency. Its current World Factbook puts the United States just inside the most unequal third among 184 nations, between Uruguay and Cameroon. Immediately below the USA and Cameroon in the rankings – that is more equal -- are Ivory Coast, Iran, Nigeria, Guyana, Nicaragua, and Cambodia. There are no developed countries with greater inequality. Stability and development tend to go hand in hand.
America has avoided much of the instability, violence and strife that has plagued much of the world largely because of the degree of equality of opportunity that our nation has treasured. This appears to be changing and changing very rapidly.
We have reached the greatest inequality of wealth since statistics have been kept. The top 1% of our wealthiest citizens controls a great percentage of our nation’s wealth than the time of the gilded age of Rockefellers, Carnegies and Mellons.
The financial collapse has hit the poor and the middle class the hardest. Accompanying the economic hit, governments, like the state of Washington, have slashed the safety net, housing, and health care assistance. While the rich have managed to dodge the bullet, Washington's tax system remains that most regressive in the nation. The poor and middle class pay 2 to 4 times the percentage of their income in taxes than the rich. Washington policy-makers have thwarted efforts to maintain some semblance of a safety net by imposing progressive taxes that more closely mirror those of our neighboring states.
One of the key predictors of prosperity is the level of education in a society (the other is union density). Sadly, investment in these arena have been slashed. Washington state has cut funding for higher education by nearly 50% over the past four years as citizens aged 25 to 34 are reported to have less education than those 34 and older.
Will all this lead to greater political and economic instability in the U.S.? Much of that depends on what we do next. How comfortable will middle-class Americans be as a newly third world country?