By the Numbers: Inequality and Social Instability

If that argument were true, then an unequal income distribution — in a predictable fashion — would lead to social strife and violence.

To answer the underlying question, we chose two measures of income inequality for a number of selected countries.

The state of economic development is no indicator of a fair income distribution.

Irrespective of concentrations of income in the top 10% of households, countries with inter-ethnic violence are all over the map.

The first chart shows the Gini coefficient — an index of inequality that ranges between 0 (perfectly equal) and 100 (perfectly unequal). The percent of income earned by the top 10% is often used as a quick and easy to understand measure of the concentration of income and wealth in a society.

One might expect that income inequality causes social instability. The poor, with few alternatives, might be expected to rely on violence to equalize wealth. And the rich might be expected to rely on violence to retain their place.

But both charts demonstrate that this assumption is simply wrong.

1. Inequality = instability?
Severe social instability seems to occur in countries with both very equal and very unequal incomes. Apparently, the level of income inequality has little to do with social instability.

2. Rwanda = Germany?
The most horrible recent ethnic massacre — the slaughter of the Tutsis by Hutus — occurred in a country with an income distribution about equal to that of Germany. And the Rwandan income distribution is much more equal than that of the United States.

3. Indonesia vs. Russia
Indonesia's meltdown created severe inter-ethnic tensions and riots — while Russia's similar meltdown did not create such problems.

4. Zimbabwe and Mexico
Conversely, Zimbabwe — with a very unequal income distribution — is experiencing violence and riots, both between whites and blacks and among blacks. But Mexico — with an even more uneven distribution — is moving towards healthy democracy.

Does the Zimbabwe/Mexico difference reflect the black/white split in Africa — or is it because Robert Mugabe is not half the statesman that Ernesto Zedillo and Vicente Fox were?

P.S. On a final note, notice that China’s income distribution is practically equivalent to that of the United States. Perhaps these two lands of opportunity have more in common than one might think.