A Lorenz curve is one of the most sensible ways an economist would measure inequality in a society. The yellow line in the graph represents a situation of perfect equality, where each quintile (or one fifth) of the population earns exactly one quintile of the income. That situation is certainly not argued by most economists to be a desirable state of affairs, since perfect income equality is not the policy prerogative of economists or governments. But it is a good measure of how well a society is developing, since development should give rise to, among other things, rising income and equity. By development I simply mean the transition of economy from an agrarian society to a modern, industrialized or consumer society. Any society that is in transition from an agrarian society to some modern form of production is developing.
The Lorenz curve above shows the income equality in both
In the previous entry, Middle Classistics, I mentioned the state of rising inequality in
Economists, if they are going to reason this way, are now pressured to build time-series data models, which will argue more persuasively that what was experienced in one country will also happen in another. Inductive validity and causality should be more persuasively argued for. But the Kuznets model, it turns out, is largely falsified. The U-Curve might happen in some cases, but it is not a necessary stage in development, and therefore income inequalities cannot be justified on the basis that incomes will simply equal out in the future.
It is my view that states rarely develop in ways that do not significantly limit or violate the rights of their population. For example, all sorts of landgrab reforms in
We can demonstrate the lack of persuasion the Kuznets model should have with a time-series model of
The international GINI warning level is 0.4, and this has provoked a discussion about whether we are really considering two distinct countries--the rich and the poor. However, the situation in
We can see also from the 2004 World Bank data that
The GINI time-series model for
But -- and this is a big but -- it's important to mention, just before we start thinking the Kuznets model has circumnavigated Brazil, and we reify this information as socioeconomic laws of nature, it needs to be said that the GINI Coefficients in my graph are misleading. If you look at the Y-axis, you'll see I had to squish the numbers so that the only variation we see is between 0.57 and 0.61. This is a very small margin, but I needed to do that so it would appear to be a noticeable difference. If we look at overall GINI coefficients for the time period, in full scale, the picture we get is much different:
The GINI coefficients on a time-series scale do not match the Kuznets prediction that they will eventually drop to levels equal to or below the GINI coefficients at the time inequalities began rising. One may say that the isolated urban population would be expected to display lower levels of inequality, since they are the most rapidly developing areas of
In fact, overall, the World Bank measurements are more optimistic than other measurements. The 2004 World Bank GINI puts the number at 0.41, whereas other data have found this number to be closer to 0.46. We might expect this to be the case since the World Bank analysis is tightly connected to the Washington Consensus, which argues that rising inequalities are justified if shock therapeutic developmental policies are in place.
One could say that what I have said about the Kuznets model is not yet proven correct, since
The argument that inequality must increase before it decreases, the conclusion of Kuznets' work, is based on cross-sectional data. The other way to gather and present data in economics is through time-series analyses. The U-shape in the curve comes not from progression in the development of individual countries, but rather from historical differences between countries. In his data set, many of the middle income countries were Latin American countries. The individual countries Kuznets used as the basis for argument were developed countries, such as the
The status of the Kuznets curve was once reified as a socioeconomic law. Economists and social scientists have recently demonstrated how Kuznets’s arguments, originally advanced under more limited conditions, became transformed into overarching theoretical, empirical, and political constructions. The time-series analyses suggests that even empirically grounded and testable social science models are contingent on the broader social and political contexts in which they are produced and negotiated.