A Rising Tide Lifts All Boats? –The Gini Index and the Missing Link in Sustainable Productivity.

Successive waves of ‘development’ theorizing and practice have done well to define and inform policy trajectories and pave the way for the Caribbean regions’ progress in the last decade. Faring steadily amidst an era of post-independence and shifting political leadership, World Bank policy analysts have postulated that ‘poverty and inequality declined over the past fifteen years in Latin America and the Caribbean (Cord, Lucchetti, Castelan and Ratzlaff’, 2013)’. A closer investigation of this claim however, opens pathways to unanswered concerns, particularly in relation to its attribution to the ‘Caribbean’ region.

In his opening address to the UWI’s Conference on the Economy 2013, Euric Bobb’s theme of The Reduction of Poverty and Inequality highlighted some of the most pressing issues to date in the study of poverty and inequality in the Caribbean region. Whilst researchers and policy analysts have ready access to statistics of poverty and inequality for Latin American countries, a quick review of publications and World Bank data tables reveal a lack of country specific data or reviews for Caribbean nations. As evidenced by Bobb’s review, the most recent and available frame of reference for discussing poverty and inequality in Trinidad and Tobago was a Survey of Living Standards which was last conducted in 2005. The World Bank’s last available gini index1 reading for Trinidad and Tobago was listed as 40.27 as at 1992. Jamaica’s latest figure of 45.51 was calculated in 2004. This can be attributed to highly funded I.M.F surveys of poverty in that country.

Amongst academic circles there remains an impression that authorities in the English speaking Caribbean do not place priority on funding studies which can lead to further our understanding of the nature of poverty. A further limitation in the scope of influence that researchers and policy analysts hold in this arena is the fact that topics such as ‘poverty’ and ‘inequality’ require macro-scale data collection and analysis for any substantial hypotheses to be formulated about the status of the country in question.

Moreover, although there has been widespread talk of poverty reduction programmes from governments and a general consensus on reducing poverty in accordance with U.N. Millennium Development Goals over the last decade, experiences, particularly in the Latin American and Caribbean region pointed to the need for an additional dimension to poverty theorizing and analysis.

Although the terms ‘poverty’ and ‘inequality2’ are often paired, their distinctions should be noted. Whilst ‘inequality’ typically relates to a measure of the extent of the distribution of income or consumption expenditure among individuals or households in an economy, ‘poverty’ indices demonstrate the relative numbers of people at the lower end of that income distribution. Traditionally, ‘poverty’ measures have received more attention than ‘inequality’ measures, perhaps due to an oversight in the earliest sociological theorizing that failed to see the role that ‘inequality’ could play in impeding development. Overall, the lack of a ‘trickle-down effect’ where wealth was concerned has increased the urgency for a proactive approach by governments to find innovative and effective ways to filter those benefits to the poorest groups.

In a general sense, statistical confirmation reiterates observable ‘everyday’ phenomena, as for instance, a quick assessment of one of the ‘wealthier’ Caribbean islands such as Trinidad and Tobago exhibits stark differences in income distribution among its socio-economic sectors. Three issues remain to be considered; how do we generate more wealth for the economy, how do we make wealth creation/productivity sustainable and how do we diminish the income earnings gap amongst citizenry?

Latin American based researchers, Nora Lusting and Luis Lopez-Calva, highlighted the utility of exploring forces behind a diminished earnings gap and increased government transfers. It has since been postulated that further redistribution of wealth within a carefully coordinated interplay of market forces and state action will benefit both equality and growth. “Economic theory tells us that the co-existence of imperfect capital markets and investment indivisibilities imply that market forces in Latin America were likely to produce and maintain inequality unless government action equalised opportunities and outcomes’’(Lusting and Lopez-Calva 2010). The

key recommendation being ‘informed government action’, a goal which necessitates a high level of coordination in both poverty and inequality assessment and analysis to, in turn, determine policy directives.

Indeed, as indicated in a World Bank report of June 2013, Shifting Gears to Accelerate Shared Prosperity in Latin America and the Caribbean, growth and redistribution have so far demonstrated a direct link to a decline in extreme poverty as well as an increase in the region’s middle class.

The demand for analysis using wealth indicators has grown significantly and has even seen the introduction of a new index called ‘change in wealth per capita’ which can aid in identifying threats to the sustainability of economic growth and poverty. This growing demand for analysis and updates to wealth indicators has proven to help resource-rich countries such as Ghana, Guinea and Indonesia among others to manage their natural capital. Furthermore, encouragement of knowledge generation in relation to poverty and inequality has strengthened the World Bank and other multi-national organizations’ dialogue with countries about linking their economic growth with necessary sustainable development strategies.

Major shortfalls in country-specific data collection and resources for researchers, again, place the Caribbean nations at a disadvantage. Governments often fall short in facilitating the knowledge generation and dialogue required to take charge of their development agendas. With any hope for tackling the endemic reality of inequality and pockets of chronic poverty within these seemingly ‘developed’ societies, a refreshed awareness and advocacy is welcomed from the regions’ citizenry.

References

Bobb, Euric (2013) The Reduction of Poverty and Inequality: Opening address at UWI’s Conference on the Economy 2013.

Retrieved from://sta.uwi.edu/conference/13/cote/documents/The Reductionof Poverty and Inequality.pdf

Cord, Louise, Lucchetti, Leonardo, Castelán, Carlos Rodríguez & Ratzlaff, Adam (2013) Prosperity and Poverty in Latin America and the Caribbean. Retrieved from http://www.voxeu.org/article/prosperity-and-poverty-latin-america-and-caribbean.

Lustig, Nora, & Lopez-Calva, Luis (2010) Declining Latin American inequality: Market forces or state action? Retrieved from http://www.voxeu.org/article/declining-latin-american-inequality-market-forces-or-state-action

World Bank (2010) Survey of Living Conditions, New York, World Bank.