Mobility: a solution to inequality?

A large por­tion of the world’s pop­u­la­tion has been lift­ed out of pover­ty by the com­bined effect of advance­ments in knowl­edge, and the growth and glob­al­i­sa­tion of trade. Accord­ing to the World Bank, in 1981 close to 40% of the world’s pop­u­la­tion was liv­ing under the pover­ty line (on less than a dol­lar a day). By 2008, this fig­ure had fall­en to 14%. While in 1988, 40% of India’s urban pop­u­la­tion was liv­ing in pover­ty, the num­ber dropped to 12% just eleven years lat­er, due to rapid growth, with the aver­age annu­al growth rate ris­ing from 0.77% in the 1970s to 3.9% in the 1980s.

The glob­al reduc­tion in inequal­i­ty is not only a mat­ter of income, but also health. Between 1940 and 1980, the aver­age life expectan­cy in devel­op­ing coun­tries rose by near­ly 20 years, from 44.5 to 64.3 years of age. In devel­oped coun­tries, this fig­ure rose by just nine years over the same period.

Since the ear­ly 1980s, rapid eco­nom­ic growth in Chi­na and India has enabled over two bil­lion peo­ple to escape pover­ty. At the same time, this growth has gen­er­at­ed new inequal­i­ties between these coun­tries and oth­er economies, par­tic­u­lar­ly those in African states, which have not expe­ri­enced the same growth. Last­ly, growth in India and Chi­na has increased inter­nal inequal­i­ties: only lim­it­ed sec­tions of the Indi­an and Chi­nese pop­u­la­tions have become pros­per­ous, or rich, even though pover­ty rates have dropped sharply in both coun­tries since the 1970s.

The same phe­nom­e­non of grow­ing “intra-coun­try” inequal­i­ty can also be observed in oth­er coun­tries. In the West­ern world, there are those who have inno­vat­ed and adapt­ed to best take advan­tage of tech­no­log­i­cal rev­o­lu­tions (ITC, AI, etc.), and those who have been left behind. Should we be con­cerned about ris­ing inequal­i­ties with­in our borders?

Growth in India and Chi­na has increased inter­nal inequal­i­ties in these countries.

Inequal­i­ty can be mea­sured in sev­er­al ways. We could look at the top rich­est 1% with­in a country’s income; at a more glob­al mea­sure of inequal­i­ty, such as the Gini coef­fi­cient, which mea­sures the dis­tance from per­fect equal­i­ty for the entire pop­u­la­tion; or at social mobil­i­ty mea­sures and the pover­ty traps that hin­der social mobility.

In my view, if we want to encour­age growth through inno­va­tion while lim­it­ing inequal­i­ty, we must fight pover­ty and increase social mobil­i­ty. Inter­est­ing­ly, greater social mobil­i­ty tends to be asso­ci­at­ed with low­er over­all inequal­i­ty (a phe­nom­e­non known as the Great Gats­by curve). By focus­ing on social mobil­i­ty, we could kill two birds with one stone.

In that case, must we sim­ply ignore the rich­est 1 or 0.1%? The answer is no, since the rich can use their resources to block new inno­va­tions and reforms aimed at open­ing up access to edu­ca­tion and health: those who suc­ceed­ed yes­ter­day may wish to stop oth­ers from doing the same today, and thus pre­vent competition.

There­fore, in order to pro­mote tru­ly inclu­sive growth through inno­va­tion, we must estab­lish an eco­nom­ic and social mod­el that: (1) stim­u­lates social mobil­i­ty through high qual­i­ty edu­ca­tion, train­ing and health for all; (2) pro­tects peo­ple and pre­vents them from falling into pover­ty by shield­ing them against the risks asso­ci­at­ed with job loss and career change; (3) encour­ages tech­no­log­i­cal advance­ments and inno­va­tion as sources of wealth cre­ation, while estab­lish­ing safe­guards (relat­ing to tax­es, com­pe­ti­tion, cor­rup­tion laws, etc.) to pre­vent yesterday’s inno­va­tors from block­ing the paths of oth­ers to pros­per­i­ty and freedom.

This col­umn is the repost of an arti­cle that was orig­i­nal­ly pub­lished in the Paris Inno­va­tion Review on 02/01/2018.