Inequality still a widening global issue - CNBC Africa

Inequality still a widening global issue

Special Report

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Globalisation plays a key factor in income and county inequality globally. PHOTO: Getty Images

“The Gini coefficient is a measure of inequality. It falls between zero and one. It’s not a very intuitive concept. What we really need to know is that if the Gini coefficient falls between 0.30 and 0.50, then the country is equal and income inequality is not that high, it’s moderately equal,” Madhur Jha, senior global economist at Standard Chartered Bank, told CNBC Africa.

“Anything above 0.50 levels tends to be a very unequal society, so obviously all governments would like to bring the Gini coefficient down to below the 0.50 levels and as close to .3 or .2 as they can.”

According to Standard Chartered’s report, entitled ‘Taming the Gini: Inequality in perspective’, which was released in July, South Africa currently had the highest Gini coefficient in Africa at above 0.60, followed by Zambia at 0.60, and Malaysia at just under 0.55.

(READ MORE: Inequality still plagues South Africa)

Other African countries with Gini coefficients that worsened since 1995 include Uganda, currently at 0.45 from sitting below 0.40, Mozambique at 0.45 from being just below the same figure, and Cameroon at above 0.40 from 0.35 in 1995.

Over the last 30 years, according to Jha, inequality between countries has however gone down. 200 year before that, at the height of the industrial revolution, a number of countries in the Western world became significantly wealthy, and others got left behind.

Since the 1980s, however, a lot of countries have [improved] in the emerging market space, a lot of countries have grown very rapidly, led by Asian economies.

"Inequality between countries has fallen, extreme poverty levels have fallen dramatically, so you’ve got less than 30 per cent of the global working population in poverty right now, compared to more than 50 per cent earlier," Jha explained.

Countries whose Gini coefficients had improved include Bolivia, whose Gini coefficient was at 0.55 in 1995 and currently sitting just below the figure, Indonesia at 0.50 from 0.65, and Thailand at 0.50 from 0.60.

(WATCH VIDEO: Tackling inequality in Africa)

Jha added that the second key observation was that inequality within countries had however risen, an aspect that governments had become increasingly worried about. This particular type of inequality can invariably lead to social disturbances.

“This is quite furiously debated in some parts of the world, for example in the United States. People don’t always accept that inequality has risen within the country. That’s because the data is not that good, but overall the expectation is that inequality within countries has gone up, and maybe the extent to which it has gone up is still debated,” said Jha.

“A lot of people put that down to globalisation, but we think the real reason is technological development in the developed world, and in the emerging world. It’s a process of urbanisation and growth that is leading to widening inequality.”