Rising Equality

Click to embiggen. There’s a famous landmark in the picture. What’s it?

I can justifiably claim that equality is rising in the world. Meaning, the world used to be less equal than it is today, and that in the future it will become more equal than today. The reason that claim appears to contradict reality is that I have not specified the dimension for the comparison implicit in any measure of equality. When it comes to comparisons of material wellbeing, there are three distinct dimensions — consumption, income, and wealth.

My claim is that consumption equality is increasing, not wealth or income.

Here’s a trivial case that illustrates what I mean. Warren Buffet’s income and wealth is six orders of magnitude greater than mine. Meaning his wealth is measured in units of “000,000,000” and mine is measured in units of “000.” Billions as opposed to thousands. Similarly his income per year is measured in billions and mine in thousands. Certainly, compared to Buffet in terms of wealth and income, I am dirt poor. But I am not dirt poor compared to Buffet in consumption.

Let’s talk consumption then. Buffet lives in a nice but a modest house. Me too. His house has a HVAC unit (heating, ventilation, air conditioning) just like mine has. Running hot and cold water? Yes. Fridges, stoves, kitchen gadgets and gizmos? Yes. Big fat TVs and good audio system? Yes. Computers and internet service? Yes. Subscriptions to various channels of entertainment? Yes. Nice furniture in the living room and bedroom? Yes. He eats food bought at some supermarket? Me too. His drinks Coke and so do I. His burgers are not gold plated — they are from the same bunch of fast food places that every American eats. He puts on his pants one leg at a time, just like you and I. What we consume is mostly similar.

There are some stark differences between our consumption: he travels by private jet and I can only afford commercial air travel. Perhaps he holidays in private yachts. But aside from such things, my consumption is not six orders of magnitude lower than Buffet’s consumption.

This was not true any time in the past. The consumption of the rich and the superrich was vastly different from that of the rest. John D Rockefeller’s consumption could not have been duplicated by the average American.

In the future, there will be even vaster differences in wealth and income across the world. The greatest thing would be that the consumption “floor” will keep on rising. The average person of the year 2100 will have greater consumption than the richest of today. That’s what I am optimistic about.

Fun fact: In 1957, Fortune magazine listed Jean Paul Getty as the wealthiest American. When asked whether he was really worth a billion dollars, he said, “You know, if you can count your money, you don’t have a billion dollars.”

Click on the image above. See if you can answer the question. 

Author: Atanu Dey

Economist. View all posts by Atanu Dey