A better inequality measure than Gini is needed

Comments on Tom Conley "Big P Political Economy - The Many Faces of Inequality and Poverty in Australia and the World", 29/06/2015

While the measure of inequality using the GINI coefficient is useful and also be informative, such a measure also has significant shortcomings particularly in a dynamic sense. A more comprehensive measure to reflect both static and dynamic situations or some complementing measures may be needed.

To capture some of the shortcomings of the Gini coefficient measure, one can ask the following question and attempt to answer it:

Do you wish to be 1% better off in a world/country of falling Gini coefficient where the average growth is less than 1%, or do you wish to be 5% better off in a world/country of rising Gini coefficient where the average growth is greater than 5%?

I think that most people are likely to prefer to be in the second situation as opposed to the first one.

If that proposition/supposition is correct, then it means that to simply use the Gini coefficient is problematic and we need to develop another measure to better reflect that.

I would suggest we need some measure of inequality that can also capture the dynamic growth in it. It should not be too difficult to develop such a new measure to better the current simple Gini coefficient.

Proposal for UN to expand Gini measurement

Comments on UN “2014 AMR Part II (17 February - 2 March): Sustaining development gains through inclusive development”, 22/02/2014, https://www.unteamworks.org/node/423746#comment-63704

I address the last question listed above first. I think that a set of necessary and widely applicable conditions or strategies for fostering social inclusion and citizen engagement can be identified. 

If I can talk about social inclusion and citizen engagement in terms of economic ones because it is an important area and without this any benefits will not be sustainable in the long term.

Let's define economic growth as average growth of the economy of a country or a region. Then one can also calculate the economic growth by a set of classification of population based on their income levels, say percentiles. Inclusion can mean a number of concepts, say the lowest 10 percent, 20 percent, or 30 percent have also achieved growth that is not appreciably below the average growth.

Many people are used to using Gini index for equality purposes. Gini index is very useful in measuring income or wealth distribution for a country or region and indeed the whole world if one wishes to do so.

I do mind using that but have some concerns on indiscriminately using it to every occasion particularly to situations where changes are rapid and large in some of the underlying indicators like GDP growth. This is because Gini is a static indicator of relativity of income distribution for a particular point of time and can indicate very little about the level. As such, it may mask significant improvement in, say, poverty reduction when economic growth is rapid with the poor benefiting from it but at the same time Gini may show inequality has increased.

China is a case for this where poverty has been reduced significantly but its Gini measure may have worsened.

I think the UN should undertake some studies to develop some measures which can improve the shortcomings of Gini in that regard. This work may have important applications in managing expectations and contributing to a better and happier society by showing a true picture.

Realistic and optimistic on Asia

Comments on Koh "

Three challenges to Asia’s global ascent", 9/03/2012, http://www.eastasiaforum.org/2012/03/08/three-challenges-to-asia-s-global-ascent/

The three areas Koh listed are all very important issues that many Asian countries face, and should and must be dealt with sooner or later.

I somehow am confident and optimistic that those issues will be able to be dealt with and resolved in the due course.

Although I have been aware that Gini is high and has been on the rise in China and many people have used that as a big problem in the rapid growing Chinese economy, I didn't realise that Gini is 0.48 in Singapore. I think that China will pay more attention to inclusive growth and achieve better equity in terms of income distribution as its income level rises and as its labour force turns from surplus to relatively scarce especially in the context of rapid growth of the economy and of physical capital investment.

In terms of environment sustainability, it is likely that we will see gradual and significant improvement in some fast growing economies, especially China, as it's economy enters into a stage of extensive physical quantity growth to intensive quality and value growth phase. I think China, leaving aside urbanisation that will still be dominated by extensive physical growth, is very close to this critical transition. Besides, as income level rises, the relative value people place on environmental goods will rise so naturally from now on we are likely to see more "demand" for environmental goods relative to other goods.

Corruptions in many Asian countries are reported to be serious. However, I do believe that it is likely to decline and possibly significantly so in major large fast growing Asian countries, especially in China.

If China is one of the best representatives of Asian fast growing countries, especially when its size and share in those fast growing economies are concerned, my confidence and optimism in them to resolve those three issues seems to be justifiable.

On China’s prospects for diminishing regional disparities

Comments on Jane Golley “China’s prospects for diminishing regional disparities”, 31/08/3010, http://www.eastasiaforum.org/2010/08/31/chinas-prospects-for-diminishing-regional-disparities/
If Chinese top policy makers are willing to use the most appropriate policies to coordinate the development strategies of the whole country inclusive of the eastern, central and the western regions, it should be possible for China to do much better than "regional inequality between the west and the rest of China is likely to be diminished marginally at best".

For example, they could use some sort of fiscal transfers and link them to encourage the private sector in the eastern region to invest in the other less well off regions to tilt a bit the balance between investing abroad and inland.

There are advantages in investing inland. For example, due to various reasons including cultural, language, systems, transport and market, the barriers or the costs and the risks of investing inland are likely to be much smaller, thus to raise the return to investment. It is also much easier to coordinate the required infrastructure development within a country, especially given the policy priority of the central government.

There are also vast labour supplies including skilled and educated personnel. Certainly it will be easier to train or educate workers if needed.

Urumqi riots and ethnic issues in China

Comments on Anthony Garnaut “Urumqi ethnic conflict and failure of the Chinese justice system”, 12/07/2009, http://www.eastasiaforum.org/2009/07/12/urumqi-ethnic-conflict-and-failure-of-the-chinese-justice-system/

Ethnic issues have been problems in China for many centuries, ever since probably the Qin dynasty unified China and brought national system of many things, such as measurement. Han generally dominated China, with some noticeable exceptions such as the Yuan and Qing dynasties when "minorities" ruled China.

I am not a historian, but only an ordinary Han if in Chinese ethnic terms, so I may subject some natural biases. My understanding is that the history of ethnic issues in China has generally been better since the establishment of the People's Republic of China.

While the Chinese Communists, like most communists, may have had strong ideological background in the past in terms of capitalism and socialism/communism systems or "classes", they have not been racists, at least inside China. To the contrary, they have treated ethnic minorities more favourably, given them special privileges.

For example, the Chinese family planning system has allowed only one child for Han people, but this one child policy has not applied to most ethnic minority groups. Just think about how important family continuation is for anyone, especially the Chinese, one would come to realise how special and favourable the policy has been to ethnic minorities in China.

Problems like inequality and conflicts exist in every societies and countries. The main differences are how they manifest themselves. For example, in Australia the Indigenous people suffer great disadvantages, as the recent report from the Productivity Commission shows. They not only range from extremely low income, but also to low life expectancy, dozens times of imprison rates compared to other Australians. This inequality should be much worse than the inequality in China between different ethnic groups.

China’s inequality is largely of a regional nature, as compared to ethnic nature. China has stated itself that there are three broad regions, the Eastern, the Middle and the Western regions in terms of development, with the Eastern region the most relatively developed and the Western the least. It happens that most ethnic Uyghurs live in Xinjiang and most ethnic Tibetans live in Tibet and those two regions are all in the Western region and are relatively poor among many provinces in China, although my understanding is that the situations in Xinjiang are certainly better than those in Tibet.

People can fight even among own families, like between brothers and sisters, parents and children. They can fight between different families of the same ethnic group. They may fight between different local regions. Anything can happen there.

The situation can be very different if potential separation of regions is involved. Most Chinese naturally don’t like the idea to give away any territories. For example, many people resent the fact that Mongolia (Chinese say the Outer Mongolia, because there is an Inner Mongolia in China) was allowed to be independent and the Chinese Communists accepted that.

Others may like to see it in ethnic terms. But mostly, seeing it in ethnic terms is likely to beat up the matter and distort the fact.