Daily Times

No, with due apologies for bursting the bubble, the word gini is not misspelled and sadly this article is not a fictional account along the lines of the genie of the lamp, in spite of the fact that a genie might even have been a more interesting read. The Gini here is part of an economic or statistical indicator called the Gini Coefficient. And before everyone shrugs and gives up reading, the author solemnly commits not to indulge in overcomplicated explanations of economic theory that none can comprehend. Frankly, based on empirical evidence, the view that even economists are clueless about what they say seems to be a rather appropriate observation!

So what is the Gini? Well it is named after an Italian statistician and is supposed to measure the distribution of income within a nation’s residents and, accordingly, is the conventional tool for measuring income inequalities, which everybody will agree is the burning issue for every nation. The way it works is that if Gini is zero, than the income is perfectly or equally distributed between the entire populace. On the other hand, if it is 100, then one lucky chap gets all of it. And to burst the bubble again, no, this is not a guessing contest about who that particular person is in the case of Pakistan.

Having already committed to keeping this simple, the basis of calculating Gini are ignored; in any case that methodology is linked with something called the Lorenz curve, explaining which in itself would be more difficult than conquering a labyrinth. However, everyone might have guessed that these calculations obviously involve the population and income estimates of a nation, at the minimum. In the light of the fact that most nations, particularly those labelled as developing, have yet to figure out their correct populations, let alone their related income, how do professionals accurately calculate the Gini is a remarkable feat of human intelligence, or shrewdness? In addition, in cases where a sizeable part of the economy is undocumented, or black, the assumptions and underlying data should more likely than not be questionable.

Notwithstanding the above, and reverting to previous week’s article, if 400 rich guys did actually increase their wealth by $ 95 billion in 2014, then, logically, the global Gini should be very near 100. Conveniently, and unsurprisingly, there is no information on the web to confirm this hypothesis. Why? Well, why the rich would never want the rest of the classes to know the exact level of income inequality across the globe.

So, why write about something that at first blush appears to be everything but the truth? Someone called @zerohedge and his Tweet about Tyler Durden’s article, ‘The annihilation of the middle class: the beginning of the end for modern America’, deserve the credit or blame, as the case may be. Quoting from that article, “America is more unequal than…, and Pakistan. Yes that’s right, Pakistan. Pakistan’s rank is #119, which means it is in the top 16 percent. Remember, the Gini Index measures economic stratification, not total wealth of the country. So, theoretically, you could have a country with widespread starvation, but if everyone suffers equally, the Gini Coefficient could be near zero. You could argue that the Gini Coefficient should be considered in context with other data. Obviously, it’s preferable to live in the United States and not in Pakistan, but the Gini Index still matters because equality and fairness are the foundations of democratic ideals.”

To be honest, it is rather irksome and downright depressing why Pakistan is a good example for everything bad in this world. Nonetheless, for the record, the Gini for Pakistan was 41 (FY 1998/1999) and 30.6 (FY 2007/2008), and these are the only, well nearly, reliable estimates on the web and, amazingly, were found on the CIA’s website. According to the same article, the CIA keeps track of countries’ Gini since those having a higher Gini have lower life expectancy and higher rate of violent crimes; will wonders never cease! By the way, it was an interesting article and is recommended for reading.

Getting back, the point made should have touched a nerve; everyone is not suffering equally in the country. The laws, the policies, the system, in short everything, work differently in practice for the middle and lower classes. From the Gini numbers above, a dictator apparently managed to bring down Pakistan’s Gini. On the other hand, how democracy fared over the last seven years will only be evident when someone works out the Gini for 2014. Irrespective of the fact that even these Gini numbers are highly questionable considering the conventional perception of corruption in the country, it is still a better yardstick for measuring the performance of any government compared to their other achievements, such as their contributions for restoring and saving democracy and perhaps even building infrastructure. “We can either have democracy in this country or we can have great wealth concentrated in the hands of a few, but we can’t have both.”– Louis Brandeis, US Supreme Court Justice (1856-1941).

Since the masses vote any government into power in the hope that once in power it will improve the quality of their living, an indicator that measures income inequalities should be on the top of the ‘things to monitor’ lists of the media, think tanks and civic society. Contrarily, although it was just a quick review, Gini and its movement are even missing from the Economic Survey of Pakistan. Admittedly, calculating Gini is comparable to rocket science but it can be done. Rather than having think tank upon think tank watching how democracy is faring in the country, perhaps it would be more productive to have a think tank that watches what democracy is achieving in Pakistan.

But guess why it will never happen in this world? Those at the top cannot do without hierarchal society for if everybody received an equal share of the pie there would be no one to do menial labour. Income inequality will eventually prove to be the bane of existence for democracy. Serendipitously, Gini is quite similar to the genie of the lamp; both are figments of the imagination but while the genie can grant wishes, the Gini cannot even do that!

The writer is a chartered accountant based in Islamabad. He can be reached at syed.bakhtiyarkazmi@gmail.com and on twitter @leaccountant