Inequality is growing around the world. Every year, the gap between the rich and the poor gets even wider. Today, it is estimated that 1% of the population owns more than 70% of the world’s wealth. A recent analysis by the UN shows that six of the seven countries in the world where the top 10% of the population holds more than 80% of the wealth, were in Africa.
Economists are in agreement that inequality is bad for the economy. If the income gap is too large and wealth is too concentrated, it will affect the aggregate demand which if seriously insufficient, induces an economic recession. A large income gap will also reduce the liquidity of a country’s social class and the resilience of economic growth in the medium and long term which will have a negative impact on economic growth. These issues affect the effectiveness of monetary policy.
While the factors responsible for this inequality in the developed world are different from their drivers in the developing nations, the effectiveness of the government’s policy initiatives aimed at closing this gap is equally wide apart in different climes. Despite the imperativeness of such policies, many African countries have yet to initiate them, not to talk of evaluating the aggregate impact on the economy.
Read also: Poverty and Widening Inequality in Nigeria
Mahatma Gandhi was once quoted to have said that “the Earth has enough resources to meet the needs of all but not enough to satisfy the greed of even one person”. This quote is apt in our world of today but very relevant in the analysis of most of our problems in Nigeria today where the greed of the few suffocates the wellbeing of the majority.
Poverty and inequality in Nigeria are not due to a lack of resources but to the ill-use, misallocation and misappropriation of such resources. In our public space, we have consciously and unconsciously institutionalized the culture of unequal distribution of jobs/opportunities, unequal distribution of political patronage, unequal distribution of national assets, and unequal distribution of infrastructure. At the root of this unfair distribution is corruption. It is common knowledge that public officeholders in Nigeria steal billions of dollars from the national wealth every year.
In Nigeria, there is an overwhelming sentiment that laws and regulations are designed to benefit a particular region. The concentration of key government agencies in the hands of one region leads to undue political undertone, corrupt practices and ineffective regulatory powers of government. The best jobs and heads of ‘juicy’ agencies and parastatals are the exclusive reserves of a particular region/tribe. Many Nigerians believe that the law and its implementation are not in the best interest of all citizens. The slogan “go to court” is now used as a mockery of the judicial system. The socio-economic consequences of all these are very injurious to our society.
When wealth distribution becomes concentrated in a small number of people, political power tends to become skewed in favour of those small wealthy people who manipulate the government to their favour through both legal and corrupt practices. This explains why godfatherism, vote-buying and other forms of rigging are prevalent in our society. It is now proven that we are incapable of conducting credible elections no thanks to the devilish desire of the few to perpetually cling to power for selfish motives. The negative impact is that the worst of us have continued to rule the best of us to the detriment of our country.
Researchers have consistently pointed to evidence that economically unequal societies have higher crime rates. Surveys conclude that ‘inequality is the single factor mostly and consistently related to crime.’ Denying people what is due to them may induce the urge to violently take it, resulting in a higher propensity for criminal behaviour. This explains why violent crimes like kidnapping and armed robbery are on the rise in our nation.
As the means of legal livelihood get fewer in an unequal society, illegal ways of sustaining lives increase even when risks of punishment when caught are taken into consideration. Who is still in doubt about why prostitution, drug trafficking, cybercrime, ‘Yahoo and Yahoo plus’ and other vices are on the increase?
A high level of economic inequality means a higher level of poverty. Poverty is associated with poor public health, poor schooling and poor decision-making ability which place significant burdens on the economy. When the price of commodities increases in the midst of low income, the populace’s support for government policies declines. With the increasing number of poor people blaming the government for their woes, they tend to, directly and indirectly, resist even the policies that might be in their best interest in the long run. The resultant effect is that the citizens and the nation will be stuck in the vicious cycle of poverty.
A widening rich-poor gap tends to increase the rate of rent-seeking and predatory market behaviour. While stocks and corporate profits soar to new heights, wages as a percentage of GDP have stagnated. It is an aberration that the profits of Nigerian banks have continued to increase at arithmetic progression year by year while the manufacturing sector is shrinking and the national economic growth rate is declining. The huge profit level of our banking industry is an indication of a malfunctioning economy driven by the obsession for profit at the expense of providing financial services and support for commerce and industry at competitive fees and charges.
Unequal income distribution increases political instability. Political capture produces ill-gotten wealth which perpetuates economic inequality. The massive concentration of economic resources in the hands of fewer people presents a significant threat to inclusive political and economic systems. Instead of moving forward together, people are increasingly separated by economic and political power, inevitably heightening social tension and increasing the risk of societal breakdown. Our elites are completely detached from the masses. The widening gap between these two extremes is a time bomb waiting to explode. History favours the poor in a class war. Nigerian elites should note this while they continue to strangle the masses with the relentless public display of their affluence.
Equality of opportunities is a central tenet of inclusive modern societies. Recent evidence shows that income inequality and inequality of opportunities are highly correlated. Unfortunately, in Nigeria, strong family connections rather than merit is a greater determinant for the type of job a fresh graduate can secure. Our graduates’ life chances are strongly determined by their parents’ socio-economic status. Those who have power, have it for themselves, their friends and their families. Sadly, ordinary citizens’ fate and achievements are being determined by their tribe, religion, family or any other immutable characteristic.
Nigeria must build a new political and economic system that works for everyone, not just for the fortunate few. Every Nigerian should be given the chance to succeed. Any system where, whether a citizen succeeds or not is not in his hands, should be dismantled. A level playing ground and deliberate redistribution will help in this regard. Statistics have shown that combined direct and indirect effects of redistribution can lower inequality. Economic growth may produce few wealthy individuals but economic development involves lifting a significant number out of poverty. The latter should be the ultimate target. ‘No society can be flourishing and happy when the far greater part of its members is poor and miserable’ -Adam Smith
Nwolisa is a Lagos-based Economist