Poverty vs. Inequality

I am not particularly comfortable musing about broader concepts for which I have little expertise but I think they do inform the broader conversation about long term economic development so I will soldier on.

I listened this morning to an LSE podcast where an economist was lecturing on the ‘haves and have nots’ and making a persuasive case for greater focus on inequality around the world.

There were a couple of particularly interesting points.  One, he said that rich people tend to be very interested in the concept of poverty and poverty reduction but disinterested and maybe even threatened by the concept of inequality.

I see some parallels in Canada when it comes to the whole transfers debate between provinces.  Ontario politicians and pundits have traditionally been a supporter of equalization as a ‘poverty reduction’ issue in the sense of its use as a way to ensure all Canadian citizens have good access to public services (I realize this has been changing in the past decade or so but I would say historically this has been true).  They have not been supporters of ‘equality’ in the sense that all provinces should have some relatively similar economic performance.   In fact, there have been times when they have been quite hostile to efforts meant to revive the economy down here.   I have always maintained that if the federal government put their support behind multinational companies expanding in Atlantic Canada, they would get serious push back from leaders in Ontario.  They don’t mind ACOA dumping millions into small firms here but if big auto manufacturers, or aerospace companies or pharma or whatever were attracted to Canada – and then given federal support to locate in Atlantic Canada – you would see the fireworks on full display.  “They take our tax dollars to steal our jobs” or something similar.  In my view, this is loosely similar to the global poverty vs. inequality debate.

The second interesting point is that this economist said that migration from poor to rich countries was one of the two ways to foster more equality around the world.  He is of the view, we have discussed it here, that rich countries to should open the door to millions of new immigrants from the poor countries (I think this was the conclusion of a UN study a while back).  For me, this is the Alberta view within Canada.   Forget, transfers or economic development in Atlantic Canada, we have the jobs in Alberta so why not just encourage people to migrate to the jobs?

But an LSE student posed a great question.  Wouldn’t this brain drain from poor to rich countries just make the problems in the home country worse?   He kind of hedged on this point and talked about forcing immigrants to go back to their home countries for a period of time after becoming more affluent in the west.

I think this is the issue in Canada.  We have witnessed a large scale out-migration from Atlantic Canada – and that may have raised the average income level of those out-migrants it hasn’t done much for their home region here in Atlantic Canada.

It’s an interesting discussion.  Certainly the global issues are far more severe but there is an interesting parallel, it seems to me, in Atlantic Canada.

3 thoughts on “Poverty vs. Inequality

  1. Canadians used to pat themselves on the back over our equalization provisions (and you’re right David, things have changed), but it has never come close to being “equalization” or equality. In recent years it has become even more compromised. Moving away from a formula driven result, the Martin government established a limited pot to be divvied up through increasingly gerrymandered provisions.

    Interestingly, other federations like Australia and Germany actually do equalize, or virtually so. And if we were a unitary state, there wouldn’t be much discussion over whether funding essential public services – health education, transportation – ought to be funded equally regardles of region.

  2. “He is of the view, we have discussed it here, that rich countries to should open the door to millions of new immigrants from the poor countries (I think this was the conclusion of a UN study a while back).”

    Good post, but I think that the economist here has made what I would call an unhelpful suggestion. Doesn’t really matter whether it is a good approach or not, because it just isn’t going to happen. Rich nations are not going to open their borders and let large numbers of unskilled and illiterate people into their countries with the object of making them citizens. As you say, poverty reduction in theory is fine, until it begins to affect someone’s security or bottom line.

    AB has absorbed a lot of Atlantic Canadians, to be sure, but many of them were trained and well-educated. That migration has benefitted AB but the country would be better off if we, as a nation, were more interested in getting the poorer-performing regions on their feet.

    “you would see the fireworks on full display”

    I think that Atlantic Canada has to craft some approached to economic development that will not be seen as obvious threats to, e.g. ON. We will always be losers if we try to pit our political clout against theirs.

  3. When you say inequality, do you mean inequality of “opportunity” or inequality of “outcome?”

    The first fosters an argument that everyone should have the opportunity to succeed through hard work and effort and the second fosters the idea that everyone should be treated equally regardless of performance, ability or merit. And as I see it, for years, we have created a ‘false’ economy where protections have been overly afforded to pseudo work, declining industries, useless government employees and workers who have been unproductive, mostly through generous transfers of wealth from the very taxpayers who are, as many would like to believe, also poaching our best and brightess (i.e. Ontario (at one time?), BC and Alberta). I would argue that many Atlantic Canadian workers have been forced into the arms of Alberta and other provinces because of wasteful, intrusive and mismanaged policies which limits the choices and opportunities of so many of us.

    It a part of life that economies restructure or adjust themselves in global free markets. So I guess we should be asking ourselves, are we going to move forward with more choice and opportunity of equality or are we going to dwell on the inqualities of outcome (i.e, income) through protecting ourselves from the real world. Thus, limiting what choices and opportunity NBers have a their feet in the future.

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