The growing gap

We live in one of the most unequal societies in the world. It should cause us disquiet, and lead to action.

Managing for profit by Peter Hughes

The images of unrelenting poverty that flicker across our TV screens are set to get worse as robots and other technology spur mass global unemployment, Johann Rupert told the ‘Business of Luxury’ summit in Monaco recently. How is society going to cope with such endemic unemployment “which drives envy and hatred?” he asked the audience, comprised of those who sit at the very tip of the world’s wealth pyramid. He added that it was a question that kept him awake at night.

I wonder what the wealthiest of the wealthy thought about Rupert’s speech. Did he touch a nerve and set them seeking solutions? Or did they simply amble away towards their private jets and yachts, without giving his ominous words another thought?

Back home
For most of us back home who have to worry about our day-to-day lives and struggle to cope with price increases, it is difficult to identify with Rupert and those he addressed in Monaco. But while the growing divide between rich and poor will not affect them in the same way, it poses a huge risk for us all.

In fact, it has been a worry for years. So much so that, as far back as 1912, Italian statistician and sociologist Corrado Gini developed a way of measuring the gap between rich and poor: the so-called ‘Gini Coefficient’. A brilliant concept, it works like this: on an index of 0 to 100, the most equal society on earth would be the one in which every person received the same income.

In this case the Gini would be 0. Conversely, the most unequal society would be one where a single person received all the income and the other people nothing. Here the Gini would be 100.

According to the World Bank’s website, the Gini coefficients of countries vary from about 35, in societies where there is little disparity between rich and poor, to as high as 66 (the Seychelles), where the gap is huge. With their high taxes and state-funded social benefits, Sweden, Norway and Denmark come in at levels of 26 and 28 respectively.

Developed countries, such as Australia, New Zealand and the UK, range between 34 and 38, while China sits at 42. Closer to home, Zimbabwe, Swaziland and Lesotho are in the 50 to 60 range. South Africa is at 63, as is Botswana.

It’s not surprising, then, that Rupert raised the matter of his sleepless nights at the summit – like the readers of this magazine, he lives in one of the most unequal regions of the world.

Grow your business!
Unfortunately, he did not tell his audience how they could solve the problem. Instead, he is reported to have closed off with the words: “We’re in for a huge change in society. We need to get used to it, and be prepared.” That’s not a particularly useful observation, but then who does know how to solve this enormous and growing problem? If Rupert does not have the answer, who am I to be able to make a contribution?

However, of one thing I am certain: if your enterprise and every other business in South Africa does not make a profit and expand, we have little chance of ever getting our Gini below 60.

This article was originally published in the 24 July 2015 issue of Farmer’s Weekly.