A man, dressed in African attire, went to one of the confectionary shops in down town Lusaka and bought a whole medium size chocolate cake.
As he was about to exit from the shop, holding the colourlfully wrapped cake in his right hand, a young man said to the man carrying the cake, “Can I join you to share the cake you are carrying?” The response from the owner of the cake was swift, “You are well – come, provided that you pay for a slice you may get.” The man added, “This is not a national cake which every citizen has a claim on it, based on the principles of equality and fair sharing of national wealth.”
The young man disappointingly waved farewell to the man and vanished into the crowds roaming up and down the crowded corridors of shops on one of Lusaka’s busiest streets.
The above hypothetical encounter reveals one important fact. That is it is not a straightforward matter that one can claim to share something for which one has not made any tangible contribution. The claim on national cake made by every citizen is based on the assumption that every citizen has made material or personal contribution towards the development of the nation – state. A citizen makes contribution in the form of taxes. As regards personal contribution this may come in the form of the defence of his or her country, or taking part in voluntary work in time of national disasters. Arising from these sacrifices made by a citizen, he or she can make a claim to have an equal and fair share of the national cake. But it is not always possible to make such a claim and to achieve it. One reason that may be given is that there are many people with legitimate claims over equal and fair share of the national wealth. These claims are highly competitive, controversial and sometimes conflicting. A good example to show how controversial is the claim on the national wealth is South Sudan. This newly established nation – state was involved in bloody fighting between factions within the ruling party, called Sudan People’s Liberation Movement (SPLM) in 2013. Each faction was claiming to have the right to rule and to have a bigger slice of the cake of the nation – state to the exclusion of the other faction and all others who are not part of the mainstream SPLM. The fighting resulted in massive destructions, several thousands of people displaced internally and externally. It was only recently that the parties to the conflict agreed to end hostility and to work for peace. It remains to be seen whether the agreement will be fully implemented. National wealth is for all. But the difficulty is how to effect the sharing. Unless all share the cake or all lose same, there will be conflict, and in most cases a destructive confrontation.
Adam Smith, more than 233 years ago wrote about “An Inquiry into the Nature and Causes of the Wealth of Nations.” In this work, Adam Smith raised a number of questions on the differences in wealth among nations. Here Smith’s concerns will be narrowed down to questions on the differences in wealth among citizens. That is whether it is possible for citizens to have equal and fair share of the proceeds of the natural resources of the State. The article examines cases relating to the distribution of income and wealth within the territory of a sovereign State: any state in the world.
Income and wealth, economists, such as, Professor Oliver Sassa, Professor Michael Parkin, or Professor R Glenn Hubbard, will advise the reader these are two different matters. But they have one common feature of ‘inequality’. They are distributed unequally among the citizens of a nation – state. Income should be understood as money income. It equals market money and cash payments (if any) to households made by government. Market money, as understood in economic terms, includes rent, interest, wages, and profit earned, before income taxes are paid to the revenue authority (in Zambia: the Zambia Revenue Authority [ZRA]).
Wealth is to be considered as a household’s value of the things that it owns at a point in time. It is noted that income is the amount a household receives over a given period of time. Because wealth is owned at a point in time, it is unequally distributed. Those who work extra hard may earn more than their counterparts assuming no illegitimate methods are employed. This claim is supported by the examples of Henry Ford and Bill Gates achievements.
Understanding inequality in the distribution of income and wealth is important in accepting inequality in the distribution of wealth. A simple example from the United States of America (USA) will show the seriousness of inequality in the distribution of income and wealth. In the case of income, the poorest 20 percent of households in the USA received only 3.2 percent of total income of the USA. While the highest 20 percent households received 51.1 percent of total income of the USA. Simple calculation will show the glaring disparity in the distribution of income in the USA. Same can be said about income inequality in Africa, Asia, and Latin America.
As in the USA, Europe, and Asia, in Africa the poorest members of society have no wealth. In the USA the second 25 percent of households own only 1.1 percent of total wealth of the USA. While the richest 25 percent of households are in possession of nearly 90.4 percent of total wealth of the USA. This shows considerable differences between the poor and the rich. The statistics for Africa and Asia which are not readily available may indicate even vast disparities in income and wealth between the poor and the rich. But poverty in Africa and Asia has declined dramatically from poverty level in 1970s. In Africa it declined from 40 percent in 1970s t0 32 percent in 2006. In Asia poverty declined from 20 percent in 1970s to less than 3 percent in 2006 due to high economic growth in Asia, eg China, South Koria, Thailand, Japan, etc.
Differences in the ownership of wealth cannot give the reader clear picture of economic conditions prevailing in one particular country. Wealth is accumulated over a period of time. This period may be short or it may be very long. For example, Henry Ford started his struggle to become a leading manufacturer of automobile way back before 1896, the year he built his first Quadricycle. In 1908 he built the T model of car which he intended to be cheap for every American worker to buy. The T model was sold at $825. Ford reduced that price to $575 and his company was able to sell more than ten thousand of the T model. Thus, Ford made name in history in the automobile industry, and accumulated considerable wealth. Henry Ford’s fortunes could not be used to measure the health of the USA economy. Another example of huge wealth that may be mentioned is the wealth of the co – founders of what was then called Microcomputer. Today Microsoft Corporation is the richest business firm in the entire world with an asset value exceeding $ 50 billion. Again Gates wealth cannot be used as measurement for the economy of the USA. Gates and his associates can only be cited as the richest people on Earth in our time. The two examples can also be taken to prove inequality in the distribution of wealth. The inequality in wealth allocation cannot be cured, not even under classic communist system. Under communist government private ownership of property is restricted or not allowed. Real estates, businesses, other property generating activities are run or controlled by the State in the interest of the working class. Microsoft and similar corporations would not have emerged under communist regimes. If such companies or businesses existed before the emergence of a communist regime it or they would quickly be confiscated and nationalized. However, such measures would not immediately translate into equitable distribution of wealth. It means that under democratic governments or communist / socialist regimes inequality in wealth distribution will persist. What governments can do is to prevent the inequality in wealth distribution from making people (the poor) to remain poor. This can be done by devising effective mechanisms that will progressively reduce inequality in the distribution of income.
It is sad to note that in Brazil and South Africa, examples of developing countries with strong industrial infrastructures, the poorest 20 percent of households receive only 2 percent of total income. While the highest 20 percent of households receive 65 percent of total income. Applying simple calculus to the preceding figures will show that the richest person in Brazil or South Africa receives more than 33 times the income of an average person. In Finland and Sweden, just an example, the poorest 20 percent of households receive 8 percent of total income. The highest 20 percent of households receive 35 percent of total income. This means that in these two countries a person who is considered as rich receives only 4.4 times the income of an average person in the society. The reduction of income differences in Finland and Sweden and other countries in Europe is attributed to aggressive redistribution of income measures adopted by those countries.
African governments can reduce inequality in income distribution by adopting well known ways for equal distribution of income. Scheme of income taxes where certain groups of citizens are exempted from paying taxes. The establishment of income maintenance programmes. The focus of this measure is the institution of effective social security schemes and healthcare programmes, in addition to efficient way of dealing with unemployment (to compensate unemployed youth). African governments should devise more generous welfare programmes for the poor and people with disability. Subsidies should be reintroduced where services are provided at prices below the cost of production. These are high cost programmes, but they must be tried to determine their efficacy.
African countries should institute measures for the elimination of income inequality. If this is done, economic inequality will also be eliminated. For most African families three meals per day has vanished. Some families have reduced their meals to two per day. But the majority of families have settled for one meal per day or in the worst scenario no meal at all. The members of these families are exposed to malnutrition and may resort to other vices as means for survival. African governments must do something in their economies, in order to prevent social disintegration.