The Pope of Inequality

Pope Francis has turned the Catholic world on its head, reversing several decades of conservative dogma and refocusing the church on solving social ills rather than trying to enforce morality. I applaud this act. The church can be a great instrument for social change and to relieve poverty around the world. This, and focusing on charities, hospitals, and schools around the world will actually do far more to draw in converts than banning female bishops or crusading against gays.

The pope is concerned for good reason. Inequality is growing all around the world, and it threatens to destroy the existing social contract in many countries. There are rebellions throughout the Middle East. Israel saw a wave election electing new populists. Greece and Italy threw out the bums and are on the verge of a leftist revolution. Workers are protesting in the streets of Kiev. Even in socialist Venezuela there are agitations. Brazil’s growing middle class is trying to assert itself. Malaysia’s growing urban/rural divide and anger against corruption has finally trumped racial divisions in the last election. Saudi Arabia only avoided a massive riot by continuing its generous fuel subsidies. At the very least, the world is a pot about to spill over. I fear that this is what will drive the next global crisis (rebellion against debt, corruption, and a failed ladder to prosperity).

And that brings me to a random thought I had. It goes back to how certain countries become rich. City states like Singapore, HK, and Switzerland that are big financial centers actually do have very high inequality. They just do a better job of masking it in official statistics by importing cheap immigrant labour that’s undocumented or not counted in the statistics. So while all the Swiss you meet on foreign travels may be rich, and certainly by GDP per capita they are, it doesn’t mean that the country’s wealth is distributed equitably. It may be that all Swiss are well-paid bankers and service professionals, while most menial jobs are served by foreigners. It’s similar in the US with undocumented immigrants serving as janitors, except that the US is more honest about keeping statistics on these people.

Other countries like Norway or Australia do a better job of spreading their natural resource wealth. But even they are forced to import labour from their neighbours (Swedes, Kiwis, and Indonesians).