Corrado Gini was an Italian fascist with a lot of bizarre ideas. For example, he was a eugenicist and a close friend of Benito Mussolini who believed that Italy should become part of the United States.
On the other hand, Gini also was a brilliant demographer — he got his PhD from the University of Bologna, which has long been Italy’s top university — who gave his name to a statistic that is useful in understanding the Philippine economy today.
That number is called the gini coefficient, also called the gini index or the gini ratio.
Briefly, the gini coefficient is a single number that helps understand why dozens of corporate bigwigs fly in executive helicopters to their offices in greater Manila while people below them in the Tondo District live without running water, without toilets, without electricity and without trash removal.
The gini coefficient is a number between 0 and 1, and it measures income inequality. A value of 0 means that everyone has the same amount of money. A value of 1 means that a single person owns everything. In other words, the higher the number, the greater the inequality.
Worldwide, the gini coefficient is between 0.610 and 0.680, according to the Organization for Economic Co-operation and Development. This is very high — the highest it has been in two centuries — and it continues to increase, meaning that inequality worldwide also is increasing.
In the Philippines, the most recent gini coefficient is 0.393, as reported by the World Bank in 2023.
This represents a slight improvement over previous years. The number was 0.407 in 2021, 0.423 in 2018, 0.449 in 2015, and 0.430 in 2012. So, income inequality in the Philippines is slowly decreasing.
The Philippine Statistics Authority publishes gini coefficients for every region, and the Bicol region scores close to the national figure. As for Catanduanes Province, no specific number is available; however, because of its rural nature and low population density, it is presumed that the gini coefficient here is lower than the national figure.
In world rankings, the score of 0.393 puts the Philippines at somewhere between 65 and 70 out of 193 nations. Locally, the score puts the Philippines in the middle of the pack of Southeast Asian nations.
The three highest gini coefficients worldwide are from South Africa, at 0.630; Namibia, 0.580; and Colombia, 0.548. The lowest are Slovenia, with 0.246; the Czech Republic, 0.250; and Belarus, 0.253.The last three nations are considered “social democracies” — capitalist democracies with strong “welfare state” attributes — and this explains the low gini coefficients.
High gini coefficients are correlated with higher crime rates, political instability, lack of social cohesion, lower social mobility, slower economic growth, and reduced health and mental wellbeing.
To be absolutely clear: High gini coefficients do not cause these problems. High scores on the index are merely indicators of underlying problems. Astute readers of the news can see this playing out in reports from South Africa and Colombia
Also, a low gini coefficient is not a sign of general prosperity: Everyone in a population can be equally poor.
The United States provides a textbook example of how government policies affect the gini coefficient. Recently in the U.S., federal tax policies cut income taxes for rich people, providing for increased concentration of wealth at the top of the income scale. Meanwhile, wages for the middle classes have stagnated due to low minimum wage requirements. Meanwhile, the gini coefficient rose from 0.397 in 2021 to 0.418 in 2023.
Here in the Philippines, the government has several tools at its disposal to address income inequality.
For example, the government could offer free secondary and tertiary education, especially in vocational training and STEM programs — Science, Technology, Engineering and Mathematics.
It also could offer universal healthcare by expanding PhilHealth coverage to include everyone, as in 10 European nations where health care is free. And it could provide public daycare to allow young women to continue their education.
There also could be a massive increase in public housing. The Philippines could follow the examples of Singapore and Hong Kong by knocking down slums and building mid-rise, in-city housing. To wit, in Hong Kong, approximately 46 percent of occupied housing units are publicly subsidized — some 30 percent in public rentals and 15 percent in subsidized purchases. In Singapore the figures are even higher: Approximately 78.4 percent of Singapore’s residents live in public housing, making it a model for the world.
The Philippines also could invest more in rural development. It could improve farm-to-market roads and build barangay irrigation and water systems. The government also could construct post-harvest storage facilities for fresh fruits and vegetables, as well as meat and fish.
It also could deepen progressive taxation. The government can close loopholes like simulated sales and undervaluation of assets. The government could also introduce a modest wealth tax on ultra-high-net-worth individuals.
The government also could scale up “targeted cash transfers” — direct cash payments to poor families. For example, it could expand the 4Ps — “Pantawid Pamilyang Pilipino Program” — to cover all vulnerable households.
The foregoing is a merely short list of options. There are more, and policymakers are aware of the possibilities.
Unfortunately, there is a Catch-22 lurking behind these proposals. The catch is that many of the people who have the power to implement these kinds of changes are also the plutocrats — the Marcoses and the Villars of the world — who also have the most to lose from reduced income inequality. The burden for change falls on the shoulders of voters, whose job it is to elect the right people to office.
Money has a quality that economists call “decreasing marginal utility”: After a certain amount, people don’t really need any more to lead comfortable, fulfilling lives..
The Philippines has at least 15 billionaires with a combined wealth of US$53.7 billion, according to Forbes magazine.
Maybe some of those billionaires could spring a couple billion bucks to knock down the Tondo District and build 120,000 low-rise “Tondominiums” for the district’s 600,000 residents. If history has any lessons, this would reduce drug trafficking, prostitution and child sexual exploitation, at least.
Bryce McIntyre, PhD, resides in San Andres. He holds a doctoral degree from Stanford University, Palo Alto, California, USA