Marching against corruption in India is akin to marching against corporate fraud in the US. Civic activism across the globe is taking place because the youth want more transparency and fairness in the system

Across the United States and across the world, young people, and some not so young, have gathered in city centres to protest. This so-called and misnamed ‘Occupy Wall Street’ protest is supposed to be about a protest against capitalism and globalisation. But the protest, which has been criticised for lacking in goals, is not about markets. If it was, it could be dismissed. It is about something deeper and more important. It is about fairness.

The concept of fairness is something that is not only basic to humans, it is also found in primates. Monkeys trained to trade pebbles for cucumber slices become less cooperative when some of their colleagues get tastier grapes instead of cucumbers. When the grapes are given to a few monkeys without even the required pebble, the other monkeys will go on strike and toss the cucumber back at the tester and throw their pebbles away.

The protestors certainly have a point. In many countries, the economic divide between rich and poor has been growing. One way to measure the difference is the Gini coefficient. The Gini coefficient is a measure of the inequality of the distribution of a nation’s wealth. It is always expressed as fraction between 1 and 0. If the value is 0, then all citizens of a given country have the same amount of money. If the value is 1, then one person owns everything.

Some of the lowest Gini coefficients are as one might expect in Northern Europe. Sweden and Norway have Gini coefficients of 0.23 and 0.25, respectively. Most developing countries have very high Gini coefficients, with Latin America ranking the highest. Brazil has the top number among the BRICs with a 0.56. China is at 0.47, while Russia’s Gini is at 0.42. Only India remains at a relatively equal 0.36. The Gini coefficient is not only high, it has been rising. In the US in the mid 1980s it was 0.34. It is now over 0.4. China is even worse. Over the same period it went from 0.3 to close to 0.5.

Economic unfairness is not static. I live in the small city of Newport on the east coast of the United States. At the end of the 18th century, the houses of the frugal merchants and seamen were all rather small and about the same size. A hundred years later at the end of the 19th century, the super-rich built huge opulent mansions to be used only in the summer. In those days, the top 0.1% earned 8% of the country’s income. Two World Wars and a Great Depression sort of evened things out. By the 1960s, the number had fallen to only 2%. But things change. By the beginning of the 21st century, the top 0.1% again receives 8% of America’s income.

In contrast, the future for young people around the world is hardly promising. The unemployment rate in the US is 9.1%. For people below 25 it is 17.1%. In the European Union, youth unemployment rate averages 20.9%. In Spain it is 46.2%. This number is not unusual. Perhaps one of the principal causes of the Arab Spring was the unrest among unemployed young men. In South Africa it is over 50%. The recession will no doubt exacerbate these numbers. In the nine past recessions in the US, employment recovered 10 months after the economy recovered. In this one, employment is not expected to recover for another three years.

Is capitalism the source of this unfairness? Not really. The promise of America has always been the promise of rising income due to a market economy. What has changed?

The great economist Mancur Olson pointed out that power groups within a system will, if not limited, take more of the economic pie rather than attempt to grow the pie. To do so they use their power to increase their cut with various methods. Most involve the government and laws. They encourage lower taxes, favourable or discriminatory regulations, preferred access to contracts, higher subsidies, better salaries, protected employment, higher pensions etc. If that is not enough, they simply steal through massive corruption. As the power groups grow richer, so does their power to affect and steal from the government.

But it is not just the avaricious immoral the rich. It is often the old. Conservative Tea Party members in the US and their Left-wing compatriots in civil service unions in Europe and Brazil are comfortable, because the political system works for them. They want to keep it that way.

So what the young people demonstrating across the world want is a fair chance. But what is at stake here is not just their future. Fairer systems are less distorted and encourage economic growth. So in the end they are not trying to destroy capitalism. They are trying to save it.  
 
(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected]).