“The disposition to admire, and almost to worship, the rich and the powerful and…neglect persons of poor and mean condition…is the great and most universal cause of the corruption of our moral sentiments.”
Mathematically the Gini coefficient is the ratio of the area between the line of perfect equality and the observed Lorenz curve to the area between the line of perfect equality and the line of perfect inequality.The higher the coefficient, the more unequal the distribution is. For example, of the 156 countries that data is available to calculate the GINI Index Lesotho has the highest (63.2, est. 1995) and Finland is the country with the lowest (21.5, est. 2015). Mexico is in 25th place (from highest to lowest) with a Gini Index of 48.2 (est. 2014). It has said that Latin America had the some of the world’s worst income inequality.
The Gini coefficient has gone up a lot in some rich countries since the 1980s. Take for example the United States where the Gini Index climbed from 34 in the mid-1980s to 38 in the 2000s. Or China where it went up even more, from under 30 to over 40. Nevertheless, as poor countries are on average growing faster than rich ones, inequality in the world as a whole is falling (take for example the case of Brazil).
Economists have long argued that inequality is a much less important problem than poverty. They feel that inequality in itself isn’t a problem as long as everyone is able to lead a decent standard of living, if everyone’s working harder, we’re producing more, and everyone does better. But things are not that simple. Studies have shown that there is also a strong link between inequality and violence, incarceration, drug abuse, etc. It seems that the we have reached a point where the inequality is damaging everybody, including the wealthy. We can say that inequality means less innovation, entrepreneurship and hurts economic growth. For example, the OECD found that the main mechanism through which inequality affects growth is by undermining education opportunities lowering social mobility and impeding skills development. Inequality is preventing people with less income and wealth from reaching their potential in terms of education and invention.