What if? A question from my friend Daniel

Hey Jacob, interesting graphs about giving as a percentage of GDP (ish).  I’ve sometimes wondered, if the world was a perfectly altruistic place, what might that percentage be? (take today’s world and then imagine everyone suddenly became altruistic) -Daniel

Interesting question, one that has a variety of ways to answer. For those of you who missed it, I previously wrote about how the amount of money that Canada is giving to poorer countries (Aid as % of all our wealth) has been dropping. Daniel wonders what would happen if we all became “perfectly altruistic”.

We’ll start small- “What would a normal level altruism look like?”. The standard for rich countries is that they give away 0.7% of their income as aid. In the last post, I wrote that this goes back 2005, but it was actually in 1970 that the UN decided on 0.7% as a “minimum” amount of giving. The global track record isn’t great, with only four countries ever achieving the goal, and the average never exceeding 0.4% of GNP. (OECD)
in 2013, the world spent $134 billion on aid. That is a lot of money, but is only 0.3% of of our income for the year. Canada was at 0.27% and Japan at 0.23% ($5 and $12 billion, respectively, OECD). To meet the minimum standards of altruism, world leaders would have to commit an additional $179 billion to aid.

But that’s not really the answer you’re looking for. In a perfectly altruistic world, I would always give away some of my money to someone who had less, and so would everyone else. The end result is that everyone in the world would have exactly the same amount of money. What would it take to make that happen?

To measure the inequality in a society, scholars use something called the Gini coefficient. If one person owns all the wealth, the Gini is 1, and if everyone is absolutely equal, the Gini is 0. For reference, the Gini in communist Russia was around 0.28 (pretty low), and Brazil’s current coefficient is 0.53 (quite high). The current Gini in Canada is 0.33, and 0.4 in the US.

National inequality is fairly straightforward to measure, but global inequality gets tricky for a couple reasons. To measure global inequality, we have to adjust for price differences between countries and deal with the inequalities within and between countries. The best research on this is being done by Branko Milanovic, who put a lot of data together to come up with a “global Gini”, which he estimates to be at about 0.7.

Milanovic, 2013

A Gini of 0.7 beats every country by a long shot. It also means that if we wanted everyone to be equal, we would have to redistribute 70% of the wealth! Instead of 0.7% of our GDP, we would give 100 times that much!*

As for Canada specifically, aid as percentage of GDP isn’t a great indicator for altruism, because we don’t really care for a world in which all countries have equal GDP (China and Fiji don’t need the same amount of money) but where people have the same level of well being. So we’ll stick with individuals within countries.

The global average income is $11,00, while Canada’s is $50,000. If Canadians kept giving away their income until they were at the world average, then they would have to give away 78% of their income, even more than the world average!

Of course the real question is, “If we were perfectly altruistic, what would we spend all this money on?” But you’ll have to ask if you want to find out.

Do you have a question that you think I might be able to answer? Whether poverty or power rangers, I’d love to give it a try, or find someone who can. Comment or email me if you have any ideas!

**This is a pretty rough comparison, because aid is between countries, and this measurement is between individuals. Milanovic estimates international inequality (between countries) to be around 0.54, which is still 77 times as much as our current goal.


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