Inequality in Georgia
03 October, 2013
In terms of income, Georgia is among the least equal countries in the former Soviet Union. The Soviet Union was itself extremely equal. As the old saying goes, “everybody had plenty of money, but there was nothing to buy. Now you can buy anything you want but nobody has any money.” Well some people have some money. Economists and mathematicians measure how equal or unequal a society is by using a number called the Gini Coefficient. The lower the number
out of one hundred, the more equal, the higher the number the less equal. Using recent World Bank data, Denmark is the most equal at 24 with the Seychelles off the coast of Africa is the least equal 66. The United States traditionally the least equal of wealthy countries is 45, Georgia, Turkmenistan, and Morocco are about 41. Russia is 40, Turkey 39, Azerbaijan 34, Armenia 31, Ukraine is 26.

Many believe that inequality simply does not matter. This view is popular among some very rich people, as well as a few people who lived in the Soviet Union. People who have lots of money have it due to a combination of good fortune as well as hard work or intelligence. Some times there is much more of one than the other but there is always plenty of good luck. But after people have lots of money, some of them start to believe that they themselves are completely responsible, and they forget the role that luck played. These tend to be the ones not to care about the dangerous consequences of inequality in society. Others that don’t think equality matters, feel that the Soviet Union was bad and there was income equality therefore income equality must be bad or at least irrelvant. But that is not logical. The Soviet Union was bad but that doesn’t mean that everything was bad. I have heard that the bread was very good in the Soviet Union. Some good movies were made. Those people say that enforced equality is bad. I agree with them that a market system is the only way to run an economy and any market system will have some differences in income and success but that doesn’t mean that the rules can’t be set up to give some basic services to everybody even those who aren’t so lucky, and to tax those who are very lucky and have piles of money.

One of the most dangerous things about Georgia’s high and rising inequality is the question of mobility. In theory, you could have a society that is very unequal, but is very mobile across generations. In that case, how much one person has is not related to how much money her or his children will have. But in practice it doesn’t happen that way. In Georgia, the schools don’t do a good job of preparing students for university entrance exams, so the parents with money hire tutors, lots of tutors, as well as sending their children to private schools. They can help their children learn languages early when it is easier. They have friends who can help their children get internships that will give them the contacts to get good jobs later. In most cases, the less equal a society is, the less mobile it is. I have no data for Georgia, so I can not say, but we all need to ask ourselves if you compare the children of the rich to the children of the poor, is the difference in opportunities they have small or big?

Another problem related to inequality is individual mobility in and out of prosperity. In the Soviet Union there were not big income differences. Then in the nineties as capitalism appeared, big differences between rich and poor began. But because of housing privatization, almost everybody owned their own house. Foreigners would always comment that there were apartment buildings with very expensively remodeled flats, but with stair cases, elevators and other flats that hadn’t been repaired in years. Now many of the wealthy live in new buildings. They are much more likely to have cars rather than use sidewalks and minibuses, and to have their kids in private schools and they simply spend less time talking to those with significantly less money. Again I have no hard data about this, but my sense that the income isolation is less of a problem in Georgia than in the United States or other countries. But the trend should be watched carefully. The last thing that Georgia needs is a new ruling class, where those with money and power keep the money and power, and those without have unfair difficulties entering the system.