Sometime last year, I read a 2007 Reuters news report about wealth disparity in Singapore that juxtaposes the poor with the uber-rich. I believe the report achieved its intended effect of playing to sentiments because my impression at that time was that inequality in this country looks set to approach chronic levels. The underclass in Singapore looked like they were going to the dogs when income inequality was being compared to the the likes of the Philippines and Guatemala.
But what the Reuters news report lacked, I subsequently found in Nexus by Mark Buchanan, a book about network effects and complex physical and social systems. (A relatively easy read still, given the topics that sound way out of this world.)
When understood in its proper context - and contrary to being completely shocking - wealth and income inequality is a natural consequence. It is a result of some unseen but existing law. This means that even when inequality appears severe, regardless of whichever country it originates from, it is still adhering to fundamental principles.
Way back in 1897, Vilfredo Pareto, an Italian engineer-turned-economist, discovered a pattern in the distribution of wealth. This pattern had a strange quality to it, as it acted in a similar fashion as a physical law, such as thermodynamics or chemistry. Moreover, it was also universal, applicable across cultures and continents. It is pretty much the same way the laws of gravity hold in Singapore, as it does in China.
The pattern revealed that a small fraction of people will always own a large fraction of the wealth. This is showed to occur when the doubling of the level of wealth will result in the number of people who have that much to decrease by a constant factor. Thought of in this way, it is not surprising to find giants lingering among dwarfs, only to discover mega giants lingering among giants.
But as far as mathematicians are concerned, no one really knows how to explain why this phenomenon (also known as Pareto's law among other names) even happens.
So, is there a solution to counter the resentment of those who are less well-of, irked by the conspicuous lifestyle choices of the rich? (After all, happiness, like wealth, is relative.)
One, the less well-off can be placated by instruments of the state (easily done in Singapore). Two, the absolute level of wealth across the board can be raised (Singapore has been successful over the years to a certain extent). Three, taxes on the rich can be implemented to re-distribute wealth to those hovering around the lower rung (wishful thinking).
Last but not least, appreciate the fact that Pareto's law might perhaps never be defied.
