The Murdoch Sulzberger Gap
We'd heard that Rupert Murdoch was planning to reshape the Wall Street Journal so that it would compete more directly with the New York Times, but we didn't think he meant it that way. That was the reaction of more than a few Wall Street Journal readers yesterday when confronted with the Journal's front-page headline, "China Earthquake Exposes A Widening Wealth Gap." It was reminiscent of the old joke about the New York Times headline when the world comes to an end: Planet Destroyed; Poor, Minorities Hit Hardest.
The Journal fronts the self-fulfilling news that "the disaster is throwing a harsh spotlight on the widening gap between the nation's rich and poor." The article goes on to report that China's president and premier "have based much of the public legitimacy of their administration on trying to address a widening wealth gap resulting from decades of capitalist reforms." It avers that "natural disasters often wreak their worst havoc on the disadvantaged, who tend to live in subpar housing. This was the case with Hurricane Katrina in the U.S." The article says that "China's booming economy has lifted the financial fortunes of most of its citizens, but some have gained far more than others. Economists say the country, still nominally socialist, is now among the most unequal major economies of the world."
It's hard to know just where to begin here. One element is the claim that China is "among the most unequal major economies in the world." The statistics don't quite bear that out. A commonly used measure of income inequality is the Gini index. A country where everyone's income is the same has a Gini index of 0, while a country where a single person has all the income and everyone else has no income has a Gini index of 100. China's Gini index, according to the most recent World Bank statistics, is 46.9. Argentina, Chile, Costa Rica, Panama, Malaysia, Brazil, Colombia, the Dominican Republic, Ecuador, Paraguay, El Salvador, Honduras, Bolivia, Guatemala, South Africa, Botswana, Namibia, Lesotho, Nepal, Madagascar, Papua New Guinea, Haiti, Zimbabwe, Gambia, Zambia, the Central African Republic, and Sierra Leone all have higher Gini indices than China. Or, to put it another way, China is among the most unequal economies — if you ignore much of Africa and nearly all of Latin America.
A second flaw is the idea that the "wealth gap" is a consequence of capitalism or of economic growth. A recent study by a World Bank economist, Martin Ravillion, specifically rejects that idea. He writes, in a paper titled "Are there lessons for Africa from China's success against poverty?" that "the periods of more rapid growth did not bring more rapid increases in inequality; indeed, the periods of falling inequality (1981-85 and 1995-98) had the highest growth in average household income." He also writes that, "the provinces with more rapid rural income growth did not experience a steeper increase in inequality; if anything it was the opposite."
The claim that "natural disasters often wreak their worst havoc on the disadvantaged" is almost a caricature of Sulzbergerism. The disadvantaged have less property to lose, so the financial damage they suffer in a natural disaster is often less than the rich suffer. More broadly, the idea that a natural disaster can tell whether it is afflicting a rich person or a poor person is just absurd on its face. Just ask the Malibu, Calif., homeowners afflicted by the wildfires that, as the Associated Press put it in a 2007 dispatch, "swept through an exclusive seaside neighborhood of multimillion-dollar homes." Or the victims of the 1989 Loma Prieta earthquake in San Francisco, which, Wikipedia records, caused extensive damage in that city's Marina district, where "many expensive homes collapsed." Or Colonel John Jacob Astor IV, a first class passenger on the Titanic. The iceberg that killed him didn't care about the gold watch, gold pencil, and diamond-encrusted ring and cufflinks that were found on him when his corpse was recovered.
Far be it from us to give instructions on how to compete against the Times to Mr. Murdoch, who makes more money at newspaper work in a day than we've made in years. But the fact is that if it were reporters for the New York Times who were sent out to cover an earthquake and came back with a disquisition on income inequality worthy of Karl Marx, no one would bat an eyelid. When it fetches up on page one of the Wall Street Journal, it's enough to make readers of the paper that was for years rated the most credible of the major papers wonder what kind of newspaper war they're in for.
