The Greed Line and Global Structural Greed Indicators
Paper prepared for the World Council of Churches
Carlos Larrea1
Introduction
This paper deals with the selection and analysis of a short set of global structural greed indicators.
Individual greed can be defined as the desire to accumulate material wealth beyond what is needed
and what may be considered the legitimate share of a person in a given society. Structural greed
refers to “the institutional arrangement aiming at the excessive accumulation of goods, means
(especially capital) and power which results in structural deprivation of the conditions of life in
dignity for the majority of people”, including current and future generations (Raiser, 2012).
Structural greed is embedded in the unlimited pursuit of satisfaction derived from the individual
possession of goods and services, regarded by conventional economics as an essential component of
human nature, which leads to the rationality of market functioning in capitalist society.
“Since the economic order of capitalism is based on the individualism of the homo oeconomicus
and the pursuit of ‘rational’ self-interest, it not only fosters greed but depends on the unlimited
desire of greed” (Raiser, 2011).
The weakly regulated social pursuit of wealth has led to increasing social inequality, massive
poverty and exclusion, and the expansion of economic activity beyond the planetary capacity to
support it (Larrea, 2012). Moreover, the contemporary financial crisis and its effects on
unemployment have exacerbated the situation, even in developed countries.
This paper presents and analyses a short set of reliable economic, social and environmental
indicators, which are both representative and available for most countries in the world. They were
selected to capture the principal effects of structural greed on the contemporary global society.
Structural greed, as an underlying element of global capitalism, can not be observed directly.
Moreover, its definition implies a moral assessment, so the definition of a greed line depends of the
researcher’s perspective. There is not a defined boundary, as in the case of poverty lines which are a
function of the measurable satisfaction of basic needs.
The analytical perspective of this paper, therefore, concentrates on certain observable effects of
structural greed. The selected dimensions are, first, capital accumulation and cumulative economic
growth; second, social inequality and exclusion; third, lack of environmental sustainability, and
last, poverty. Additionally a short set of financial and economic indicators linked to the current
economic crisis has been selected and will be analysed.
As analysed elsewhere (Larrea, 2012, World Council of Churches, 2012), the almost unrestricted
pursuit of profit has led to an exponential expansion in the production and consumption of goods
and services. This phenomenon did not contribute to improvement in the living conditions of most
1
Universidad Andina Simón Bolívar, Ecuador
of the world population, and it also surpassed the natural capacity of the ecosystems to regenerate
and sustain human society, leading to a global environmental crisis.
Economic Indicators
Per Capita Gross National Income (2005 PPP dollars, 2011). Per capita income figures have
been widely criticised as indicators of wellbeing (Stiglitz, Sen and Fitoussi, 2009). In this paper
per capita income will be used rather as an indicator of cumulative economic accumulation. Per
Capita GDP data is available in PPP 2005 dollars for most countries in the world from 1950 to
2010 in the PENN data base (Heston, Summers and Aten, 2012). Per Capita Gross National
Income for this analysis was taken from 2011 UNDP Human Development Indicators.2
Social Inequality Indicators
Gini coefficient. It is the most widely used indicator of income inequality. One of the best
compilations of international Gini coefficients for several years and most countries is available
at the United Nations University (WIDER).3 In this analysis the most recent information was
used, including both the Gini coefficient and shares to top and bottom 10% of the population.
Four integrated sources of Gini coefficients for the world, including inequality between and
within countries, have been analysed as well. WIDER estimated the world’s wealth
distribution in 2000 (Davies, Sandström, Shorrocks, and Wolf, 2008) as did the Credit Suisse
Research Institute in 2012 (Credit Suisse Research Institute, 2012). The UNDP analysed the
world’s income distribution from household surveys between 1970 to 2000 (Dikhanov, 2005),
and the World Bank studied it in 2005 (Milanovic, 2009).
Top 10% share. It is the share of total income appropriated by the richest decile of the
population, available from the United Nations University. Unfortunately there is not available
information for most countries on the top 1% share.
Bottom 10% share. It is the share of total income appropriated by the poorest decile of the
population.
Environmental Sustainability Indicators
Footprint ratio. It is the ratio of the ecological footprint to the biocapacity of a country in a
given year. When it is greater than one, the country is taking net ecological resources from abroad;
if it is lower than one, the country is not exploiting its natural resources to the fullest possible
Gross national income (GNI) per capita is defined as the “aggregate income of an economy generated by its
production and its ownership of factors of production, less the incomes paid for the use of factors of
production owned by the rest of the world, converted to international dollars using purchasing power parity
(PPP) rates, divided by midyear population” (UNDP, Human Development Report, 2011).
http://hdr.undp.org/en/statistics/
3
www.wider.unu.edu .
2
2
debree. The Global Footprint Network provides a database with a time series of footprint indicators
for most countries in the world.4
Adjusted Net Savings Ratio. Rate of savings in an economy that takes into account
investments in human capital, depletion of natural resources and damage caused by
pollution (including particulate emissions), expressed as a percentage of gross national
income (GNI). A negative value implies an unsustainable path (UNDP HDR, 2011). Human
capital investments are added to gross savings, and capital depreciation, pollution damage
and natural resource depletion are subtracted from it. Country figures are estimated by the
World Bank.
Per Capita Carbon Dioxide Emissions from Fossil Fuel Burning. “Human-originated
carbon dioxide emissions stemming from the burning of fossil fuels, gas flaring and the
production of cement, divided by midyear population”. (UNDP HDR, 2011). A detailed
time series for most countries is reported yearly by the International Energy Agency.
Social Indicators
Life expectancy at birth. “Number of years a newborn infant could expect to live if
prevailing patterns of age-specific mortality rates at the time of birth stay the same
throughout the infant’s life” (UNDP, 2011).
Average years of schooling. Average number of years of education received by people
aged 25 and older, converted from education attainment levels using official durations of
each level (UNDP, 2011)..
Overall Life Satisfaction Index. Defined as the country average of national household
surveys on life satisfaction, on a scale from 0 to 10, where “10” means maximum
satisfaction. Data is provided yearly in the UNDP Human Development Report.
Poverty Indicators
Social Vulnerability Headcount Ratio (Vulnerability line 4 PPP US$-day per person).
This is the percentage of population with a per capita income-consumption below the
vulnerability line. Figures are estimated by the World Bank, with PovCalcNet software,
from the most recent reliable household survey in each country. The chosen vulnerability
line is slightly above conventional poverty lines used by the World Bank (2.5 PPP US$ per
day per person) in order to include people with high risks of become poor under
unfavourable conditions generated by natural disasters or detrimental economic events. The
vulnerability line is roughly similar to CEPAL poverty line adopted in Latin America.
Multivariate socio-economic and environmental indices
The best known socio-economic indices are the UNDP Human Development indices. The living
standard index is derived from per capita gross national income; the health index is built on life
expectancy at birth; and the education index is based on schooling averages. The Human
4
http://www.footprintnetwork.org/en/
3
Development Index (HDI) is the geometrical mean of its three components. The UNDP also
estimates inequality adjusted indices.
Similar widely used indicators for sustainability or sustainable human development are not yet
available. Nevertheless, a rigorous and suggestive set of sustainable human development indices has
been proposed by the Technical University of Crete (SAFE database). The Human Sustainability
Index (HUMS) is estimated from 46 social indicators, and the Ecological Sustainability Index is
built on 30 ecological indicators. A combined index is also presented (OSUS).The method for
building the indices is based on “fuzzy logic”.5 Indices are available for 128 countries. The HUMS
has a strong correlation (0.93) with the 2011 HDI.
A Preliminary Proposal for Greed Indices
In the capitalist system, market expansion is fed by the unrestricted pursuit of the accumulation of
goods and services, beyond human needs and usually in detriment of a significant share of world
population and the environment. Structural greed is an essential component of capitalist values.
Therefore, it is difficult to distinguish between greed and capital accumulation itself.
Nevertheless, it is possible to focus on three elements of structural greed. The first is luxury
consumption beyond reasonable human needs; the second is accumulation of material goods and
services in detriment to other human beings; and the third, the expansion of the economy beyond
ecosystem capacity to absorb it. The effects are luxury consumption, social inequality and poverty,
and lack of sustainability.
As structural greed has effects on different dimensions, which affect specific groups of counties in
various ways, it does not seem appropriate to elaborate a single numeric greed index. The objective
of this paper is proposing a set of three indices, concentrated on luxurious consumption, inequality,
and unsustainability.
A database with the eleven selected indicators was constructed with information for the same 128
countries included in the SAFE database and Costa Rica. This group of countries, with almost
complete information for the indicators, represents 96% of the world population. There is also a
complete set of SAFE indicators available for this group of counties, excluding Costa Rica. In some
of the few cases where country information was not available for an indicator, the figure was
inputted using regression methods.
Information was processed using two well know multivariate statistical methods: principal
component analysis (PCA) and cluster analysis. The PCA can identify and optimize a short number
of underlying common factors from a set of correlated indicators, thus creating indices with the
maximum accounted share of the total variance of the original indicators. Cluster analysis defines
an optimized multivariate typology, dividing the countries into a small number of homogeneous and
differentiated groups. (Statistical details on the methodology and results are presented in the
Technical Annex).
5
“Fuzzy logic is a scientific tool that permits modeling a system without detailed mathematical descriptions,
using qualitative as well as quantitative data.” SAFE: Sustainability Assessment from Fuzzy Estimation,
http://www.sustainability.tuc.gr/index.html (January 2013).
4
Cumulative Accumulation Index. 45% of the total variance of the 11 indicators comes from
differences between rich and poor countries, according to levels of achieved accumulation. Higher
levels of per capita income are strongly associated with higher per capita CO2 emissions, and also
with improvements in average social indicators, like schooling and life expectancy at birth.
Social Inequality Index. Independently of levels of cumulative accumulation, countries can be
differentiated by social inequality. The Index is mostly based on the Gini coefficient, and the top
and bottom shares of the distribution of income or consumption. Social inequality accounts for 24%
of the total variance of the original indicators.
Sustainability Index. This index differentiates between countries with acute problems of
exhaustion of their natural resources, and countries with lower pressures on their natural
endowment. The most important contributing indicators are the footprint ratio and adjusted net
savings. The index captures 12% of the total variance of original indicators.
All indices have been transformed to a scale between 0 and 100 points to facilitate interpretation.
Multivariate Country Typology
The multivariate typology of countries was elaborated with hierarchical cluster analysis, taking the
Ward method and the squared Euclidean distance. 25 countries with incomplete information on
social inequality, mostly for the Middle East, were not included in the typology. Four groups are
differentiated, and their principal traits are summarized in Tables 1 and 2.
Wealthy countries. This group includes 48 countries, with about 24% of total world population,
which concentrate 62% of total GDP and 55% of total CO2 emissions from burning fossil fuels.
Both per capita GNI and per capita CO2 emissions are the highest among the groups, as are life
expectancy and years of schooling. The group simultaneously concentrates most of the planet’s
wealth, the best social conditions, and CO2 emissions. Within-country social inequality is the
lowest, but the ecological footprint ratio is the highest. Environmental and social indicators suggest
that this group concentrates wealth in an exclusionary and non-sustainable way. Most of the
counties are OECD members, 20% are in Eastern Europe, and a small group is in the Middle East.
Most unequal countries. The group, constituted by 20 countries, stands out for the highest social
inequality in the world. The top 10% of the population concentrates 42% of income, while the
bottom 10% receives only 1%. The Gini coefficient is also the highest. The group is concentrated in
Latin America and Sub Saharan Africa to a lesser extent. The group integrates 10% of the world
population and a similar proportion of global GDP.
Less Sustainable countries. This group shares two traits. First, countries have an ecological
footprint about twice its biocapacity, meaning that their internal natural area is already utilized or
overexploited, and that they are taking natural resources from abroad. Second, the group manifests a
trend toward accelerated economic expansion, with a very high net savings rate. The combination of
rapid economic growth with structural internal environmental limits suggests limited sustainability.
The most important country in this group is China, and countries such as India, Bangladesh,
Philippines and Pakistan are also included. The group, with 15 countries, accounts for most (57%)
of world population and generates about 24% of global GDP.
5
Poorest countries. This group, integrated by 21 countries with 8% of world’s population, generates
only 1% of global GDP. Per capita GNI is 21 times lower than that of wealthy countries. Poverty
reaches the highest levels, and social achievements are critically low. Life expectancy at birth
averages only 57 years, 20 years less than wealthy countries.
Country Scores
Country scores for the three indices are plotted in Charts 1, 2 and 3, and indicators loadings to the
indices are plotted in Charts 4, 5 and 6. Countries are identified in four colours according to the
typology clusters.
The Accumulation Index increases with per capita GNI, per capita CO2 emissions, and average
education, health and life satisfaction indicators. Its highest values correspond to wealthy countries
with high CO2 emissions. Not surprisingly, the first position corresponds to the United States.
European countries, with lower carbon intensive technologies, rank behind (Chart 1). Latin
American and East Asian countries have intermediate positions, and the other end of the scale
corresponds to the poorest countries, located mostly in Sub Saharan and North Africa. The lowest
position corresponds to Mali, followed by Burundi and Rwanda.
The first rank in the Inequality Index corresponds to Namibia, and African country with an export
economy based on diamond, uranium and copper mining, a former colony of South Africa, where
apartheid prevailed until independence in 1989. Other African countries with mineral exports also
rank high in inequality, like South Africa, Botswana, and Sierra Leone. However, most of the
countries with high social inequality are in Latin America, with Brazil, Colombia, Honduras and
Chile at the top. China is located slightly above the world’s average. OECD countries have
relatively low internal inequality, but the United States stands out among the highest countries in
this group. The lowest levels of inequality correspond to former socialist countries, like Hungary
and the Czech Republic.
The Sustainability Index captures not only imbalances between country’s natural endowments –
biocapacity- and their footprints, but also pressures on the natural endowment arising from rapid
economic growth. Higher indices are associated with cases where the footprint outweighs
biocapacity several times, or with threats to sustainability arising from fast economic growth with
limited biocapacity. Among the less sustainable countries are China, India (high population density
and extremely fast growth), South Korea and Israel, both with high population density and acute
water scarcity –low per capita biocapacity- and high footprints with economic expansion, and other
countries like Bangladesh and Philippines with similar problems. Countries with extended and
diversified natural resources –water, fertile lands, raw materials –such as Russia, United States and
Australia, have higher sustainability indices.
At the national level and in the short and medium term, a high footprint-biocapacity ratio in a given
country leads to significant raw material, energy and staples imports, as in the case of China,
generating ecological debts. In the long term and at the global level, the problem leads to an
unsustainable situation, as the world footprint currently outweighs the planet’ biocapacity by 50%.
6
Table 1
Greed Indicators and Indices by Multivariate Typology
Indices
Accumulation
Group
Wealthiest
Most unequal
Less sustainable
Poorest
Total
Inequality
70.0
63.2
39.3
24.0
48.0
Sustainability
30.6
61.5
39.1
38.5
39.3
Per
Capita
GNI
43.3
43.1
20.8
43.9
30.4
26934
10462
4971
1269
10553
CO2
Ems.
Life
Expec.
10.25
3.56
2.88
0.19
4.52
77.4
72.7
69.6
57.3
70.8
Life
Schooling Gini
Satis.
6.3
6.4
5.0
4.2
5.4
10.7
7.9
5.9
3.8
7.1
Top
10%
Sh
33.0
53.2
40.8
42.0
40.3
Bottom
10% sh
25.6
41.9
32.5
33.2
31.8
3.0
1.2
2.8
2.4
2.6
Sub
Saharan
Africa
Total
Poverty
8.9
31.6
82.4
91.5
60.1
Table 2
Multivariate typology by Region (Population in millions)
Group
Wealthy
Unequal
Less
sustainable
Poorest
Region
OECD
Latin
America
and
Caribbean
East Asia
and Pacific
South Asia
Eastern
Europe
Middle East
and North
Africa
979
0
0
0
550
4
48
29
1849
29
0
1620
332
0
4
96
0
43
0
55
0
1484
634
3520
0
979
0
554
14
1940
0
1649
0
336
16
155
466
521
496
6134
Footprint
Ratio
3.15
0.99
1.96
1.19
2.08
Ad. Net
Savings
5.4
6.3
28.4
6.1
18.8
Chart 1
8
Chart 2
Cumulative accumulation and Sustainability Indices
9
Chart 3
Inequality and Sustainability Indices
10
Chart 7
Sustainable social welfare functions
Chart 8
The Greed Line
Chart 9
A Fuzzy Greed Boundary
Chart 10
12
Chart 11
United States: The Bottom 90% of Population Per Capita Income
Chart 12
United States: Top Average Income Trends
13
Chart 13
OECD Top Average Income Trends
14
Chart 14
Non-OECD Top Average Income Trends
15
Top Earners, Greed Line and Income Redistribution
The Greed Line has been defined as the maximum morally acceptable individual consumption level
in a given historical context, above which any increase in individual consumption is negative for
society and/or future generations and nature (Larrea, 2011).
The definition of a structural greed line implies a subjective moral assessment, and its precise
determination may not be the best approach. Lucas Andrianos suggested a fuzzy logic approach, so
that a boundary domain may separate moral acceptable consumption and greedy consumption.
The minimum morally acceptable level of individual consumption is linked to the satisfaction of
human needs according to human social rights. Poverty lines define the minimum economic value
of goods and services for providing education, nutrition, housing and health according to social
rights. Additional individual consumption beyond poverty lines is legitimate and desirable, to the
extent that higher consumption continues to contribute to the authentic realization of human
potential, without negatively affecting other people’s rights to human realization or those of future
generations, or ecosystems integrity.
Nevertheless, beyond certain boundaries, which may be fuzzy and difficult to define, very high
levels of individual consumption, once legitimate individual needs are satisfied, may have
detrimental effects on social equity, nature and future generations. Those consumption levels are
regarded as greedy (See Charts 7, 8 and 9).
Although a precise greed line may be difficult to define, available and reliable information about
income and wealth inequality and very high levels of individual income has become increasingly
available in the recent years. The objectives of this section are to describe and analyse the share of
top income earners in developed societies and at global level, and to explore how a partial
redistribution of this income may contribute to reduce or eliminate poverty and improve global
sustainability.
The UNDP presented global estimates of household per capita income (Dikhanov, 2005) from 1970
to 2000, based on household surveys (Table 3). During that 30 year period, Gini coefficients went
up; the top 10% per capita income increased by 59%, and in 2000 this group concentrated 54% of
global income, with a per capita level fivefold higher than the world average.
WIDER and Credit Suisse have calculated estimates of world wealth distribution by individuals.
According to the latter, 28’641.000 individuals (only 0.4% of the world population) held a per
capita wealth of over 1 million dollars, concentrating 39% of global wealth. The Gini coefficient of
wealth distribution was 0.902. The WIDER found similar information in its pioneer study in 2000.
Then, the top 1% of the world population concentrated 40% of global wealth, with individual
figures above 512,000 dollars, and the Gini coefficient of wealth distribution was 0.892. At the
opposite extreme, the poorest half of the world population owned just 0.5% of global wealth,
surviving in exclusion, poverty, or high vulnerability.
Available information on top earnings in 40 developed and developing countries improved
substantially as a result of recent research from tax returns. Most household surveys do not provide
reliable estimates of top incomes, due to underestimation of capital earnings, concentrated in a
16
small percentage of the population. Tax returns are more accurate although they may still have a
certain amount of underreporting. (Information is available in the World Top Income Database). In
the United States, average income received by the top 10% of the population almost doubled
between 1975 and 2005, while per capita income remained constant for the bottom 90% (Charts 10,
11 and 12). Most developed countries shared similar trends, although the process of income
concentration reached its highest level in the United States (Chart 13). As Stiglitz points out, during
the past 40 years, benefits from growth in the United States were exclusively concentrated in the top
echelons of the income distribution, without improving living conditions for most of the population
(Stiglitz, 2012). Some developing countries shared similar trends of income concentration, but they
did not exclude most of the population from the benefits of growth, as in the cases of China,
Colombia and Argentina (Chart 14).
Table 3
World Income distribution: 1970-2000
(1999 PPP dollars)
Year
Top 10%
Share
1970
1980
1990
2000
48.5
50.0
52.4
54.4
Bottom
10% Share
0.5
0.5
0.5
0.5
Gini
Coefficient
0.668
0.681
0.686
0.684
Average
Top 10%
Income
18891
22810
27070
30100
Poverty
headcount
ratio (PL
1400)
55.4
54.4
49.6
43.3
Per capita
income
3895
4562
5166
5533
Source: UNDP, 2005.
In 2000, world per capita income was four times higher than the poverty line. The world economy,
therefore, exceeds by far the capacity to satisfy basic needs for everybody in the planet, and
widespread poverty (43% of the world population) is a consequence of social inequality. A
significant question arises: how much income needs to be redistributed to eliminate world poverty?
Clearly, the top income and wealth shares described above are greedy, because their levels, well
above legitimate personal need, are morally unacceptable and detrimental for most of the current
world population and future generations, given the unsustainable path of the global economy.
An important question is related to the share of top income or wealth that must be distributed, as an
ethical imperative, to substantially alleviate poverty and inequality (social distribution), and
progressively return the global economy to a sustainable path.
Although this topic requires an extended and in depth analysis and goes much beyond the scope of
this exploratory study, initial estimates may provide guidance.
17
Taking the 2005 world distribution of income and a poverty line of 1,400 dollars per year, 43% of
the world population was poor in 2000. The income transfer required to eliminate poverty in the
world is just 9.3% of the income received by the top 10% of the world population. Obviously,
poverty cannot be eliminated by monetary transfers only; it requires sustained investments in
education, health, housing, and employment generation to enhance the capabilities of poor families.
Even assuming that social programs to alleviate poverty will double the required money transfer
amount, a redistribution of about 18.6% of the top 10% income share will provide a substantial
impulse to eliminate world poverty in a short period of time.
Since 87% of the top decile income comes from OECD countries, an income distribution form this
group to the poor implies an international transfer from developed countries mainly to regions were
most of the poor live, notably Sub Sahara Africa and South Asia.
Within-country income transfers from the top 10% to the poor may be enough to eliminate poverty
as well, but only in Latin America and East Asia. In both regions the required redistribution
accounts for 6% and 30% of top income share, respectively. In Sub Saharan Africa international
contributions are desirable, because the required transfer accounts for 78 % of top 10% earnings.
Redistribution of income above Greed Lines
Greedy individual income or consumption belongs to persons whose legitimate human needs are
already covered, and it is appropriated or spent in a harmful way with respect to the rights of other
persons to have a dignifying life, the rights of future generations, or ecosystems integrity.
As the current situation of the global economy is ethically unacceptable, contrary to religious
values, and environmentally unsustainable, a partial redistribution of greedy income or consumption
is not only a moral imperative, but also the only feasible way to build a future society under
ecological and socially sustainable bases.
Assuming that the precise definition of a greed line is difficult, some very high individual income
levels can be regarded as greedy from a structural perspective, and therefore their partial
redistribution may be regarded as socially desirable and morally imperative. Distribution can be
pursued either through voluntary contributions or through taxation by local or national
governments, or international institutions and agreements. The second option may lead to transfers
defined by given rules, and will be fairer and more effective. Taxes may be direct, as on income or
wealth taxes, or indirect, as taxes on financial transactions or greenhouse gas emissions. Although
the latter dos not target greed itself, it will also contribute to social redistribution, given that wealthy
households are usually the largest polluters and the largest financial traders.
In this section, based on a theoretical proposal made by Larrea, two forms of distribution are
analysed. Social redistribution will pursue poverty reduction and social justice, and environmental
redistribution will promote the transition towards a sustainable society (Larrea, 2011).
Social redistribution will be discussed from two different perspectives. The first one is the transfer
needed to progressively eliminate poverty, and a second perspective involves compensation for
welfare loss due to social inequality. Both perspectives will be separately evaluated.
18
As the Nobel Laureate Gunnar Myrdal pointed out, an income transfer from developed to
developing countries, based on a reduction in consumption of the former, will consolidate a virtual
circle of causation promoting substantial improvements of living conditions of the poor. This
change is indeed beneficial even for developed countries.
“As has also been amply demonstrated: the cutting down of consumption, and of
production for home consumption, of many other items besides food, and in all the
developed countries, is rational and in our own interest” (Myrdal, 1975).
The total income to be redistributed may be defined as an increasing fraction of personal income
above a given level regarded as greedy. As available empirical information on income distribution
is still scarce and not always accurate, a methodological decision to initially focus on the top decile
of the population is reasonable, given that this information is available for most countries in the
world.
The following discussion will define criteria to evaluate the fraction of top income whose
redistribution may be desirable and appropriate.
Social redistribution to reduce poverty. An initial estimate has been already analysed. Poverty
elimination requires a global distribution of top 10% earnings in a range between 9.3% and 18.6%
of top income earnings. As 87% of this income comes from OECD countries, developed societies
must provide most of the required resources. Latin America and East Asia may also have significant
contributions, but Sub Saharan Africa and South Asia will re quire transfer from wealthy
countries.
Social redistribution towards justice. The UNDP evaluates in the Human Development Report
the proportional loss of welfare due to inequality. The "inequality proportion of welfare loss" can be
assumed as a criterion to define redistribution towards achieving social justice. A qualitative
definition of greed-based transfers towards reducing social inequality, in addition to the ones
targeting poverty elimination, goes beyond the scope of this paper. However, the topic can be
addressed in further research.
The average inequality loss is 23%, according to 2011 Human Development Report. Sub-Saharan
Africa has the highest inequality loss (35%) followed by South Asia (28%), and Latin America
(26%) and OCED countries have the lowest value (12%).
Redistribution towards sustainability. As an initial criterion, an environmental redistributive
mechanism may be applied to top income earners in countries where the ecological footprint
outweighs biocapacity, and the per capita carbon dioxide emissions are at least twice the world
average. The environmental transfer ratio may be estimated from the latest evaluations on the
economic cost of preventing global warming above 2 º C at the end of the century. According to
Nicholas Stern, the figure reaches 2% of global GDP per annum. This amount is roughly equivalent
to 4% of top 10% global income earnings. Other global environmental problems, such as
biodiversity loss, nitrogen eutrophication, which already had outpaced planetary boundaries, will
require urgent attention as well (Rockström et al, 2009).
19
As developed countries present the highest ecological imbalances, their ecological compensation
must be the highest, followed by the Middle East, East Asia, and Eastern Europe. Latin America
and Sub Saharan Africa may have lower contributions.
Table 4
Percentages of Top 10% Earnings to be distributed for poverty elimination by region
Region
Domestic Poverty
elimination
OECD
Latin America and Caribbean
East Asia and Pacific
South Asia
Eastern Europe
Middle East and North Africa
Sub Saharan Africa
Total
0.4
6.4
29.7
57.0
3.9
22.6
78.3
22.5
Table 5
Percentages of Top 10% Earnings to be distributed poverty elimination by type of country
Type
Domestic Poverty
elimination
Wealthy
Unequal
Less sustainable
Poorest
Total
4.2
7.3
33.6
205.8
19.8
Towards a Definition of the Greed Line
A quantitative estimate of the greed line requires, as noted, a moral assessment regarding the
maximum ethically acceptable per capita consumption, and it cannot be univocally determined from
economic indicators only. Moreover, according to the fuzzy logic approach, any estimate may have
an additional error margin or boundary region to avoid abrupt transitions from ethical to non-ethical
consumption levels. Taking all this into account, an initial proposal for a global greed line is
presented below, departing from a few basic definition criteria.
1. Given the three most important detrimental effects of greed - namely poverty, social
inequality and global environmental unsustainability – the greed line may be defined in
such a way that the redistribution of greedy income may progressively lead towards a
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sustainable and equitable future society during a reasonable period of time, such as a
generation.
2. Taking into account the huge gap between the richest echelons of the world population and
the rest of global society, the greed income transfers towards alleviating or eliminating
poverty, reducing inequality and building a sustainable society must come mostly from the
richest 10% of the population, which concentrate about 54% of global GDP and 85% of
global wealth (Davies, Sandström, Shorrocks, and Wolf, 2008; Dikhanov, 2005), and
whose income or consumption levels are well beyond reasonable human needs.
3. As defined elsewhere (Larrea, 2011), the personal income share to be redistributed must
follow an increasing function, starting from 0 (no transfer at all) at the adequate human
needs line, increasing with higher incomes so that the maximum after-transfer appropriated
income will be no higher than the greed line, which is the maximum morally acceptable
level of personal consumption.
The adequate human needs line was defined as the minimum level of consumption necessary to
meet basic and human needs, excluding sumptuary consumption. Human needs include the basic
needs that are indispensable for comfortably meeting biological and cultural requirements, and
other needs that, although not indispensable, contribute to realizing the full potential of human
beings, such as access to culture, art, leisure, the exercise of creativity and freedom, the augmenting
of physical and spiritual capacities, etc.
To initially estimate an adequate human needs line, household expenditure surveys were analysed.
According to the latest available information, the annual household consumption of the upper levels
of the middle class in the United States, roughly equivalent to the fourth quintile, was $ 72,000 in
2011, or $ 25,700 per capita. This figure corresponds to about 22,760 PPP dollars in 2005, which
are the intentionally comparable monetary units of the greed indicator database.
Household consumption for this stratum was spent mostly in food (13%), housing (33%),
transportation (18%), insurances (11%), health (7%), clothing and services (4%), entertainment
(5%) and education (1.4%). The typical household has 2.3 vehicles and owns a house but is paying
a mortgage. The total consumption level improved only slightly during the last 35 years, and its
structure dos not seem particularly excessive or luxurious. Based on this information, an
internationally comparable adequate consumption line was set up at 22,760 PPP dollars, at 2005
constant prices.
To analyse social redistribution, a poverty line must be determined as well to estimate the transfer
value to eliminate poverty. The poverty line of 1,700 annual 2005 PPP dollars per capita was
assumed, in accordance with the UNDP analysis of world income distribution (Dikhanov, 2005).
The greed line. Time series data on the top 1% household earners in the United States evidence a
process of acute income concentration from 1976 onwards, that is, from the onset of neoliberal
globalization (Charts 15 and 16). Income went up from about 300,000 dollars in 1976 to recent
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figures that stand above a million dollars, while the group’s GDP share increased from about 10%
to 20%.
Chart 15
Average income of top 1% income earners in the United States: 1913-2011
(Real 2011 dollars)
Chart 16
GDP Share of top 1% income earners in the United States: 1913-2011
(Real 2011 dollars)
22
In order to explore the distributive effects of transferring the additional income received by this
group that are above the levels of the 1950-1975 period, a household greed line of 300,000 annual
dollars, equivalent to 105,000 per capita PPP 2005 dollars, was defined. Given the fuzzy nature of
the greed line, an interval of ± 20% seems adequate and compatible with the results of the
simulation model explained below. A similar error margin can be applied to the adequate human
needs line.
Redistribution simulation. A simulation model was constructed in order to estimate the
distributive effects of applying a global income transfer using the proposed adequate consumption
line (22,760 PPP dollars per capita) and greed line (105,000 PPP dollars).
The empirical database is the most recent estimate of world income distribution developed from the
World Bank, and taken from an extended international set of recent national household surveys,
including 170 countries, processed with a method for making incomes comparable.6 Information on
national income groups was then transformed by the author to international PPP 2005 dollars, using
currency conversion rates from the PENN database of the University of Pennsylvania (Heston,
Summers and Aten, 2012).
According to the simulation, the international income to be transferred from extremely wealthy
households came to 10.6% of global GDP. The income transferred was almost exclusively in the
ranks of the top 10% of world incomes earners, particularly the top 1%, in whose case,45% of
income was to be transferred.
The transferred income in the simulation was devoted to increase the consumption of poor
households up to the point necessary to eradicate poverty in the world. The transfer needed to
eliminate poverty accounted for 4.9% of world GDP, or 9.4% of top 10% earnings. The result is
consistent with the model estimated from UNDP database explained earlier (Dikhanov, 2005).
The remaining part of the transfer - 5.7% of global GDP - would be invested in sustainability.
According to the latest estimates from Nicholas Stern, the required investment in climate change
mitigation (renewable energy sources, energy efficiency, avoided deforestation and technology
transfer and research and development for mitigation) accounts to 2% of global GDP in order to
avoid a global warming above 2 º C by the end of the century, which would be regarded
catastrophic. In addition to investment in climate change mitigation, other global environmental
problems require urgent attention, such as biodiversity loss, food security and eutrophication from
nitrogen fertilizers, which are critical according to recent scientific assessments (Rockström et al,
2009, Brown, 2012).
The described transfers from the richest to poorest households describe here will have an important
effect on international inequality reduction. The world Gini coefficient will decline from the current
value of 0.667 to 0.562. The change is illustrated by the Lorenz curves (Chart 17).
6
World Bank,
http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPROGRAMS/EXTPOVRES/0,,conte
ntMDK:23022308~menuPK:8322745~pagePK:64168182~piPK:64168060~theSitePK:477894,00.html. Visited
in February 2013.
23
Chart 17
Lorenz curves of the 2005 world household income distribution and the simulated greed line
transfer
Albeit important, obviously, the inequality reduction is not enough, and a Gini coefficient of 0.56
still remains very high. Nevertheless, it is expected that the redistributive effects of social policies
aimed to generate productive employment, improve education and health, as well as investments in
clean technologies will have additional effects on inequality reduction, if they are properly planned
and executed.
Finally, it must be pointed out that the criteria for defining the greed line and the maximum
acceptable human needs line were rather conservative. Even using the rather conservative estimates
of the greed line and therefore of the amounts that need to be transferred, as presented in this paper,
the effects are quite significant in terms of poverty alleviation and the transition to a sustainable
society. Lower greed lines will increase transfers and accelerate the transition.
The transition towards an equitable and sustainable society
The contemporary global economy is no longer environmentally sustainable; production already has
surpassed the carrying capacity of the planet, and the combined effects of climate change,
biodiversity loss and chemical pollution “have reached a scale where abrupt environmental change
can no longer be excluded … The exponential growth of human activities is raising concern that
24
further pressure on the Earth System could destabilize critical biophysical systems and trigger
abrupt or irreversible environmental changes that would be deleterious or even catastrophic for
human well-being.” (Rockström et al, 2009, pp. 1-2).
Moreover, almost half of the earth’s population lives in poverty, social vulnerability and exclusion,
and the benefits of economic growth have been concentrated among top income earners, a very
small fraction of the population. The recent financial crisis “increased poverty and unemployment
among millions in the global North and worsened and deepened poverty, hunger and malnutrition
among even larger numbers in the global South” (World Council of Churches, 2012, p. 2).
World Council of Churches has stated:
“The drive to consume is a culture of greed that destroys all of God’s creation. The
economic activity of the last five centuries has caused massive ecological destruction. Over
the years, big businesses, governments and multinational corporations have been reckless
through policies and practices of unlimited growth which have led to pollution, destruction
of forests, overproduction and the alienation of the poor and of farm workers from the land.
Natural resources are limited, and the human ecological footprint already surpasses the
Earth’s bio-capacity. Individual self-interest and long-term social welfare are not
necessarily compatible, and market mechanisms do not lead to an optimal social
distribution.” (2012, p. 4).
A deep structural change towards a new global society, a society that is both equitable and
sustainable, is required and urgent. The new social structure must be based on “satisfying the needs
of people and the realisation of all economic, social and cultural rights and human dignity. Such
architecture must be focused on reducing the intolerable chasm between the rich and the poor and
on preventing ecological destruction. This requires a system which does not serve greed but which
embraces alternative economies that foster a spirituality of enough and a lifestyle of simplicity,
solidarity, social inclusion and justice”. (World Council of Churches, 2012, p. 4).
Contemporary society and its endless exponential growth are driven by weakly regulated profit
maximization in production, and consumerism individual orientation on decisions. Both are
understood with reference to the “economic abstraction of Homo Oeconomicus, which constructs
the human person as being essentially insatiable and selfish” (World Council of Churches, 2012, p.
4). The current maximization of producer profits, consumer desire and national economic growth as
fundamental economic drivers is no longer sustainable. A new set of principles, articulated by an
alternative paradigm, is necessary.
The new society will pursue the universal fulfilment of human rights, including social rights for
appropriate education, health, nutrition, employment, and shelter, and political rights for adequate
participation in society, with freedom of thought and respect for cultural diversity. A new paradigm
is also required in which human kind will conceive of itself as an integrated and organic element of
a living universe, and human realization cannot be regarded as feasible beyond ecosystem limits
(Boff, 2012, Boff, 1997, The Earth Charter Initiative, 2009). The recognition of rights for nature, as
stated in the Ecuadorian Constitution, is an important principle of the new paradigm (Asamblea
Constituyente, 2008).
Although market forces may have an important role in the future society, their effects must be
properly regulated by adequate institutions and the public sector (local, national and international
governments and organizations) together with active participation and monitoring from civil
society. Social participation and strong public institutions must displace market forces as the
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leading drivers for transformation. Social and economic planning will promote equity, sustainability
and poverty elimination. Economic growth maximization will be replaced by the maximization of
social welfare within sustainable boundaries. Representative social indicators, such as life
expectancy at birth and life satisfaction, can be selected as long-term goals for social planning.
The new society will substantially reduce or eliminate poverty. This goal may be reached in a short
period of time by social redistribution form the richest echelons of society, as explained earlier. The
estimated amount of social transfers will fluctuate between 5 and 10% of global GDP, and the goal
may be reached in about two decades.
The new society must also be equitable. World social inequality is extremely high, and its reduction
goes beyond poverty elimination, which will be one of the initial steps. Inequality also has different
expressions, including gender, ethnic, regional, cultural, and age-related disparities, as well as forms
of discrimination based on nationality, religious identity, political ideas or beliefs.
An extended and continuous set of policies directed towards enhancing human capabilities,
including education, health, nutrition, training, technical assistance, credit and support for small
enterprises may be an essential component of an overall policy aimed to reduce inequality.
Particular emphasis must be placed on women’s empowerment, as well as special supports for
disadvantaged ethnic groups and discriminated minorities.
Achieving ecological sustainability is a very complex task. It requires not only a huge investment in
transforming energy supply and consumption, developing sustainable sources and improving
efficiency, but also on setting up a steady and prosperous economy without growth. Growth may be
necessary in poor countries to overcome poverty and social inequality, but in the long term a
sustainable world economy cannot continue to grow.
Jackson’s contribution provides a pioneer analysis on the structure and macroeconomic traits of a
future steady-state, albeit prosperous economy (Jackson, 2009).
“Prosperity goes beyond material pleasures. It transcends material concerns. It resides in the
quality of our lives and in the health and happiness of our families. It is present in the
strength of our relationships and our trust in the community. It is evidenced by our
satisfaction at work and our sense of shared meaning and purpose. It hangs on our potential
to participate fully in the life of society.
Prosperity consists in our ability to flourish as human beings – within the ecological limits
of a finite planet. The challenge for our society is to create the conditions under which this
is possible. It is the most urgent task of our times” (Jackson, 2009, p. 7).
Delinking human realization and increasing material consumption has been an essential belief of
multiple philosophical and religious traditions such as Christianity, Buddhism and Islam, as well as
indigenous cultures in Africa (Ubuntu) and Latin America (Sumag Kawsay). (World Council of
Churches, 2012).
Under current economic structures, lack of growth leads to rising unemployment and social unrest,
as it did in Greece and Spain. Nevertheless and obviously, unrestrained growth leads to
environmental crisis. According to Jackson, the dilemma can be solved by a consistent and
sustained investment in green technologies (e.g. renewable energy sources, improving energy
efficiency, research and development of new technology, sustainable use of biodiversity), which
will generate employment and simultaneously reduce the negative environmental impacts of
economic activity, without necessarily promoting economic growth.
26
In summary, the future society will be based on a new paradigm, an integrated vision of human kind
as an organic and conscious expression of a living earth and universe, which cannot flourish beyond
limits of ecosystems. Human realization will be founded on social cohesion, expansion of human
capabilities and freedom, with respect for diversity, and it will not depend on increasing material
consumption.
Financial indicators
The current global financial crisis, sparked in New York in September 2007, has been regarded as
the worst economic downturn since the 1929 depression. From 2011 onwards, the Euro crisis
disseminated its effects mostly to Greece, Spain, Portugal, and Italy. Unemployment reached
unprecedented levels, particularly in Spain, and drastic adjustment policies have been imposed,
mostly on Greece, whose government debt was the worst. Widespread social unrest is affecting
Europe, the United States and other regions, particularly the Middle East.
A separate database has been suggested to explore and analyse the financial crisis and its
relationship with greed. A set of suggested indicators include the following variables.
Country Indicators
1. Unemployment rate. It captures the most important social effect of the financial crisis.
2. Country Credit Default Swap Rate. It captures both volatility and market punishment of most
affected counties.
3. Country total household debt/GDP ratio. It identifies the most vulnerable countries and roots
of disequilibria.
4. Country total government debt/ GDP. It identifies the most vulnerable countries.
5. Country 10 year bond interest rate. It captures volatility and market punishment.
6. Ratio of financial assets relative to GDP and total wealth. It captures speculation, volatility
and expansion of financial capital relative to productive capital.
All indicators are available yearly for most countries in the world (World Bank, IMF, Credit Suisse
Research Institute, Trade Economics, Indexmundi).
Additionally, market indicators are also important, such as oil, food, metals, and copper, and gold
real price indices.
27
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