All things being unequal

AN INTERESTING chart jumped out at me from the pages of the New York Times the other day. It ranked six countries according to the distribution of income. Of the six, Britain was ranked most equitable, Brazil the least and the United States came about halfway in between.

The chart's numbers came from the World Bank and the United Nations, and compared how the richest fifth of the population compared with the poorest fifth. In Brazil, it found that the richest quintile command over 64 per cent of the nation's wealth, versus a mere 2.5 per cent for the poorest. The UK figures were respectively 39.8 per cent and 7.1 per cent, while the US numbers were 45.2 per cent and 4.8 per cent.

That a deep gulf between rich and poor often leads to social strife was perhaps well illustrated by the subject of the accompanying article - the great success being reaped in Brazil by companies that fit out cars with armour plating.

Another country on the list, Mexico, has a wealthiest quintile that controls more than 58 per cent of its wealth, with only 3.6 per cent in the hands of the poorest fifth. I have yet to visit Brazil, but I have been to Mexico on several occasions. Mexico City writhes with a palpable tension that I've experienced in few other places. Heavily armed guards stand outside of banks, stores and the residences of the rich. Crime has risen sharply in Mexico City in recent years, and some Mexican states have districts that are on the verge of revolution. Car armourers find plenty of customers in Mexico, too.

So how, I wonder, will the Internet affect the distribution of wealth on this planet? The Net, after all, is supposed to be a great leveller, giving everyone, in theory, an equal voice. Unfortunately, at this stage of the game, I think just the opposite is true. The Net is going to skew things the other way, wildly.

The problem is that you have to have a computer to get on the Internet, and while there are some 100 million computers online as you are reading this, that figure represents only 1.6 per cent of the people on the planet. Even the least expensive Palm Pilot or ancient 386 PC is way beyond the means of people in the poor quintiles in most countries.

Indeed, literacy is beyond the means of most of the world's poor, so even if Bill Gates were to use his entire fortune to equip every world household with, say, a new PC, it wouldn't do much good. Billions of people wouldn't be able to read the hyperlinks on Web pages, or their e-mail; much less flame the newbies in chat rooms.

So the world has the possibility to go from worrying about the richest fifth to worrying about the richest 1 or 2 per cent. And it's all too possible that such a tiny fraction of the population could begin to amass wealth at a far greater rate than their luckless, and unwired, neighbours.

The reasoning goes something like this: while far too much is made of computers' "usability", networked computers are nevertheless beginning to convey real and measurable benefits upon their users.

Take a simple example: trading shares on the stock market. Once that required part of a day, say an hour, to travel to the broker's, place the order, do the paperwork and maybe make a trip to the bank. Today, online stock brokerages can accomplish the same thing in about a minute. That means that the online customer can accomplish something about 60 times more efficiently than an unwired investor. Indeed, day-trading in stocks has drawn a growing of investors who work at it full time.

If the wired segment of society begins to realise such huge productivity gains, it stands to reason that they will begin to amass wealth much faster than those who don't have access to such tools. It's true that computers confer such efficiency imperfectly: some activities benefit little from computers and networks, and computer crashes can turn a simple task into a nightmare, for a net loss.

But if a wired individual realises gains only some of the time, then it makes sense that he or she will fare better over time than his or her unwired peers, all other things being equal. Larger gains equate to greater wealth which equates to better tools - more bandwidth, better computers, and so the spiral starts.

Today, 8 per cent of California's population creates 42 per cent of the state's wealth, and, yes, those 8 per cent live in Silicon Valley. Boy, are they wired, and boy, are they rich.

Compare a resident of Sao Paolo's slums with a denizen of Palo Alto's mansions: a day's work for the Palo Altan may bring more wealth than a lifetime's labour for the Sao Paolan, and the trend is not toward greater equity.

And, to be sure, this is more than just an issue of computer ownership. Nevertheless, it's already happening that small numbers of people are cornering ever larger proportions of the world's wealth, while others, mired in poverty and illiteracy, fall daily farther behind.

And unless the wealthy and fortunate make a concerted effort, there's hardly anything on the horizon to suggest that things will change. Cheaper computers may help a little, but even pounds 100 machines would be out of reach of most people in the world, not to mention the barriers of illiteracy and culture.

So what's the easy answer? Maybe a wireless, pounds 1 machine that was fluent in any language would help. While we're waiting for that breakthrough, though, it might be wise to pick up some car armourer shares. Online, of course.

cg@gulker.com