The Moorish Wanderer

Economic Growth – Couscous Plate-wise

Posted in Moroccan Politics & Economics, Morocco, Read & Heard, Tiny bit of Politics by Zouhair ABH on October 31, 2011

Let us leave aside the rough-and-tumble excitement of the upcoming elections for a minute, and move back to economic issues, though the subject as hand does not strain much from the field of economic policy.

The initial claim here is that growth is necessary to do away with poverty and inequality; growing the economy means that each and every one of us will see their share of wealth increases as GDP grows overtime. Let us consider a Couscous-filled plate as an analogy to illustrate this claim;

Not everyone benefits from a larger couscous plate...

– at a certain point of time, the total size of the GDP couscous grows to a larger size. The difference between the initial size of the couscous plate and the present one is obviously, what can be considered growth gain for everyone eating the couscous. But, there is a catch to it: not everyone benefits from this growth. In fact, it is hardly systematic: a larger couscous plate does not necessarily mean a larger share. As a whole the plate has grown, and new individual shares increase in size as a whole, not necessarily so when taken individually. This explains the fallacy of considering the average income/GDP per capita (or average couscous share) as representative of other shares in its dynamics.

– the fallacy finds its origin in an extrapolation over national statistics; i.e. that everything is either uniformly distributed across individuals, or that there is a huge concentration around the average -thus rendering extreme ends of very poor or very rich individuals irrelevant. In statistics, these two states are referred to respectively as the Uniform and Gauss-Laplace distributions. In real-life however, especially in Moroccan real-life, these distribution types do not apply.

Since 1999, the average Moroccan household have doubled their income. Let us keep up to our Couscous analogy, and assume their couscous share have almost doubled in 10years. This is good news for our average household, since this increase is inflation-free, that is, their increase is in real terms: all components of their couscous share have all doubled by physical measures: pounds of meat, number/pounds of vegetables and pounds of sesame, regardless of monetary value (or price).

All is well then, though it is highly unlikely to meet this fortunate “average household”. They don’t exist as such. This is one of these magical tricks where numbers create a reality by themselves: in this case, the average household has been created by simply dividing, every year, the total Gross National Income -or the Big Plate of Couscous- over the adult population -or the total number of hosts gathered around the big plate. It is a convenient estimate to have a certain idea of what each guest would get in terms of couscous share. It does not, however, tell much about how the big plate of couscous is divided across the guests, and this is a problem.

Why so? let us consider a simple example: suppose there is one particular guest who systematically get a larger share of couscous. The other guests cannot do otherwise but accept that particular guest gets a larger share, and sometimes accept that other particular guests get more and more. But remember, the average share per guest has double over time; someone needs to sacrifice their potential gain and settle for a smaller than expected; in fact, they might even settle for a smaller than expected share in absolute terms.

The First Guest has got served. Generously.

Let us start over: in 1999; there were 5 guests poised to share the couscous plate.These guests have different degrees of importance: Guest 1 is wealthy, important and powerful. Guest 2 is less so, but nonetheless has a good standing, and can still claim a large share, and so on and so forth. Guest 5 finds themselves almost thrown away from the feast: they have only 6.53% of the big Couscous plate. A decade later however, the same guests decide to feast again, this time on a bigger couscous plate, because in the meantime they can afford to. And so they went, in 2009, to meet up and eat from the big couscous plate.

But surprise, they will not share the couscous plate the same way; the first guest, because they have contributed more to the plate, will now take 48% of the whole

These guests, as one might guess, are ranked households per respective income, and then gathered into groups of 20%, or quintiles. And the couscous, of course, is total GNI. Yes, the richest 20% captured almost half of GNI in 1999, while the poorest 20% could afford only 6.53% of the national income, and 10 years later, the richest increased their share to the expenses of almost everyone else.

But hold on! the relative share might have shrunk, but that does not mean the other guests will not get a larger share with respect to what they have got in 1999. And indeed it did: the third guest -the one who leaves an equal number of guests to their left and right in terms of wealth and importance- have had their income increase from MAD 57,000 in 1999 to MAD 64,000 in 2009.

Sadly, these are only monetary values. In order to go back to our couscous analogy, we need to take out the effect of inflation, that is, the increase in the price of meat, sesame, vegetables and services around providing the plate of couscous. When these are eliminated, the actual share, even by physical measures, have decreased.

The Couscous analogy tells us the following: it is a fallacy to consider average as representatives when it comes to incomes and households in Morocco. There are great disparities and these have been dangerously widening; we are catching up pretty fast with one of the most unequal societies on earth: the United States.

Our Gini Index has been computed by the HCP to 0.46 in 2009.The United States stand at 0.56; We have been catching faster in inequality, than we have been able to do in terms of output creation.

(I apologize for this Couscous analogy. I am experimenting on some “for dummies” kind of posts, and my pedagogical skills are yet to be improved)