20 February, 2009

Libya's Distribution of Wealth

"Libyans, this is your historic opportunity to take over your oil wealth, power and full freedom. Why do you want to let the chance slip away from you?': the Libyan Leader, Muammar Al Qaddafi, told his people a few days ago. And now, hundreds of thousands of emotionally charged Libyans are gathering to discuss this proposal of handing out oil revenues directly to them. Imagine 32 or so billion dollars or more - being dished out to about 6 million people; each year, the same process would be repeated. That is: the country's wealth would be dished out to every Libyan. Every one of them. With the poorest getting the most. That's how it will work out according to the proposed plan: the poorest will get the most share. And should the price of oil rise to its high level of 150 dollars a barrel as before, that would mean about 100 billion dollars or more being distributed for that year.

The Libyan Leader says that due to rampant corruption in Libya - very few of his people are benefiting from the immense earnings from oil exports; he wants each Libyan to have his/her right share from the earnings. Under the process he is proposing to distribute all oil revenues directly to his people and purge most state departments except the Defense, Interior, Foreign Affairs and Justice. How this proposed new system will work out, is still not clear. How will the infrastructure, general and civil services be provided, maintained and cared for?

Most top Libyan officials, many if not most of whom stand to lose their jobs under the proposed system, are not for this idea at all; but Mr. Gaddafi says the officials are simply trying to cling to the status quo to protect their privileges…so they can keep their positions and privileges. The Libyan Leader is known for his radical and revolutionary ideas, ranging from his ideas in his The Green Book, to his proposing at one time in the 1980s of getting rid, completely, of currency; to his suggestion that Palestine and Israel form a bi-national state called "Israetine"; and to his vision of a United States of Africa. But this new proposal by the Libyan Leader is so unorthodox and untried, that most economists don't believe it can work. Note: in world rankings, Libya has the 14th largest sovereign wealth fund in the world. The country too, has the highest Human Development Index in Africa and almost no foreign debt.

In the meantime the Libyan Leader has many Libyans sweating and having sleepless nights: some, like the top officials, because they might lose their jobs and 'cookies'; and for most - at the prospect of having and handling all that money; and wondering how it will all work out to and mean. Suppose Gaddafi's idea can work and is feasible? Or: is this just one of the Libyan leader's antics? Postscript 28th February, 2009: it is reported that Libya has abandoned the idea of distributing its wealth to the masses. After 'heated meetings and discussions' across the country, the whole controversial idea was reportedly 'postponed' and is to be 'modified' for later discussion. Eastern Libyans were reportedly in favor of the proposed wealth distribution.

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The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician Corrado Gini and published in his 1912 paper "Variability and Mutability" (Italian: Variabilità e mutabilità). The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It has found application in the study of inequalities in disciplines as diverse as economics, health science, ecology, chemistry and engineering. Wikipedia
If you have much, give of your wealth; If you have little, give of your heart” ~ Arab proverb. It is most noble and honorable for any leadership or society to set up a just mechanism that would fairly distribute its wealth. Worldwide, on the basis of the Gini coefficient - compared to other countries - Sweden with about 23.0 now and other Scandinavian countries, have the lowest income inequality: South Africa is one of the worst while Zimbabwe has the most unequal distribution. The U.S. has a Gini index of 40.0 to 45.0. No where else is wealth distribution, and disparity, so shockingly remarkable as in the US - the world's economic juggernaut and leading powerhouse, where it is reported that wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers).

Through out history, many leaders, economists and thinkers - from Aristotle to Ibn Khaldoon to Wang Anshi to Karl Marx to Adam Smith - have tried to come up with a proper theory, formula and way of how wealth can be properly and fairly organized, managed and distributed or re-distributed. It seems, most have failed. Or, those trying to implement their theories have failed. Otherwise, why should millions around the world be so desperately poor that many go hungry every day? “What has destroyed every previous civilization has been the tendency to the unequal distribution of wealth and power” ~ Henry George

+ Islamic Economics and Distribution of Wealth
+ The Father of Economics
+ World wealth distribution
+ Nation Master 
+ Global Finance
+ Make Wealth History
+ UNDP Report
+ African Economic Outlook 
+ Libya Economic Statistics and Indicators
+ BTI 2010 | Libya Country Report
+ Wikipedia - Economy of Libya
+ The Scramble for Access to Libya’s Oil Wealth Begins