Rising Inequality

Rising Inequality: How to Reverse It.


DEVELOPMENT & SOCIETY : Sustainability, Poverty, Economics, Social Development
2014•11•10 Annett Victorero and Dominik Etienne, United Nations University

The last decade has witnessed a revival of concern over the impact of high-income concentration on economic development and wellbeing. The global distribution of income has for decades resembled a ‘champagne glass’, as shown in Figure 1.

Figure 1. Distribution of world GDP, by quintiles; richest 20% top, poorest bottom. Source: Ortiz and Cummin (UNICEF, 2011).

Today, the top 20 percent receive more than 70 percent of the global income, and the top 1 percent (70 million people) earn as much as the poorest 3.5 billion people — that is half the world population. Some positive news can be found, for example in the case of Latin America, but progress is much too slow. At the current rate of progress it would take 800 years for the bottom quintile to get even 10 percent of the global income.

To discuss why it is crucial to integrate the economic equity perspective into national and international development processes, UNU-WIDER, the International Labour Organization (ILO) and the United Nations Conference on Trade and Development (UNCTAD) organized a policy seminar and shared examples of policies that have worked.

On 23 October more than 50 representatives of over 20 international organizations — among them 13 UN agencies and bodies — and permanent missions to the UN joined in the discussions with an expert panel consisting of Isabel Ortiz, Richard Kozul-Wright and Giovanni Andrea Cornia. The meeting was chaired by Tony Addison, Deputy Director and Chief Economist of UNU-WIDER.

Inequality must be a cornerstone of the development agenda post-2015

According to Ortiz the case for equity is now enormous; it is not only about social justice. Equity contributes to growth and builds political stability. Indeed some countries in Asia and Latin America have been focusing on cutting inequality in order to foster national demand and consumption.

But in order to bring equity into the development agenda and policy advice of international organizations the key will be to mainstream it systematically into all sectors — from agriculture, education and health to finance, trade, industry and others (Figure 3). It is not enough to simply be undertaking a few interventions in selected areas.

Sector	Typical interventions with equitable outcomes	Typical interventions with inequitable/regressive outcomes
Education	Universal free education; scholarships and programmes to retain students	User fees; commercialization of education; cost-saving in teacher’s salaries
Energy and Mining	Rural electrification; life-line tariffs (subsidized basic consumption for low- income households); windfall social funds; contract laws ensuring local benefits from natural resources	Untaxed oil/mineral extraction
Finance	Regional rural banks; branching out to local areas; managing finance (regulating financial and commodity markets, capital controls)	Financial liberalization; rescue of banking system (transfers to large banks); subsidies to large private enterprises
Health	Universal primary and secondary health services; nutrition programmes; free reproductive health services	User fees; commercialization of health; tertiary highly specialized clinics that benefit a few (e.g. cardiology centers)
Housing	Subsidized housing for lower income groups; upgrading of sub-standard housing	Public housing finance for upper income groups
Industry	Technology policy to support competitive, employment-generating domestic industries, SMEs	Deregulation; general trade liberalization
Labour	Active and passive labour programmes; employment-generating policies	Labour flexibilization

 These excerpts are from a longer article that first appeared in WIDERAngle newsletter.  United Nations University World Institute for Development Economics Research (UNU-WIDER).  This work is licensed under a CC BY NC SA 3.0 IGO License.  Included here for perspective on shared concerns.