Last week, Oxfam released a powerful report on inequality, “Working for the Many: Public services fight inequality.” The report makes a persuasive case for the need to bring more attention to the issue of inequality in policy discussions. Indeed, at the recent World Economic Forum Annual Meeting, World Bank President Jim Yong Kim stated that “at Davos, income inequality should be front and center” as an important item on the global agenda. I was recently a discussant in a session on the Oxfam report at a Spring Meetings event alongside Max Lawson of Oxfam Great Britain and David Coady of the IMF's Fiscal Affairs Department. The case Oxfam makes that inequality is harmful to the global economy is well articulated and their prescription for a solution is highly focused: increase the amount of progressive taxation to fund free and universal health and education. In the following slides, I provide a few examples of where we might want to broaden our thinking on the issue of inequality. In particular, I offer a couple of illustrations where a singular focus on inequality would lead us to undervalue some very important progress that has been made in the fight to eliminate poverty. In contrast, by ‘twinning’ the goals of eliminating extreme poverty and boosting shared prosperity, the policies we design may be more likely to ensure that everyone shares in growth and prosperity.
Providing public services must deliver reliable results because it's in the public interest. However, development practitioners may wonder whose interest is really at stake- the public's or the private sector's. "And there you find contestation of the public good and what you need to do differently," says Cyprian Fisiy, former Director of the Social Development Department in the World Bank's Sustainable Development Network.
Watch the full video for Cyprian's review of what it takes to be successful in development.
Oxfam has been banging on to good effect recently about extreme global inequality in income and wealth. Over many years, we have also been making the case for universal health and education. It turns out the link between the two is stronger than I’d realized, according to ‘Working for the Many: Public Services fight Inequality’, a new paper published today.
We normally discuss inequality before and after tax (eg it’s progressive taxation that really brings Europe’s inequality down). But recent work published by the OECD and World Bank has put a monetary value on the ‘virtual income’ provided by public services. This produces some startling findings on inequality.
Public services mitigate the impact of skewed income distribution, and redistribute by putting ‘virtual income’ into everyone’s pockets. For the poorest, those on meagre salaries, though, this ‘virtual income’ can be as much as – or even more than – their actual income. On average, in OECD countries, public services are worth the equivalent of a huge 76 per cent of the post-tax income of the poorest group, and just 14 per cent of the richest. It is in the context of huge disparities of income that we see the true equalizing power of public services.
Seeking accountability from public service providers remains one of the most prominent governance challenges in developing countries. In recent years, there has been a burst of social accountability tools, and NGOs and governments have promoted their use widely. Broadly, social accountability refers to approaches that seek to foster accountability through enhanced civil society engagement.
The advocates of social accountability approaches believe that the regular cycle of elections—in spite of the near continuous cycle of elections for the village councils, state and centre—are not enough to bring about a substantive change in service delivery. In this context, there is the opportunity to experiment with alternative mechanisms of fostering social accountability. Researchers at the Centre for Future State of the Institute of Development Studies, Sussex, UK, conclude from their field studies in Delhi and Sao Paulo, Brazil, that social accountability tools can be used to set the minimum required standard of public services by “highlighting deficiencies in existing provision or entitlements”. This also works when citizens’ demands are “framed in terms of legal or moral rights”.
As a set of approaches for “good governance”, social accountability tools represent an interesting collection of hypotheses. One, that involving citizens in local planning, budgeting and spending decisions will ensure that the design and implementation of public services is pro-poor. Local governments and decentralized systems for local planning and service delivery are the usual form in which this approach manifests itself.
Our Top Ten blog posts by readership in 2013
This post was originally published on August 15, 2013
It was a sunny, hot Saturday afternoon and I mingled with farmers, community leaders, coffee producers and handicrafts entrepreneurs who had traveled from all parts of Bolivia to gather at the main square of Cliza, a rural town outside of Cochabamba. The place was packed and a sense of excitement and high expectations was unfolding. It was to be anything but an ordinary market day.
Thousands of people had been selected from more than 700 rural communities to showcase their products and they were waiting for a special moment. President Evo Morales, Nemesia Achocallo, Minister for Rural Development, Viviana Caro, Minister for Development Planning, and World Bank President Jim Yong Kim, on his first official visit to Bolivia, would soon be meeting them.
While waiting among them, I felt their excitement, listened to their life stories and was humbled by the high expectations they had in their government, their leaders and the international community to support them in reaching their aspirations for a better future for their families and communities. From many I heard the need to improve the well-being of their families and communities and their goal of “Vivir Bien!”
The growing militancy of middle class citizens in developing countries is very much in the news these days; and there is a corresponding attempt to understand why so many protest movements in developing countries are now being led by hitherto quiescent middle classes. I have particularly enjoyed analyses by Francis Fukuyama in the Wall Street Journal, President Lula of Brazil in the New York Times and James Surowiecki in the New Yorker. The humble contribution I’d like to make (from my personal experience) is this. To understand the growing anger of middle class citizens in developing countries you have to understand two aspects of the conditions under which they live: the merely bit and the barely bit.
Let’s begin with the merely bit; that is, why in many of these countries when you are merely middle-class you have a problem. To grasp why being merely middle class is a tough situation to be in you have to understand what those they aspire to be like (the well to do in their societies) are able to provide for themselves. Before I left Nigeria in the middle 1990s, the wife of one of our leading politicians came up with the following insight: that to be comfortable you had to become your own local government. And she was right. Here are the things that your local government should provide and it did not and so you had to provide these things for yourself:
Cover Photo: © Getty Images, Inc.
Book Title: In From the Shadow : Integrating Europe’s Informal Labor
by Truman Packard, Johannes Koettl, Claudio Montenegro
Few phenomena that occupy the time of governments and economists are as ambiguously defined and difficult to measure as the “shadow" or "informal" economy. Those terms immediately make some people think of the guys who built an extension for their house and insisted on being paid in cash. Others remember the taxi driver who took them home after a late night out, and either didn’t have a meter or didn’t turn it on. Those who have been in very poor countries might recall bustling markets where you can haggle for anything from a handful of fresh chilies to a pair of sandals or even livestock. All of these are likely to be part of the unregulated and untaxed transactions that make up a country's informal economy.