This Sunday, Tunisians will go vote for the third time this year. The first vote, the Parliamentary election on October 26, saw the secular-leaning political party Nidaa Tounes gain the majority of votes in the country’s fist free and fair election since the new constitution. As no candidate received more than the required 50% of all votes, a runoff between the two leading candidates is scheduled for Sunday.
Source: Branko Milanovic
If you thought the wealth gap was vast between the miser Ebenezer Scrooge and the oppressed Bob Cratchit in “A Christmas Carol,” then lend a Christmastime thought for the desperate Dickensian divide that’s now afflicting the global economy.
The biggest economic-policy issue of 2014 has certainly been the outpouring of alarm about the chronically intensifying divide between wealth and poverty – an uproar that has had a transformational effect on the worldwide debate on economic policy. As a seminar at the Center for Global Development recently discussed, the precise statistics on inequality (and the perception of inequality) are subtle, with many nuances of measurement (whether data should be derived, for example, from tax-return filings or from household surveys). Yet this year’s irrefutable interpretation among economists and business leaders has been driven by a landmark of economic scholarship: the bombshell book “Capital in the Twenty-First Century” by Thomas Piketty. "Capital" has forced economists, policymakers and scholars to reconsider the inexorable trends that are driving the modern-day economy toward an ever-more-intense concentration of capital in fewer and fewer hands.
No wonder Piketty’s “Capital” was acclaimed as the Financial Times/McKinsey “Business Book of the Year.” Piketty’s analysis has fundamentally changed the parameters of the public-policy debate, and many of its ideas challenge conventional economic theory.
To explore the implications of the alarming trends in income and wealth inequality, there’s no analyst more insightful than Branko Milanovic, the former World Bank economist who is now a scholar at the LIS Center (working on the authoritative Luxembourg Income Study) at the City University of New York. Milanovic has justly won acclaim for his work, “The Haves and the Have-Nots,” which pioneered the territory now being explored by Piketty.
Confirming the trends that Piketty identified in “Capital” – and taking those insights one significant step further, to measure the wealth gaps both within countries and between countries – Milanovic recently led a compelling CGD seminar on “Winners and Losers of Globalization: Political Implications of Inequality.”
The seminar’s sobering conclusion: If you think the wealth-and-incomes gap is painful now, just wait a decade or two. If allowed to go unattended, the widening economic divide will soon become a dangerous social chasm. That data-driven projection is leading many analysts to dread that inequality (whether between countries or within the same country) threatens to pose a stark challenge to social stability, and even to the survival of democracy.
The breakthtaking “a-ha!” moment of Milanovic’s CGD presentation was the chart (see the illustration, above) – hailed by seminar chairman Michael Clemens and discussant Laurence Chandy as “the Chart of the Century” – that plotted-out the pattern of how globalization has exerted relentless downward pressure on the incomes of the global upper-middle class, which roughly corresponds to the Western lower-middle class.
Globalization has helped promote the prosperity of skilled workers in developing nations, Milanovic explained, with the dramatic surge of China's economy being the greatest driver of global "convergence." Yet globalization has had an undeniable downward effect on the wealth and incomes of low- and medium-skilled workers in developed, industrialized nations. That certainly helps explain the angry mood among voters in Western Europe and North America, whose overall incomes and wealth have been stagnating for perhaps 40 years.
At the same time – reinforcing the significance of Piketty’s iconic formula that r>g (that the returns on capital are destined to be greater than overall economic growth) – a vast proportion of the world’s wealth has been concentrated in just the very top echelons of society. Milanovic’s meticulous data (see the illustration, below) confirm the extreme concentration of global absolute gains in income, from 1988 to 2008, in the top 5 percent of the world's income distribution. Rigorous empirical evidence from multiple sources indeed confirms that most of the global gains in wealth have accrued to the already-vastly-wealthy top One Percent. The data on increasing socioeconomic stratification are, by now, so well-established that only the predictable claque of free-market absolutists and dogmatic deniers cling (with increasing desperation) to the notion that the inequality gap is merely a myth.
Source: Branko Milanovic
Reinforcing Milanovic’s analysis, yet another well-documented study – this time, by the OECD – asserted this month that economic inequality is intensifying within the world's developed nations. That within-country trend accompanies the yawning inequality gap between developed and developing economies. The OECD thus joined the chorus that includes the World Bank Group, the International Monetary Fund, the United Nations’ Department of Economic and Social Affairs and the U.S. Federal Reserve System in sounding the alarm about the way that income and wealth disparities are becoming socially explosive. Even on Wall Street, many pragmatists are warning with increasing urgency that “too much inequality can undermine growth.”
In my last blog post, I showed that while governments are increasingly using the technology to demonstrate that services are improving, their efforts risk being undermined by “gaming” – in other words, fiddling the performance statistics to make things look better than they really are.
We focused on the problem in the UK. In this blog, I look at what the UK has and hasn’t done to address the problem, and what we can learn from that.
This is a short piece written for UNDP, which is organizing my Kapuscinski lecture in Malta on Wednesday (4pm GMT, webcast live)
Power is intangible, but crucial; a subtle and pervasive force field connecting individuals, communities and nations in a constant process of negotiation, contestation and change. Development is, at its heart, about the redistribution and accumulation of power by citizens.
Much of the standard work on empowerment focuses on institutions and the world of formal power – can people vote, express dissent, organise, find decent jobs, get access to information and justice?
These are all crucial questions, but there is an earlier stage; power ‘within’. The very first step of empowerment takes place in the hearts and minds of the individuals who ask: ‘Do I have rights? Am I a fit person to express a view? Why should anyone listen to me? Am I willing and able to speak up, and what will happen if I do?’
Asking, (and answering) such questions is the first step in exercising citizenship, the process by which men and women engage with each other, and with decision-makers; coming together to seek improvements in their lives. Such engagement can be peaceful (the daily exercise of the social contract between citizen and state), but it may also involve disagreement and conflict, particularly when power must be surrendered by the powerful, to empower those ‘beneath’ them.
Governments are under pressure to show their ever more educated and informed citizens that schools, hospitals and other public services are getting better. Traditionally, they have done that by spending money and building things: look, a brand new hospital! Of course, everybody knows that there is more to service quality than dollars, bricks and mortar. But at least we can see and touch bricks and mortar. How can we put a finger on service quality?
Though the Indian government has steadily increased funding for its health sector, per capita allocation is still low; reform is thus critical to effectively utilize the available budget.
The underlying question is: Given a set of resources, how do you procure goods in a way that achieves value for money and maximum efficiency?
Drugs and medical supplies are not procured and distributed in time, and this interruption in the delivery of services in health facilities affect the general population’s health outcomes.
Recently, the Jordan Transparency Center conducted a Corruption Perceptions Index (CPI) study for the years 2001–2014 based on the guidelines issued by Transparency International. A team of academics, researchers and legal experts at the Center gathered information from local and international reports, highlighting what they see as reasons for corruption in Jordan
Development depends on how well resources are spent. So, how can we truly follow the money from the moment that it is delivered all the way through how it is spent? How can we gather the data necessary to make informed decisions about the resources that drive development?
Connecting data from revenue generation through spending is key to tracking resources. If we have open data about development assistance, as well as open data about public contracting, and we can connect that data, we will be better able to have the information necessary to ensure that resources are spent more effectively and efficiently.
The efforts of the Open Aid Partnership (OAP) to collect and disclose aid data, and the recent release of the Open Contracting Data Standard (OCDS) provide an unprecedented opportunity to "follow the money".
Sport is no longer an activity solely associated with exercising the human body and mind. It’s a global industry that captivates billions of people, employs millions, and generates as much revenue, according to a recent study, as one percent of global GDP.
Growing at around seven percent annually between 2009 and 2013 – that’s faster than the GDP of most countries in the world – sport has become a behemoth. And with huge size comes a darker side. Corruption, cheating, bribery. It’s time to clean up sport and promote healthy physical education with a new global initiative.
Since the beginning of the 20th century, modern sport has been self-governed by non-governmental organizations (NGOs) such as international sport federations (ISFs) and the International Olympic Committee (IOC). Many of those NGOs have become immersed in corruption scandals.
There is a remarkable connection between the public and private sectors in Tunisia, an intersection that I prefer to call “the Golden Boys”. It seems that Tunisia has not learned from its past mistakes; in fact, it risks going back to the old days when an elite benefited from state resources and got rich at other peoples’ expense. Everything points to the fact that Tunisia is once again providing fertile ground for corruption.