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inequality

Thomas Piketty on inequality in developing countries (great, but still not enough on politics)

Duncan Green's picture

I heard econ rock star Thomas Piketty speak for the first time last week – hugely enjoyable. The occasion was the annual conference of the LSE’s new International Inequalities Institute, with Piketty headlining. He was brilliant: original and funny, riffing off traditional France v Britain tensions, and reeling off memorable one liners: ‘meritocracy is a myth invented by winners’; ‘It’s difficult to be an honest country in today’s world. Britain used to be an honest country.’

He started with a mea culpa for the lack of attention in his best selling Capital in the 21stCentury to inequality in developing countries. The good news is that he is now putting that right, with research under way on inequality in South Africa, Brazil, the Middle East, India and China. He gave us a preview on the first three.

His overall conclusion? "Official measures vastly underestimate inequality". The most common reason for this is that inequality stats are drawn from household surveys, but samples of households typically miss the few megarich ones, and so underestimate the money at the top. He prefers to use tax and income data, which he has now got access to from governments because of his newfound fame. Even that data doesn’t tell the whole story, as it misses tax evasion, for example, but it’s a step in the right direction.

The income of the world’s poor is going up, but they’re $1 trillion poorer. What’s going on?

Duncan Green's picture

Oxfam number cruncher Deborah Hardoon tries to get her head round something weird – according to the stats, the poorest half of the world is getting poorer even though the incomes of these people are rising.

It has become something of a tradition that in January every year we take a look at the Forbes list of billionaires and the Credit Suisse Global Wealth databook and calculate how many billionaires it takes to have the same amount of wealth as the bottom 50% of the planet. Since we started doing these calculations, we have watched the wealth of the top grow at the same time as the wealth of the bottom 50% has fallen. The data tells us that the bottom 50% have approximately $1 trillion (that’s $1,000 billion) less wealth than they did 5 years ago, whilst the richest 62 have about $0.5 trillion more.

The extremely wealthy are able to accumulate more wealth in a day than a whole factory full of workers could earn in a year. On 21stApril, in a 24 hour period, Carlos Slim made more than $400 million. Thomas Piketty famously points out that the rate of return on capital is higher than the general growth rate, such that capital owners are at a distinct economic advantage.

Meanwhile those 3.6 billion people in the bottom 50% include people in debt, people with nothing and people with a net wealth of up to about $5,000. People with little, no, or negative wealth, especially in developing countries with poor social insurance mechanisms (four out of five people in the bottom 50% live in Africa or Asia – including China and India), will not only find it hard to respond to financial shocks – like a poor harvest or a medical bill, but will also find it much harder to invest in their families’ future. Having little wealth may be concerning, but having less and less wealth year to year is even more worrying.

Tackling inequality is a game changer for business and private sector development (which is why most of them are ignoring it)

Duncan Green's picture

Oxfam’s private sector adviser Erinch Sahan is thinking through the implications of inequality for the businesses he interacts with.

Mention inequality to a business audience and one of two things happens. They recoil in discomfort, or reinterpret the term – as social sustainability or doing more business with people living in poverty. Same goes for the private sector development professionals in the aid community (e.g. the inclusive business crowd).

A good example is the UN Global Compact, which steers companies on how to implement the SDGs. They completely side-step the difficult implications of inequality on business and redefine the inequality SDG as boiling down to social sustainability or human rights / women’s empowerment goal. All good things that we at Oxfam also fight for, but these can all happen simultaneously with increasing concentration of income and wealth amongst the richest – i.e. rising inequalityWe know that rising inequality is one of the great threats to our society and economy. So why is business and the aid world so uncomfortable with tackling it head on?

Man picks tea leaves at Kitabi Tea Processing FacilityInequality is a relative rather than an absolute measure. This often makes it a zero-sum game – to spread wealth and income more equally, someone probably has to lose. But the intersection of business, sustainability and development has become locked into an exclusive focus on win-win approaches where there are no trade-offs and everyone gets their cake and eats it too. Addressing inequality often hits the bottom line – meaning changes to the prices paid to farmers, wages paid to workers, taxes paid to government and prices charged to consumers. But there is hope. Through a new lens (or metric) that should drive how business addresses inequality: share of value.

Don’t confuse this with Creating Shared Value, which is focused on the win-win (without commenting on how the created value is shared). What I’m proposing is a measure that compares businesses on how they share value with workers, farmers and low-income consumers. In fact the concept dates back to the original principles underpinning the fair trade movement some decades ago.

Does “Rational Ignorance” make working on transparency and accountability a waste of time?

Duncan Green's picture

Guest post from Paul O’Brien, Vice President for Policy and Campaigns, Oxfam America (gosh, they do have august sounding job titles, don’t they?)

As the poorest half of the planet sees that just 62 people have more wealth than all of them, collective frustration at extreme inequality is increasing.  To rebalance power and wealth, many in our community are turning to transparency, accountability, participation and inclusion.  Interrogate that “development consensus,” however, and opinions are fractured over the benefits and costs of transferring power from the haves to the have-nots.

Social Media Information OverloadIn truth, our theories of change often diverge.  Most development organizations may agree on the need to advocate for more Investment, Innovation, Information, strong Institutions and Incentives, but some organizations are genuinely committed to only one of those “I’s”, and that can be problematic:  Oxfam often finds itself choosing and moving between the relentless positivity of politically benign theories of change (e.g. we just need more “investment” or “innovation”), the moderation of those who focus exclusively on transparent “information” with no clear pathway to ensure its political relevance, and the relentless negativity of activists that think the only way to transform “institutions” or realign the “incentives” of elites is to beat them up in public.

Oxfam’s challenge is to be both explicit in our theory of change and show sophistication and dexterity in working across that spectrum.  If Oxfam’s theory of change is based on a citizen-centered approach to tackling global systemic challenges like extreme inequality, then our opportunity may be engaging the “rational ignorance” of citizens and consumers.
 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

UNDP
This paper suggests that reform-minded public officials can improve development results by using citizen engagement in a variety of ways: to elicit information and ideas, support public service improvements, defend the public interest from ‘capture’ and clientelism, strengthen the legitimacy of the state in the eyes of citizens and bolster accountability and governance in the public sector.  Based on analysis of five case studies exploring recent citizen engagement initiatives in different parts of the world this paper posits that there are no blueprints for the design and implementation of such initiatives or standardised and replicable tools. Instead it suggests that successful and sustainable citizen engagement is ideally developed through “a process of confrontation, accommodation, trial and error in which participants discover what works and gain a sense of self-confidence and empowerment”.
 
The Guardian
As a reporter in the Bosnian war, in 1993 I went to Belgrade to visit Vuk Drašković, the Serb nationalist politician and writer who was then leading the mass opposition against the Slobodan Milošević regime. Drašković had drawn liberal as well as ultra-nationalist support in Serbia for his cause. As I was leaving his office, one of Drašković’s young aides pressed a folded bit of paper into my hand. It turned out to be blank except for a date: 1453 – the year Orthodox Constantinople fell to the Muslim Ottomans. Friends of mine who had worked in the former Yugoslavia during the Croatian and Bosnian wars had similar experiences in Zagreb and Sarajevo, though the dates in question were different. It seemed as if the “sores of history”, as the Irish writer Hubert Butler once called them, remained unhealed more than half a millennium later – at least in the desperate, degraded atmosphere of that time and place. And yet, while alert to the possibility that history can be abused, as it unquestionably was in the Balkans in the 1990s, most decent people still endorse George Santayana’s celebrated dictum: “Those who cannot remember the past are condemned to repeat it.” 
 

How to help communities protect their lands

Rachael Knight's picture
Kenya Land Alliance facilitates a meeting
with the community of Chara, in Tana
River county

The scale of the global land grab is staggering. While international actors have made excellent progress establishing complaint boards, issuing principles for responsible investment, and securing commitments from multi­national corporations, these protections do not chart a clear course of action that communities can follow to protect their lands and natural resources before an investor arrives seeking land. 

The problem is that once an investor arrives to “consult with” a community, it may be too late.  After a deal has been made in capital city conference rooms or in clandestine meetings between chiefs and company representatives, communities are forced on the defensive. At this point, all they can do is try to mitigate the negative impacts of investors' plans rather than assertively proclaiming their legal rights, demanding that the investor abide by FPIC principles, and then choosing whether to reject the investment or accept it on terms that ensure that the community benefits and prospers.

Meanwhile, many of the “investors” grabbing land are national or local elites unaccountable to international  institutions  –  the cousin of the President or the nephew  of the Minister – who operate with complete impunity, protected by powerful connections to government, the judiciary and the police. Such individuals do not answer to shareholders or complaint boards, and are not the least bit concerned with principles of corporate social responsibility. If a community’s land claims  are unrecognized or undocumented – and if the community’s leadership is weak or corrupt – the easier it is for these elites to manipulate their power to claim what land they want.

To have a fighting chance against elites’ bad­faith actions, communities must proactively take steps to know and enforce their rights, prevent their leaders from transacting land without community approval, and seek legal recognition of their land claims.  And they must do so before elites and investors arrive. 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Poverty is Sexist 2016 Report
ONE Campaign
Last year ONE released its first “Poverty is Sexist” report, aimed at pressuring leaders to put girls and women at the heart of key policies and decisions. The report demonstrated two truths: 1. That poverty and gender inequality go hand-in-hand. Being born in a poor country and being born female amount to a double whammy for girls and women: they are significantly worse off than their counterparts in richer countries, and in every sphere they are hit harder by poverty than men. 2. Investments targeted towards girls and women pay dividends in lifting everyone out of poverty more quickly, and are essential in the overall fight to end extreme poverty everywhere. 2015 saw the world debate and decide the Sustainable Development Goals (SDGs), the Addis Ababa Action Agenda and a climate deal at COP 21 in Paris. This year, leaders have the opportunity to turn these aspirations into results.
 
Practice Note: Young People's Participation in Peacebuilding
UNDP
Throughout the world, more than 600 million young people live in fragile and conflict-affected contexts today.  They are among the most affected by the multiple and often interlinked forms of violence – from political violence and criminal gangs to organized crime and terrorist attacks that plague their countries and communities, bearing enormous and long-lasting human, social and economic costs. Over the past decade, the involvement of some young people – particularly young men, but also increasingly young women – in violence and extremist groups has led some to paint youth generally as a threat to global security and stability. But research shows that youth who participate actively in violence are a minority, while the majority of youth – despite the injustices, deprivations and abuse they can confront daily, particularly in conflict contexts – are not violent and do not participate in violence. Moreover, a growing body of evidence suggests that young women and men can and do play active roles as agents of positive and constructive change.
 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Corruption Perceptions Index 
Transparency International 
2015 showed that people working together can succeed in fighting corruption. Although corruption is still rife globally, more countries improved their scores in 2015 than declined. Five of the 10 most corrupt countries also rank among the 10 least peaceful places in the world. Northern Europe emerges well in the index – it’s home to four of the top five countries. But just because a country has a clean public sector at home, doesn’t mean it isn’t linked to corruption elsewhere.
 
An Economy For the 1%
Oxfam
The global inequality crisis is reaching new extremes. The richest 1% now have more wealth than the rest of the world combined. Power and privilege is being used to skew the economic system to increase the gap between the richest and the rest. A global network of tax havens further enables the richest individuals to hide $7.6 trillion. The fight against poverty will not be won until the inequality crisis is tackled.

Deliberation and Development: Rethinking the Role of Voice and Collective Action in Unequal Societies

Roxanne Bauer's picture

Deliberation and Development book coverIf you’re interested in advancing sustainable development for the world’s poor, pause a moment to reflect on these two quotes:

“the very understanding of development has dramatically shifted, from a narrow focus on economic transformation (summarized by either growth rates or industrialization) to a more holistic view.” (pg. 4)

“Effective state structures have always depended on deliberative spaces that include both key actors within the state apparatus and powerful private interlocutors. In the 21st century, deliberation has become even more crucial, because the state faces a set of tasks that require bringing in deliberation in a way that goes well beyond established traditions.” (pg.51)

These ideas come from a new book, Deliberation and Development: Rethinking the Role of Voice and Collective Action in Unequal Societies, available in the World Bank’s Open Knowledge Repository. The book marries two fields that rarely intersect: deliberative democracy and development studies. The study of deliberation emerged as a critical area of study over the past two decades while the field of development has seen growing interest in community-led development and participation premised on the ability of groups to arrive at decisions and manage resources via a process of discussion and debate. Despite the growing interest in both fields, however, they have rarely engaged with one another– until now.

Patrick Heller and Vijayendra Rao edited the book, with essays from leading professors and economists working in the fields of international studies, sociology, and political science. 

Spike Lee’s ‘Chi-Raq’: The Maestro Handles Complexity Adroitly

Sina Odugbemi's picture

Chi-Raq movie billDifficult social problems are fiendishly difficult to communicate. For, these are issues about which experts disagree and citizen-voters, too. The causes are unclear, the solutions are unclear, and then there is the ideological deadweight that tends to drag meaningful debate and discussion all the way down to seedy depths. Above all, public debate on complex social problems also leads to framing battles: you frame the discussion to privilege the ‘solution’ you want. So, for instance: what do we do about homelessness in our cities? If you don’t want public funds spent on it, you frame it as an individual responsibility issue. You argue that the homeless need to pull themselves up by the straps of their dirty sneakers. If you want public funds spent on the problem, you frame the issue as a structural challenge. You ask for a focus on unemployment, targeted welfare schemes, improved care for the mentally ill and so on.

Chi-Raq’, Spike Lee’s new movie, tackles a horrendously difficult problem: the horrific and persistent gang violence in inner cities in the United States of America (and, by implication, several such places across the globe). His setting is the South Side of Chicago. The title of the movie is a play on Chicago and Iraq. The movie opens with these stunning statistics: while American deaths in the Iraq War between 2003 and 2011 came to 4,424, between 2001 and 2015 there were 7,356 homicides in Chicago. Think about that for a second: 7,356 homicides.

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