It is safe to argue that the issue of income and wealth inequality is nowadays at the center of political debate across the world. Leading intellectuals such as Thomas Piketty in his seminal work, “Capital in the Twenty-First Century,” and Joseph Stiglitz in “The Price of Inequality” have rigorously analyzed the evolution of this social phenomenon and argued that increased inequality and lack of opportunity are creating divided societies that are endangering the future of nations.
Those working in public health have for years documented and discussed how low and decreasing incomes, decline in standards of living, and lack of or limited access health care and other essential services contribute to inequalities in health, manifested in a widening gap in life expectancy between the rich and the poor.
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?
Inequality 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.
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.
In 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.
Call it “secular stagnation,” or the disappointing “New Mediocre,” or the baffling “New Normal” – or even the back-from-the-brink “contained depression.” Whatever label you put on today’s chronic economic doldrums, it’s clear that a slow-growth stall is afflicting many nation’s economies – and, seven years into a lackluster recovery from the global financial crisis, some fragile economies seem to be lapsing into another slump.
As policymakers struggle to find a plausible prescription for jump-starting growth, a tug-of-war is under way between techno-utopians and techno-dystopians. It’s a struggle between optimists who foresee a world of abundance thanks to innovations like robot-driven industries, and pessimists who anticipate a cash-deprived world where displaced ex-workers have few or no means of earning an income.
To add a bracing dose of academic rigor to the tech-focused tug-of-war, along comes a data-focused realist who adds a welcome if sobering historical perspective to the debate. Robert J. Gordon, a macroeconomist and economic historian at Northwestern University, takes a longue durée perspective of technology’s impact on growth, wealth and incomes.
Gordon’s blunt-spoken viewpoint has caused a sensation since his newest book, “The Rise and Fall of American Growth,” was launched at this winter’s meetings of the American Economic Association. His analysis injects a new urgency into policymakers’ debates about how (or even whether) today’s growth rate can be strengthened.
When Gordon speaks at the World Bank on Thursday, March 31 – at 11 a.m. in J B1-080, as part of the Macrofiscal Seminar Series – economy-watchers can look forward to hearing some ideas that challenge the orthodoxies of recent macroeconomic thinking. His topic – “Secular Stagnation on the Supply Side: Slow Growth in U. S. Productivity and Potential Output” – seems likely to spark some new thinking among techno-utopians and techo-dystopians alike.
To watch Gordon’s speech live via Webex – at 11 a.m. on Thursday, March 31 – click here. To dial in to listen to the audio, dial (in the United States and Canada) 1-650-479-3207, using the passcode 735 669 472. For those telephoning from outside the United States and Canada, the appropriate numbers can be found on this page.
- Income Inequality
- Global Inequality
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- Macroeconomists for the Poor
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