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.
Can we end extreme poverty in a world with extreme inequality? That question inspired a spirited debate in English and Spanish on Oct. 7, just ahead of the World Bank Group-IMF Annual Meetings in Lima, Peru, addressing corruption, taxation, discrimination against women, and the need to even the playing field for the younger generation.
Latin America’s experience with inequality was front and center at the live-streamed event, Inequality, Opportunity, and Prosperity, featuring World Bank Group President Jim Yong Kim, Ibero-American Secretary General Rebeca Grynspan, Oxfam International Chair Juan Alberto Fuentes Knight, and moderated by CNN Español news anchor Patricia Janiot.
The World Bank Group President Jim Yong Kim and World Bank Chief Economist Kaushik Basu had some answers in a live-streamed conversation, Building Shared Prosperity in an Unequal World, with Chinese media entrepreneur Yang Lan in the lead-up to the institution’s Annual Meetings on Wednesday morning.
It seems that everyone is talking about inequality these days, and I, for one, am happy to see this issue at the forefront in the development discussion.
We can look at inequality in a number of ways, which are not unrelated. One of the most visible types of inequality on the radar is inequality of outcomes — things like differences in academic achievements, career progression, earnings, etc. — which, in and of themselves, are not necessarily bad. Rewarding an individual’s effort, innate talents and superior life choices can provide incentives for innovation and entrepreneurship, and can help drive growth.
However, not all inequalities are “good.” When inequality perpetuates itself because those born poor consistently do not have access to the same opportunities as those born rich, what emerges is a deep structural inequality that is bad for poverty reduction, bad for economic growth, and bad for social cohesion. How pervasive are these deep inequalities? Much more than we would like. Indeed, when we examine what is happening in many countries around the world today, we find large and persistent, even growing, gaps in earnings between rich and poor. And we find that those who start out in poverty or are part of a disadvantaged group tend to remain there, with little opportunity to work their way out.
How do we explain this, and what can we do to tackle it? We need to take a step back and look at where this inequality originates, and that is where the concept of equality of opportunity comes in to play. This concept broadly refers to access to a basic set of services that are necessary, at the minimum, for a child to attain his or her human potential, regardless of the circumstances — such as gender, geographic region, ethnicity, and family background — into which he or she is born. Too often, access to such basic services like electricity, clean water, sanitation, health care and education is much lower among children born into circumstances that place them at a disadvantage. Children from disadvantaged groups thus set off on an unequal path from day one, which curbs their opportunities and potential into adulthood.
Next week, we’ll be hosting our Spring Meetings in Washington, D.C., which will attract a few thousand leaders in development from around the world. To set the stage for these meetings, I talked this week about the fundamental issues in global development and how we’re undergoing dramatic changes inside the World Bank Group to meet those great challenges.
We live in an unequal world. The gaps between the rich and poor are as obvious here in Washington, D.C., as they are in any capital. Yet, those excluded from economic progress remain largely invisible to many of us in the rich world. In the words of Pope Francis, “That homeless people freeze to death on the street is not news. But a drop … in the stock market is a tragedy.”
While we in the rich world may be blind to the suffering of the poor, the poor throughout the world are very much aware of how the rich live. And they have shown they are willing to take action.
Recent years have seen growing attention to inequality of opportunity and how processes of economic development are shaped by, and in turn shape, such inequalities. One strand of research has been concerned with the development of methods to quantify the extent of inequality of opportunity as well as the impact of interventions and policies on such inequalities. I am organizing a parallel session on May 30 as part of the ABCDE conference that will present three studies that aim to substantially extend this measurement agenda.
A paper by Dirk van der Gaer will describe recent research that proposes a methodology to evaluate social projects from an equality of opportunity perspective. The approach looks at the effect of a social program on the distribution of outcomes conditional on morally irrelevant characteristics (such as education level and indigenous background). The methodology is applied to evaluate the effects of Mexico’s opportunidades program on children’s health outcomes.