World Bank Voices
Syndicate content

Extreme inequality is a symptom of a broken society

Sri Mulyani Indrawati's picture
Also available in: Français | Español | العربية | 中文
© Curt Carnemark/World Bank


Inequality is a problem all countries face, whether they are poor, rich, or in-between. Some inequality can be a temporary byproduct of economic growth when not everyone is moving at the same speed and at the same time. But when the majority of people suffer economic and social stagnation, inequality poses a real threat to the progress of individuals and whole countries.

This is why high and persistent inequality is not only morally wrong, but also a symptom of a broken society. It can lead to entrenched poverty, stifled growth, and social conflict. This is also why the goals of the World Bank are not just to end poverty but also to promote shared prosperity.

The inequality discussion often centers on the income gap. But there are other aspects of inequality that are equally important.

The first is inequality of opportunity, which comes at a high cost and with serious implications. It means that children start off with a disadvantage from the day they are born. For example, recent evidence from my own country, Indonesia, shows that about one-third of all inequality today is due to circumstances which people are born into.

In fact, in many areas, if a child is born a girl — say, in a rural area — and if her parents are poor, or belong to a marginalized group or ethnicity, she will have fewer opportunities and is more likely to be poor. Limited opportunity restricts economic mobility, perpetuates poverty across generations, and can repress growth by limiting the potential of large groups. This is why we help countries to provide basic services that are reaching all people, particularly the poorest 40% of the population.

The second issue critical to addressing inequality is exclusion, both real and perceived. In the Middle East and some parts of Eastern Europe for example, people are less satisfied and more pessimistic about their future even compared to regions with similar levels of income inequality, suggesting widespread perception of worsening economic mobility, a growing sense of unfairness, and lack of social justice. This is why our development assistance in the region goes beyond classic “aid’’ and aims at building a new social contract, while promoting inclusive growth and job creation. In Tunisia, for example, our work supports the goals of the transition following the Arab Spring.

So what works best to address inequality? It requires the right mix of good policies, good governance, and good institutions. Countries as different as Ukraine, Indonesia, Peru, Egypt, and Ethiopia have asked us to work with them in these areas. Often this means removing obstacles, like untargeted and wasteful energy subsidies, inefficient public spending or poor service delivery.

But possibly the most important issue to address inequality is good leadership. To start with, leaders need to understand that promoting growth while sharing prosperity makes both economic and political sense. Closing gender gaps, for example, could increase growth in Brazil by 14% and in Egypt by an impressive 25%. Similar benefits can be found if the needs of children and youth are met, most importantly, through access to good health services and education.

Ultimately the world’s leaders need to be willing to challenge the status quo and tackle the common challenges of limited capacity, corruption, lack of accountability, and elite capture.

Addressing inequality will require leaders who are prepared to make necessary but sometimes unpopular decisions that can take time to show effect. It comes down to leaders who have the courage and political will to measure their success not by how a small margin of cronies and well-connected groups are doing but by how the lives of the majority are improving.

This post was first published in the Boston Globe.

Comments

Submitted by Dr. Dapo on

I know there is no medicine, no simple answer to greed, but for God sake--when would it be possible to just say--Lord help me to help my neighbors that are poor. To help my neighbors that eat garbage day and night? The world used our the resources to acquire weapons of mass destruction to shut off the poor. In other words, the poor can't even talk abut it. The poor in America--the richest place on earth just look at the rich with smiles. They can't talk about their poverty. In Nigeria--the poor just die wherever they found themselves. In Saudi Arabia--just kill them no one asks question. No-Nononono--it doesn't have to be this way. No-No --no--it doesn't have to be this way. Something must change. Something change because the world has enough. Somothing must change.

Submitted by Chitpasong vannavong on

The slope and the selfishness of adults in the country, but there is so much selfishness make recommendations in this regard are as slow as ever.

Submitted by Anbazhagan on

"One third of people are subjectected to inequality due to the circumstances they are born into."
This could be converted to basis with potential to redirect the trend towards equality, over a period of time.
The knowledge about how a circumstance turns out a child in due course , it would be possible to profile each child's future.
If interventions are designed and delivered to be serviced by a 'sevant leader' , like a good shepard he would bring them up separately from earlier groups or from the influence of the circumstances, and in due course the profile of the society would be with less avoidable inequality.

Submitted by L N BHOLA on

Unless right to education becomes a 'basic right' by spirit and practice, citizens do not know 'what are their rights and when and how to question the Government' and how to bring "change just by questioning and taking corrective steps". Developing countries or developed countries :no matter 'maximum inequality is a very chronic issue'. Wealth re-distribution policy measures are also responsible to make it more chronic.

Submitted by eusebio manuel vestias pecurto on

Agree with the overall goals of the Millennium and ensure safety nets for the poorest health education and guarantees of minimum income

Submitted by BUKENYA WILLY on

WE HAVE A WATER PROJECT PROGRAMME FOR PROVIDING PURIFIED WATER O INSTITUTIONS IN LWENGO DISTRICT. WE SEK FOR MORE PARTNERS FOR THIS PROGRAM.

Submitted by Bhuban Karki on

I think only solution to extreme inequality is education, employment and empowerment (3 Es). If these three things are applied in an integrated manner we can take care of exclusion, poverty and corruption and of course we will be able to address inequality. The Bank's strategy should be aligned in this direction

Submitted by H3000 on

Amusing to see the World Bank blogging about this. Best solution to inequality: kick the World Bank out of your country, install a progressive tax rate, and invest in public education, health, and a minimum wage.

Add new comment

Plain text

  • Allowed HTML tags: <br> <p>
  • Lines and paragraphs break automatically.
By submitting this form, you accept the Mollom privacy policy.