Inequality and the post-2015 agenda

This panel consists of:

Sara Murawski (The Broker)

Marc Vandepitte (Technische School Mechelen)

Evert-Jan Quak (The Broker)

David Sogge (Transnational Institute and NOREF)

Discuss inequality and the post-2015 agenda at www.thebrokeronline.eu

Inequality is a hot topic..

International institutions: World Bank, IMF and OECD have changed their discourse..

The benefits of economic growth DO NOT trickle down automatically. Greater inequality DOES NOT foster social mobility. (OECD 2012)

Inequality is a hot topic..

Recent literature & newspapers: Joseph Stiglitz (Price of Inequality, 2012), Paul Krugman (NYT) Martin Wolf (FT), Thomas Piketty with Capital in the 21st century and his famous formula r > g..

Inequality is a hot topic..

(International) governments: World Economic Forum (2014), Obama's State of the Union, European troika..

One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy. (Christine Lagarde, IMF)

Post-2015 process

MDG's did not pay a lot of attention to inequality

High inequality puts MDG's under pressure

But income inequality does play an important role in the design of the post-2015 agenda:-Open Working Group (OWG) on Sustainable Development Goals (SDG)-Letter from 90 academics to High Level Panel (HLP), calling for 'top-level goal to reduce inequalities'

What do the numbers tell us?

Income inequality measured by the Gini-index, focused on within-countries

The worlds richest 1% owns 40 % of global wealth, while the bottom half owns merely 1%

Two thirds of the world population live in countries where income inequality increased between the mid 1990s and the mid-to-late 2000s

The crisis has worsened inequality

Increasing inequality worldwide (source: Conference Board of Canada, 2012):

Fragile global middle class

More than a billion people live in extreme poverty (below $1.25 line)

In 2010, 2.8 billion people, which is 40% of the world's population, was living on a daily income of $2 - $10

Almost 1 billion people live just above the poverty line, between $2 and $3

Economists warn that the global middle class is very fragile, and runs the risk of falling below poverty lines due to the slow-down of the global economy

Fragile global middle class
(source: Financial Times)

Relation between inequality and growth:

Kuznets curve has been severely criticized

Inequality hinders poverty reduction

Inequality blocks growth itself

Over longer horizons, reduced inequality and sustained growth may thus be two sides of the same coin. (Berg & Ostry, IMF, 2011)

Growth is not per definition good..

It often leads to more inequality, because trickle down does not work

It exhausts our planet and natural resources (Tim Jackon (2009): Prosperity without growth)

The complex dilemma of growth:

It seems that inequality, at least on the short and middle run, can only be reduced by economic growth (fragile middle class)

Slow growth might cause more inequality, because it strengthens the power of employers at the cost of labour unions

But growth also causes inequality

Unequal growth can have detrimental effects on societies and the environment

Inclusive growth must take account of the circumstances under which inequality has increased:

Globalization

Financialization

Skill-biased technological change

Flexibilization of the labour market

What the Western world could do:

Reform the financial sector in order to prevent another global financial crisis

Dismantle tax havens

Review international investment treaties and develop a framework for fair global trade

And..?

That's all for now..