For a time in the nineties and early naughties, as financial services promised untold riches for all, discussing inequality was seen as the preserve of people at the fringe of debate. Since the onset of the credit crunch and austerity in Western countries, inequality is firmly back at the center of the public discourse.
A new Oxfam report is adding to this conversation, looking at how inequality increases poverty and vulnerability and reduces the benefits of growth. Left Behind by the G20? has worrying new figures showing that in 14 of 18 G20 countries inequality is on the rise. Back in 2010, G20 leaders argued that “for prosperity to be sustained it must be shared”. In this analysis, reducing inequality is not only morally right, it also makes future economic growth more likely.
Look at South Africa, where estimates show that in the next decade, despite growth a million more people will be pushed into poverty if the government doesn’t tackle rapidly growing inequality: in this case as in others, growth alone will not be enough.
In other countries such as Brazil, the report finds that poverty and inequality have fallen significantly – in spite of only modest levels of growth. New research in the report looks at just how many more people would escape poverty if the G20 pursued “shared growth” and finds that crucially, the policy decisions governments make really do matter for reducing the number of those living in poverty.
Comparison of percentage point change in gini coefficient of income in G20 countries over two decades, 1990-2010
Source: Figure compiled by Oxfam using data sourced from F. Solt (2010) ‘The Standardized World Income Inequality Database’, http://hdl.handle.net/1902.1/11992 (Version 3.0)
The report points to investment in universal access to health and education and progressive taxation policies as ways of reducing inequality and making the benefits of growth stronger. It also points to the need to address the prevailing gender inequalities that mean women have less access to education, health services and political spaces, as well as less access to land and credit. Inclusive growth must remove barriers to equal rights and opportunities for women.
In 2010 the G20 also endorsed “green growth”: finding ways of encouraging economic expansion without relying on unsustainable use of the earth’s resources. Rather scarily, the report states that, “No country (in the G20 or outside) has yet demonstrated that it is possible to combine high average incomes with sustainable natural resource use.” The disappointing outcomes of the recent UN Climate Change Summit in Durban, COP 17, provide further cause for concern about how committed the world’s most powerful nations are to tackling this issue.
And who will lose out? Already, we see that poor people – those who are most excluded from the benefits of growth – are hit hardest by extreme weather events and climate change. Poor people not only depend most on natural resources for their livelihoods, but also tend to live in places disproportionately affected by climate change.
The report highlights a few areas governments could act to shift things down the green path. Investment in research and development of green energy, well-directed tax breaks and tighter regulation of the major polluters will benefit the economy, help tackle inequality and promote the interests of the poorest in green economic growth.
Gone are the days when governments can simply rely on the idea that the benefits of economic growth will trickle down to the poorest people. Now we need to see the political will to take the strong action to target inequality. G20 leadership will send a message to countries around the world that tackling inequality matters. More importantly, this action is crucial if we are to prevent millions more people sliding into poverty.