On 16-17 October, the European Commission will be hosting EU Development Days, a two-day forum on international affairs and development cooperation that will see Heads of State, Nobel Prize laureates, business leaders, and development professionals meet to discuss some of the global issue that are at risk of slipping down the international agenda in the wake of the economic crisis. Debating Europe will be covering DevDays, and we will be publishing posts on each of the three main themes of the event: food security (which we’ve already looked at here), inclusive growth and how to encourage the private sector to engage in development.

Today’s post is about “inclusive growth” (i.e. economic growth that is broad-based and benefits the majority of the population). The last decade has seen the steady rise of developing countries across the world, led by the BRICs (Brazil, Russia, India and China). However, rapid economic growth has often been accompanied by rising inequality;  the World Bank reports (PDF), for example, that: “Inequality is on the rise in several countries in East Asia, most notably in China [and] is contributing to social tensions.

Whilst the World Bank also reports (PDF) that poverty rates in Africa (as in the rest of the world) have been falling due to sustained economic growth and development, the most recent report from the Africa Progress Panel argues that political instability from growing inequality risks derailing that growth, and that “Africa’s wealth disparities are among the biggest in the world.”

The Africa Progress Panel goes on to argue that:

In China, where political leaders have identified rising inequality as a threat to social stability and future growth, the Gini index is 42 [the higher the index the greater the level of inequality]. There are 24 countries in Africa with higher inequality scores than China. In Mozambique, Kenya and Zambia, the Gini index is between 45 and 55, while in Botswana and South Africa it is over 60.

The report’s conclusion is not that rapid economic growth is somehow unimportant, however. Rather:

The challenge is to harness economic growth to a more equitable distribution of opportunity and income. Meeting this challenge requires public policy action on two fronts.

First, governments need to mobilise revenues from growth and invest those revenues in the basic services and economic infrastructure that offer poor people greater opportunities.

Second, governments need to foster an environment that enables the creation of jobs and more resilient livelihoods, so that poor people can contribute to economic growth, ‘produce’ their way out of poverty and secure a greater share of the benefits from growth.

The European Development Days forum in October will be tackling some of these issues, with high-level panels looking at how we can tackle the causes of global inequality and encourage inclusive and sustainable growth. We’d like to take some of your comments and questions to these panels and publish their responses.

So, what do YOU think? How can we tackle global inequality, to ensure that economic growth is inclusive and benefits the greatest number of people? Is economic inequality inevitable if you want rapid economic growth? Or is it possible to grow your economy and distribute the benefits fairly and equally? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts to hear their reactions.

Ahead of the European Development Days forum, the International Development site DevEx (an official partner of EU DevDays) has published an article on inclusive business models in the developing world. You can read the article here.

17 comments Post a commentcomment

  1. avatar
    Josephine Cassar

    Before tackling inequalities, you have to tackle corruption, tax evasion as income is undeclared

  2. avatar
    Jai Krishna Ponnappan

    “Availability and Access to opportunities” is perhaps the key determining factor missing from the wording for this topic. I hope someone can include that :)

  3. avatar
    eusebio manuel vestias pecurto

    Este tema esta a ser um grave problema da sociadade europeia as desigualdades primeiro os estados devem combater a corrupção a evasão fiscal redimentos não declarados e depois a disponilibidade de acesso ao mercado de trabalho a UE tem que tomar uma decisão e encontrar um equilibrio entre a austeridade fiscal e a económia

  4. avatar
    Nikolai Holmov

    Good grief!

    I can’t believe this is even being asked given the enormous amount of academic material available on the subject from Rawls, Pogge, Nozik, Miller et al from 1972 to the present day.

    There is a fairly adequate road map laid out in Rawls 1972 A Theory of Justice when it comes to national inequality and opportunity, albeit to my mind, it doesn’t transpose well into the international market place, but Pogge, Nozik and Miller do a fairly good job of taking the Rawls concepts and applying them internationally taking up what he left off.

    The first question has to be whether there is a basic global structure that allows equal opportunity and the answer is quite simply – no – as many sovereign structures fail to do that.

    Much is said about the role of women in national growth and it is a factor. To have 50% of a nation either unable or not allowed to work naturally harms GDP and thus growth. As an aside, however, the knock-on effects to national demographics is also an issue with the more liberal nations in demographic decline and the illiberal nations in a continuing population boom generally speaking. That raises the question whether economics is necessarily the headline issue of the day and whether things like national culture, demographics, ethics etc should be sacrificed at the alter of growth.

    As nations, despite whatever degree of liberalism they may have, are still to perfect a system where there is genuinely equal access to opportunity, it is no wonder there is no global structure.

    No global structure despite huge amounts of academic models that provide them that is.

    What is the point of investing in academics and their work if governments, media and influential institutions ignore what they produce? (As a caveat to that I will acknowledge that most academia has now been bought off one way or another due to grubby little deals in order to continue to get funding – and most think tanks are simply now lobbyists and arbiters for their pay masters policies rather than the genuine academic that used to generate policy ideas rather than extol existing political lines.)

    Nevertheless, if the EC, UNDP, WB et al are unaware of what academics have and continue to produce when pondering the global issues then quite frankly, those within the EC, UNDP, WB et al are quite unfit for office.

    • avatar

      This is perfect!

  5. avatar
    Omar Mateiro

    The faster it grows the less time will be there to exploit inequalities…balance will inevitably follow.

  6. avatar
    Christos Mouzeviris

    Now, I am back again.

    Well how can you expect to have equality in this world, when the very culture of our civilization and our economies is capitalist, meaning that we are all constantly striving to accumulate riches for ever more. And by any cost. The free markets allow companies to charge us whatever they want and for whatever reason. Terms and conditions apply everywhere. The only thing our economies and companies must strive to achieve is growth, growth growth. More money, more power.

    That greedy attitude is the root of all evil that you are speaking of. Once a group of people get rich or powerful enough, then all they are trying to do is accumulate more and more wealth and also they are trying to prevent others of getting access to it. Simply because when too many people get access to so much wealth, that means less wealth for the already wealthy.

    So how can we promote equality in the world? In my opinion it is just a utopia, and it will never be achieved totally. But we can try to make our societies a bit more equal and less painful for those in the lower classes of our society. Because if we want to try to achieve absolute equality, then we have to proceed with wealth redistribution among the different levels of societies, and among states and regions. Now who would actually want that? Well apart from the poor.

    So in my utopia vision, which I know I have no chance of ever seeing it coming to reality the following should be done to achieve equality.

    a) ban all tax haven states. They only promote tax evasion. How on earth can we tackle tax evasion when we have countries on our planet that they are fostering it. And make profit out of it.
    b) limit the power of the banks, and the markets. or at least regulate them. promote rating agencies in Europe and Asia or other regions so that we will have more competition in this industry too. Now we are rated according to American interests and mentality. Not necessary the right one.
    c) scrap the security council in the UN, or at least reform it. The countries in it are still representing the post WW2 status quo of global power. How many third world countries are in it?
    d) allow all countries to be able to exploit their natural resources without the intervention of third parties, blocks, corporations or countries. The main problem is that while in some countries they are free to exploit their natural resources freely for the benefit of their people (Norway) in other regions the global players and powers are corrupting the national elites of a certain country with money, and they sell out their national resources for scraps, benefiting only the political elites and those corporations/groups/countries involved.

    This have happened in Africa, it is happening in Greece right now and has happened even in Ireland in the past. Why Norway is exploiting all gas and oil resources in the North Atlantic while the Irish have sold theirs and do not benefit at all? It is actually the Norwegians that exploit the Irish gas reserves. Who decided this to happen? Why shouldn’t we allow states like Greece or Ireland to exploit their natural resources for themselves, for the benefit of their people first and then share them with their European partners? Never mind what is going on in Africa and their oil, gas, metal and precious stones reserves. How can we talk about “equality” when there are forces who promote inequality by corrupting the political elites of certain states?

    e) promote transnational organizations and formations like the EU, to promote integration and break the traditional “national” politics. In some countries like Greece, (and Ireland or Spain) politics are still decided still after the influence of the divisive post civil war politics. There are usually two main parties that represent the two sides of the civil war and traditionally families vote according to their family’s allegiance to each side. How can we ever move on and progress with this mentality? We need a new blood of thinker politicians, politicians with a vision not an ideology.

    f) reform the capitalist system. stop the accumulation of money and power in some corporations or states or organizations at any cost. stop the growth oriented GDP economy and focus in creating a fair society that works, not a society that knows only to consume. control the influence of the markets and the rating agencies, pushing for growth evermore. if this “growth” means that we as a society have to go backwards in worker’s rights and quality of life of our citizens, and turn them into manic consumers that work all day with no quality of life and time for themselves and their families.

    Can you achieve all the above? personally i believe that if we manage to achieve only two of those points, our societies will move to a better direction. now where are all the politicians with a vision to push for their implementation? i am still looking to find one.

  7. avatar
    William Davis

    Inequality is almost inevitable due to the differences in starting points for each society. But the more growth oriented societies encourage and empower low growth societies to find a path the better they will be. Vietnam China Korea all were once low growth but now thwy grow. BRIC is not growing as fast as they once did but they have achieved noticeable growth while larger economies are slow. The weaker economies who have attached themselves to these BRIC economies have also grown and often at unbelievable rates such as that seen in Peru over the last decade.

  8. avatar
    Vicente Silva Tavares

    Scandinavian countries are an example of how countries can grow and still have a widespread equality. Inequality is typical of underdeveloped countries.

  9. avatar
    Mario Negre

    The definition of “inclusive growth” provided here is a partial one (i.e. economic growth that is broad-based and benefits the majority of the population). Part of the specialised literature defends that for growth to be inclusive it should improve the distribution of income, meaning it should be inequality reducing. But many, chiefly the World Bank, choose to overlook this aspect despite a large body of empirical evidence pointing to the negative effects of high inequality on both growth prospects and the rate of poverty reduction that can be obtained from growth. Curiously enough, key evidence in this regard has been provided by Martin Ravallion, WB Acting Chief Economist and Senior VP.

    Given the key role of addressing inequality in order to make poverty reduction more effective, development cooperation should make an effort to openly and seriously confront high inequality, particularly in Middle Income countries which have the necessary resources but still host 70% of the world’s poor. This is precisely the topic of a 17 Oct panel at the European Development Days 2012 organised by the European Think Tanks Group: Confronting Inequality.

  10. avatar
    catherine benning

    What needs to be concentrated on in Europe is the inequality we have right at home on this continent.

    That way you will be able to centre on what it needs to return us all to a balanced, in the black, economy. Plying the game of lets look at the world of poverty and assist ‘them’ is a cop out. It covers the fact you aren’t making it right for us who pay the bills for this lunacy. Charity begins at home. Killing the goose that lays the golden egg is not a sensible way forward.

    Put Europe first. It deserves it.

  11. avatar
    Peter Schellinck

    If we don’t address inequality seriously it will back fire. Just beware what could happen in southern Europe: a social blood bath in this coming autumn and that is just in our back yard.

  12. avatar
    Peter Schellinck

    The danger of inequality escalation is real as the world output will treble over the next 2 to 3 decades and growth accelerates on the back of the emerging economies. On average, annual world growth is projected to accelerate towards 3% compared with growth of just over 2% in the 2000s. Emerging-world growth will contribute twice as much as the developed world to global growth over this period. Inequalities in Europe are as threatening as those in rest of the world.

    By consequence coming 2050, the emerging world will have increased five-fold and will be larger than the developed world. Some 19 of the top 30 economies by GDP will be countries that we currently describe as ‘emerging’. But the small-population, ageing, rich economies in Europe will be the big losers. Switzerland and the Netherlands are likely to slip down the grid significantly, and Sweden, Belgium, Austria, Norway and Denmark will drop out of our Top 30 altogether.

    This fact becomes even more worrisome given that inequality of outcomes goes often hand in hand with inequality of opportunities. Eventually, not only social cohesion but also political and democratic structures are threatened the more extreme inequalities become and the longer they are allowed to persist. Populist, nationalist and protectionist sentiments are more likely to occur where people feel deprived of future prospects and life chances. Thus, the legitimacy and stability of any political community depends decisively on the provision of equal opportunities.

    So challenges are ample and call for a model overhaul. Taxes on wealth and consumption are to be used to reduce inequalities of opportunities. A national awareness for redistribution systems in a global economy ought to be designed to prevent the rich from free-riding these systems and to avoid a race-to-the-bottom between countries. The adaptation of a more pro-social attitude should develop a sense of solidarity and mutual responsibility among citizens.

    The urge to address inequality should impregnate into the entire social fabric. Hence, a new education and formation system must enable poor people to participate in a society. Investment in innovation can result in sustaining prosperity without growth. New business models could lead to profit sharing and /or employee-owned or cooperative organisatiion forms.

    There is no one fix it all solution as developing and emerging countries require different strategies and a different sequencing of reforms and policy measures then the so-called highly developed countries. But, which ever, inequalities exist in all countries and are the cancer of our modern socio-economic society fueled by greed. The “will” must be there at all levels of society to balance out the discrepancies and adhere to societal responsible governance.

  13. avatar
    Georgi Hrisstof

    Social inequality measure that establishes priorities, demonstrates a level of development and distance between social groups, and the difference of social relations in the state structure. Become a way to just socially stable state, social inequality argument and threats, but also areas of disease and epidemics. Ignoring it donesko trouble and a bad option, but a ‘map’ of the level of development of the country at risk, and the direction in which to develop their economies, the ratio and the ratio of the tip to the base of the pyramid are in constant and close in standard dependency. “Map” area code execution monitoring analyzes, recommendations, and achieve levels of practice and development …

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