There is an agreement in the public discourse that inequality around the world is high and on the rise. In Latin America and the Caribbean, for example, the poorest 20 percent of households hold less than 5 percent of income, while the richest 20 percent hold over 55 percent. The situation is even more acute when we look at the concentration of wealth across households, with 26 people owning as much capital as the bottom half of the world’s population. Also, it is well established that the share of labour in total income has been shrinking compared to that of capital. Not surprisingly, few issues have captured the public attention in recent years like discussions around inequality. This increased interest begs us to examine what we have learned about inequality in recent decades, and push the debate further asking questions such as, how we can more accurately measure the dimensions of inequality that matter for development? How we can capture the polarization the is happening within societies, and eroding social cohesion and stability? Moreover, what are the process that generate and perpetuate inequality? And ultimately, what is the impact of inequality in democracy? The Kapuscinski Development Lecture will focus precisely on these questions, aiming to push the debate further building on we have learned about inequality and why it matters for democracy.
Kapuscinski Development Lecture
What have we learned about the links between inequality and development?
- Inequality is a social and economic policy choice, and many countries sadly continue to choose it.
- Inequality begins and ends with a lack of transparency, respect for rule of law and legitimate governance.
- Wealth and income inequality gaps run highest in many large Latin American countries, with South Africa and Nigeria also high on the list.
SynopsisThe brutal extent of income inequality has been well demonstrated, with the statistic that 26 billionaire households own as much capital as the bottom 50 % of the global population. ‘The buck stays at the top’ might be another way to describe what happens when good governance and the rule of law, if it ever existed in the first place in a country, is permanently missing in action. It is in looking at one’s next door national neighbours that one sees that a lack of legitimate and transparent governance usually leads to dizzying economic wealth distribution imbalances as in South and North Korea, Columbia and Venezuela, Poland and Ukraine. By one measure, 14 out of 15 countries in the world considered most economically unequal are in Latin America. The fifteenth is South Africa. In some Latin American countries, more than 50 % of the working population is employed in the informal grey economy. The 10th anniversary Kapuscinski lecture was marked by a robust tradition of addressing the most burning development issues. One hundred lectures and 30,000 participants later, speakers brought forth plenty of statistics to underscore widening inequalities. Wage polarisation means those in the middle-income sectors have been losing purchasing power; growth disproportionately benefits the rich even as it provides some scraps for the poor. For example, a platinum miner in South Africa must work 93 years to earn the average annual bonus of his mine’s managing director. Growth inequality gives more bargaining power to the already powerful and wealthy. Meanwhile, general public deliberation is worsening and social networks and media misinformation, together with “fake news” are leading to a poor quality of public debate, which in turn erodes social dialogue and cohesion. One statistic suggested the GINI coefficient (for measuring economic inequality and income and wealth distribution in a population) had gone down in 40 OECD countries while going up in 46 others; providing a mixed picture. The average earning gap between those with higher education and those with high school credentials has lessened in many OECD countries. One speaker hopefully suggested that progressive taxation, progressive social spending and enshrined labour rights with minimum wage and equal pay for equal work provisions would go some way to easing social tensions and restore some perception of equality of income and wealth opportunity. But reality intrudes, particularly in countries where taxpaying and the rule of law are weak or non-existent. Singapore sits consistently in the bottom 10 of OECD countries in fighting inequality because it does not respect these principles. Nigeria is at the very bottom of 157 OECD countries for non-observance of the same rules over the past two years. In Nigeria’s case, the future does not look much brighter. The country has the highest number of children not attending school – some 10 million. Democracy properly observed would help alleviate some inequalities, but most democracies are under siege and in some cases, on the way to becoming “captured”. Former US Supreme Court Justice Louis Brandeis was quoted: ‘You can have democracy or you can have wealth concentrated in the hands of a few. But you cannot have both.’ To which he also reputedly stated, with an eye to democratic transparency: ‘Sunlight is said to be the best of disinfectants.’
This year’s lecture seemed more of a wearied reality check than a call to arms, seeming to argue that things are not quite as bad as they are perceived to be in terms of global inequalities. But they are still far from rosy.
As former UK prime minister and keynote speaker Tony Blair noted, without a demonstrated commitment to good governance and the rule of law it will be very hard for countries to attract or continue to attract inward investment.