Wednesday, 26 June 2013

Inequality – A battle lost but a war won? A dissenting view

By Carlos Fortin

Claire Melamed's recent Guardian blog on the High Level Panel Report fairly sums up the reaction of many progressive commentators to the Report's treatment of the issue of inequality.
‘Inequality campaigners’- she writes – ‘seem to have lost the battle but won the war’.
The battle lost is about an inequality goal: the Report does not propose one. The war won is about a comprehensive approach to inequality and discrimination and their perverse effects on opportunities and poverty, an approach which, it is argued, the Report embraces.
I beg to differ on both points. On the battle lost, as Claire Melamed herself remarks, adopting a quantitative goal at this stage would raise tricky problems of measurement. The Gini index may well be –with apologies to Winston Churchill - the least worst measure of inequality, but it is still a pretty crude instrument, useful as a working tool but not to be elevated to yardstick for a major commitment of the international community. Not having a quantitative goal based on it at this point may perhaps not be that bad.

By contrast, I find the Report's approach to the analysis of inequality wanting. It missed an opportunity to bring in the vast amount of work, reflection and research on inequality that has taken place in the last fifteen years.  Its basic flaws, in my view:
  1. The Report still conflates the issue of inequality with the fight against poverty and the provision of a minimum standard of living for all. To be sure, poverty reduction and minimum living standards should be major objectives of international cooperation, and in most parts of the developing world they should probably take priority over most other goals. But they are different from inequality reduction  and, although they are of course related, they do not always move in the same direction.  To give just one example, close to my heart.  Post-Pinochet social democratic governments in  Chile were spectacularly successful in reducing poverty, from over 45% in 1989 to less than 15 % in 2009; but inequality - measured, of course, by the Gini index! - was barely reduced and today Chile is among the worst cases of income inequality in the world.
  2. The Report does not tackle the issue of the structure of inequality –the distance between the various levels of the socio-economic pyramid and its determinants. Instead it emphasises the need to make it possible for individuals to move up the pyramid: upward socio-economic mobility should be coupled with the elimination of de jure and de facto discrimination against specific groups. Again, highly valuable goals in themselves, but goals which can also coexist with high levels of inequality.
  3. The Report does not link inequality with the productive structure and the generation of the primary income distribution –before taxes and transfers. There is a welcome reference to the need to ‘transform economies for jobs and inclusive growth’ but this is quickly qualified by the suggestion that what is sought is for people to escape poverty and join the middle class; the potentially unequalising effects of the neoliberal development model and of developing countries' unbridled integration into the global economy – well documented in Chapter 3 of the the last UNCTAD Trade and Development Report - are simply ignored. 
  The war, I am afraid, is far from won.