GLOBAL INEQUALITY AND THE FUTURE
https://www.shareweb.ch/site/Poverty-Wellbeing/Documents/Briefing%20Paper%20Global
%20Inequalities_FINAL%20VERSION.pdf
Executive summary
The fact that it takes merely eight men at the top of the scale to own the same wealth as half of the
world’s population epitomizes the massive extent to which global inequality has risen. Dominant
economic and political thinking established in the 1950s maintained that inequality is a necessary step in
the process of economic development measured via GDP. While this has been contested, the divide
between the haves and the have-nots diagnosed at the end of the Millennium Campaign seems to be
entrenched. The commitment to social justice laid out by the Millennium Agenda has been undermined
in that specific “pockets of the poor” were systematically bypassed by its achievements. Evidence that
inequality hampers the fight against poverty raised awareness on global inequality, as did insights on the
detrimental effects of unequal societies to the wellbeing of all, crises and risks that burden the poor
disproportionately, out-distanced middle-classes in industrialised countries and persistent mass
unemployment and highly informalised livelihoods in the global South. Not least, appeals from scientists
that the failure to effectively account for inequality will ultimately threaten our democracies propelled
the debate on inequality, putting the issue firmly back on the agenda. The power of assessing global
development through an inequality lens lies in the relational perspective of the concept. Accounting for
inequality implies a debate about the level of difference that is ethically justifiable, politically negotiable
and economically viable. The debate operates along two lines: The instrumental position puts forward
that inequality hinders economic growth and prevents poverty reduction measures from being effective,
while the ethical position argues that high levels of inequality are categorically wrong. In the past,
priority was given to vertical inequalities (between individuals/households, typically measured by the
Gini coefficient), whereas more recent perspectives advocate for a combination with horizontal
inequalities (between groups). The dimensions of inequalities unfold along three basic categories:
Inequality of what, whom, and where. Levels of inequality vary depending on the reference point:
Inequality across countries, inequality within countries, and inequality across the world’s people. Despite
the fact that the most excessive levels of inequality stretch across the world’s people irrespective of
national borders, inequalities within countries are on the rise. The state therefore remains an adequate
unit of analysis as well as a primary partner in adopting effective measures against inequality. Largely
exogenous drivers of inequality (not dependent on domestic policies) are often distinguished from
endogenous drivers (mainly determined by domestic policies), although a strict separation is not
possible. Actors responsible for growing inequality are those who undermine democratic structures and
use economic policies to destabilise institutions established to govern working relations. Inequality and
poverty are multidimensional. Nevertheless, development theories and corresponding policies have
essentially been concerned with the material dimension and thus maintain an income focus. The unique
contribution of the inequality perspective is that it relates income inequality with factors of social
exclusion, thereby framing differences in achievements from both an ex-post and an ex-ante view.
Inequality of outcomes and inequality of opportunity are two sides of the same coin, and development
policies must address both. A shift in priorities in development cooperation towards inequality
underscores the commitment towards policy coherence for conducive action upon trade-offs and co-
benefits of the Sustainable Development Goals. The inequality lens suggests a rigorous political economy
analyses and an alternative set of methods to improve diagnostics on poverty and inequality and their
multidimensional nature. Introducing complementary indices at a global scale and improving techniques
to assess inequality in national contexts will not only illuminate trends across the world, but open up for
novel thinking about the politics of distribution. Grounded data and information saturated with lived
experience will provide robust knowledge on how to best assist partner countries in building effective
pre- and redistributional policies for both universal and targeted measures.
Economic Inequality:
Aristotle distinguished between economics (managing the household) and chrematistics (the pernicious
art of accumulating wealth) arguing that “money was intended to be used in exchange, but not to
increase at interest”. This points to the fact that economic inequality can be expressed as either income
(flow concept) or wealth (stock concept). Income does not just refer to the money received through pay,
but includes wages from employment (salaries and bonuses), interest from savings, dividends, state
transfers, pensions and rents. Household income before tax that includes state transfers is known as
gross income. Household income including all taxes and benefits is known as net income
Inequality and poverty
Should inequality be treated the same way as poverty reduction or is a different approach needed?
While inequality focuses at the full range of distribution, poverty concentrates at the lower end of the
scale. The two concepts are closely linked in that inequality has an important influence on the
effectiveness of poverty reduction initiatives (Stewart 2016). Inequality aims at persistent and arbitrary
discrepancies between different people and clusters in various dimensions. It suggests itself therefore for
an analysis of the reasons for entrenched disadvantage and the causes that fuel it. Offering a relative
perspective, an assessment of power relations and a call for a “whole of society”-approach come with an
inequality lens. The relative nature of an inequality assessment is important, as people’s well-being is
greatly influenced by relative comparison. Political economy analyses offer tools to identify factors of a
disabling environment. Development agencies should be concerned with issues such as norms,
discrimination and exclusion. The focus on inequality lends itself to relatively new themes such as
taxation, e.g. how governments raise money and the distributive effect of political priorities. Social
protection and the debate on protection floors as well as ceilings enter the picture when inequality is
addressed. The powerful change in perspective on global development implied by inequality is being
undermined by a strategy of influential international agencies to restrain their focus on incomes of the
bottom 40% of the world’s population. Motives such as “shared prosperity”, “inclusive growth” and “pro-
poor” initiatives use an inequality rhetoric while not actually deviating from their standard recipes. The
“sharing”, the “inclusiveness” and a vague definition of what is “pro poor” all remain silent about the
distance between the upper and the lower end of the ladder. These concepts circumvent the much
needed debate about the extent of inequality that is justifiable. By eclipsing the upper range of the
division and thus the reticence of addressing the issue of (re)distribution, inequality is being turned into
a disguised poverty lens. A priority to inequality assists countries in their diagnostics of how means are
distributed and how they are effectively allocated. Introducing complementary measures such as the
Palma index (appendix 4) at a global scale will illuminate inequality trends across the world and provide
information on how to best assist countries to build pre- and re-distributional policies and propose an
alternative set of measures to complement traditional poverty reduction policies.
Putting inequality to work in the development agenda
This section aims at stimulating a discussion as to how inequality as the new development focus opens
up pathways for powerful initiatives to actually improve the well-being of those who tend to get
bypassed by the gains of development. We do this by depicting what we call “fields of opportunity”
based on some key elements of this briefing paper.
Key elements
Recast the goal of development: from GDP to a safe and just space for human development. The new
development agendas are framed in a growth agnostic way. Beyond worn-out debates of growth as
“good” or “bad”, this strategy requires measures to assess prosperity irrespective of whether GDP is on
the rise, falling, or stable (Raworth 2017).
Improve diagnostics: Substantiate the story of inequality by way of novel measuring techniques that are
multidimensional, relative and inclusive. Adopt tools to assess, monitor and manage the impact of a
broad set of policies (including economic policies) on economic well-being, social and cultural rights.
Reflecting adequate perceptions of growth, poverty and progress, including bottom-up, grounded
experiences, these measures build powerful arguments on inequality and poverty, and how they are best
fought against.
Integral “whole of society” approach: Inequality lends itself to an integral analysis of disadvantage,
including human rights, peace, security, social inclusion and sustainability from both a perspective on
outcomes and opportunities. While ambitious, it is the essence of the Agenda 2030: Beyond the sectoral
logic, trade-offs and synergies between the 17 goals is where we will break ground. Means to construct
and strengthen institutions to advance this approach have to be paralleled by the promotion of policy
coherence.
Addressing structural causes: The purpose of economic development is to improve human well-being.
The aim is on reforms that promote inclusive growth and reduce inequality by way of access to markets,
investing in human capital and promoting job creation. The ultimate goal is to build citizenship in a
globalised world. Spurring regulatory and institutional reforms creates an enabling environment for pre-
and redistribution.
Reimagination of the politics of distribution: The new regimes of distribution in the developing world
will be distinct from the logic of European welfare states. In light of the erosion of the working middle
classes as the backbone of Western welfare societies, and against the background of wide-spread
structural unemployment in the global South, nothing less than a reimagination of the politics of
distribution – and thus development – is at stake.
Include the voices of the most disadvantaged in priority setting: Beyond conventional participation a
consequential and determined commitment towards convening a multiplicity of stakeholders at all levels
is called for. This includes involving developing countries in international fora to prevent capital flight and
tax evasion. At national level, strengthening the capacity of local governments to provide essential
services and apply local solutions brings international goals to local people and fosters their shared
responsibility as well as accountability in goal setting and achievement. Selfdetermination is a key
principle of a human rights-based approach and it can be fostered by way of inclusive budgeting or
assistance to produce shadow reports. Innovative transdisciplinary methodologies offer promising entry
points to involve multiply disadvantaged groups and individuals.
Engage in issues of power by way of solid political economy analyses. The will provide the basis upon
which to negotiate the delicate balance between interfering with domestic politics and, as a longterm
and accountable partner, promoting substantial change towards more equal societies.
