Ending inequality

Date: 25 Oct 2016

The world has never been richer but this wealth has never been so unevenly distributed. How to explain the facts ? What can be done to act upon them when the Sustainable Development Goals appeal to improve the living conditions of the 40% the poorer ?

In 2015 the world has never been richer, if wealth is measured in terms of goods and services consumed and produced. And this wealth has never been so unevenly distributed. The share of national wealth owned by the richest 1% and 10%, in countries where tax data are available, reach the peak levels of the beginning of the last century. Rising inequality within countries is also observed at the global scale. By 2016, half of the world’s wealth will be owned by 1% of the Earth’s population.

This seemingly inexorable resurgence of inequality would be even more alarming if it was not accompanied by an equally unprecedented countermeasure: for the first time, the reduction of domestic income inequality has been put onto the international development agenda – it is one of the universal Sustainable Development Goals (SDG 10) that were adopted in September 2015 at the end of the United Nations General Assembly. It should be noted that the previous Millennium Development Goals (MDGs) did not address income inequality and focused on extreme poverty and access to basic services; moreover, they only related to developing countries, unlike the SDGs that apply to all countries whatever their level of development.

Rising inequalities are incompatible with sustainable development – to such an extent that inequality has been addressed in the list of SDGs, overcoming the objections of countries such as the United States, Indonesia and China, the diplomats of which are masters of the art of negotiation and have a preference for the comfort of sovereignty. But in what sense are inequality and sustainable development incompatible? Economic inequalities have a direct impact on access to care and health services in countries that lack an effective social protection system – a situation that now applies to 70% of the world’s population. A similar state of affairs regarding access to education, housing, energy, credit and financing occurs when the services associated with these areas are provided by failing administrations or markets. Economic inequalities raise problems of a different nature and a very different scale from the persistence of absolute poverty. SDG negotiators were right to avoid pitting one agenda against the other, but rather to make two distinct objectives.

However, a number of questions remain that the mere adoption by the United Nations of a target to reduce inequality cannot claim to solve, three of which we focus on here. How can widening domestic inequalities be explained? Or in other words - what have been the roots or “drivers” of this divide over the last twenty years? Moreover, is the reduction of inequality a means to an end - to reach other SDGs - or an objective in itself? What policy options are being considered or implemented, and how does the pursuit of the SDG 10 imply a change in the intervention methods of development agencies? Should there be a role, and what should it be, for the global consideration of taxation in this agenda?

In 2013, AFD, IDDRI and Teri gathered the first available empirical evidence demonstrating the link between rising inequality and an absence of sustainability. This exploration is continued here in the directions set out by the three aforementioned questions.