Harry Jones - Research Officer, Research and Policy in Development, ODI
Milo Vandemoortele - Research Officer, Growth and Equity Programme, ODI
Claire Melamed - Head of Policy, Action Aid
Tim Horton - Research Director, Fabian Society
Kate Bird - Programme Leader, Growth and Equity Programme, ODI
There is a growing recognition amongst researchers, practitioners and policy makers, the importance of equity (North and South) towards poverty reduction. Within country, inequality is associated with conflict and insecurity and reduced economic growth. Research shows inequality has also contributed to the global financial crisis, lack of progress towards reaching the Millennium Development Goals and deep rooted inequities can result in gaps of well-being within countries, as illustrated by differences in health and life expectancy. At this event, we analysed how public policy can impact on reducing inequality and present lessons useful for policy makers in the North and South. It is an opportunity for the cross-fertilisation of ideas by researchers and practitioners working on development and social policy and we hope that it will contribute usefully to practical policy debates both in the UK and in the South. The presentations included: Equity North and South: concepts, methods, public attitudes and public policy Why equity is a useful concept for development and social policy Public attitudes to economic inequality in the UK. Inequality and the global financial crisis Equity and Inequality in developing countries
There is a growing recognition amongst researchers, practitioners and policy makers, the importance of equity (North and South) towards poverty reduction. Within country, inequality is associated with conflict and insecurity and reduced economic growth. Research shows inequality has also contributed to the global financial crisis, lack of progress towards reaching the Millennium Development Goals and deep rooted inequities can result in gaps of well-being within countries, as illustrated by differences in health and life expectancy.
At this event, we analysed how public policy can impact on reducing inequality and present lessons useful for policy makers in the North and South. It is an opportunity for the cross-fertilisation of ideas by researchers and practitioners working on development and social policy and we hope that it will contribute usefully to practical policy debates both in the UK and in the South. The presentations included:
Equity North and South: concepts, methods, public attitudes and public policy
Why equity is a useful concept for development and social policy
Public attitudes to economic inequality in the UK.
Inequality and the global financial crisis
Equity and Inequality in developing countries
Kate Bird opened the session by noting the universal nature of concerns about equity, stating inequities exist in all parts of the world and policy responses are debated in all types of country governments. It is therefore important to link the discourse of development to that of the global north. The goal of this panel is to do just this by identifying lessons about equity across the traditional North-South divide. She also suggested that we need to think about how equity concerns play alongside other key development issues including climate change, enabling growth, achieving the MDGs, fragile states and security, governance and human rights.
She then presented a short summary of some of the key concepts associated with debates about equity.
- Fairness, social justice
- Exclusion and adverse incorporation
- Reference groups and the importance of our formed identities in this global age
- Social compact, altruism, state-citizen contract
- Equity, equality, poverty and wealth, polarisation
- Power and patronage, class and hierarchy
Touching only briefly on each of these concepts, a number of common issues nevertheless emerged. Kate argued that we need to be clearer about defining these terms, and also to question what they mean when translating them into policy and practice.
Kate then set the stage for the panelists by describing where we stand on issues of equity, noting we already know a lot about what builds equity, that in some places there has been progress and that therefore success stories are out there (see accompanying presentation for addition detail on what works in building equity). The remaining challenge is to tailor existing elements of the policy toolbox to political economy contexts in particular countries, because merely transplanting is unlikely to budge existing inequalities. This process of adaptation to country context is a critical part of nation building and developing the accountability of states to citizens but faces a number of challenges. As the default condition is one that trends towards increasing inequality, divergence and polarization, active policy responses require a constituency in favor of policies to support equity. Often this is difficult to achieve, as it may demand a willingness to be taxed more and thus require evidence of success to engender faith that funds will be used effectively. It demands a willingness to express the need for a better future.
Harry Jones then presented new ODI research on equity addressing three main questions: what is equity?; why is equity valuable?; and what are the challenges of building equity?
On the first question, he argued that equity is fundamentally about distributive and social justice, reflecting both what people get and why they get it, and can generally be conceived of according to three main principles. The first of these, equal life chances, suggests there should be no difference in life outcomes based on things over which people have no control. For example, enormous discrepancies in life expectancy at birth between neighborhoods in Glasgow or similar inequities in life outcomes between groups with different skin colors and locations of birth (urban vs. rural) in South Africa are objectionable because these are variables that are beyond people’s control. The second principle, equal concern for peoples needs, suggests some goods (necessary for a basic standard of living) should be distributed according to need and nothing else. Here Harry cited theories of distributive justice, which suggest distribution should reflect a moral equality based on common humanity and treating all people/citizens as equals. The third principle is meritocracy. According to this principle, some goods and services should be distributed according to achievements. This principle is often built upon notions of ‘fair competition.
Why is equity valuable? Harry argued there are both intrinsic and instrumental values. The intrinsic value relies on the moral argument, for example, that if we could narrow the gap in earnings between men and women, that would be valuable in its own right and doesn’t need further justification. Equity also has instrumental value demonstrated by a growing body of empirical evidence that shows equity has a number of causal effects on other significant development goals. Drawing on both the benefits of reductions in inequity and improvements in equity, Harry suggested equity has the potential to impact norms of cooperation and compliance in community life including peoples’ likelihood of paying taxes, degrees of trust, and levels of violence, drug abuse and crime. He also argued that equity has important economic value, noting the importance of early land reform movements in Southeast Asian countries such as Vietnam in improving growth and poverty reduction (conceived of both in income and non-income metrics).
On the final point, the challenge of building equity, Harry argued that tackling inequity must be considered a long-term process. Citing the continued inequities in post-apartheid South Africa, he noted that inequities are deeply rooted into society. As a result, it can also take a long time to see the instrumental impact on indicators such as GDP. Here Harry Simon Szreter’s study on English Poor Laws – a comprehensive system of social protection put in place in 17th century England. Szreter concluded that while the Poor Laws contributed significantly to creating the necessary preconditions for England’s economic growth, changes took nearly 60 years to embed (practically and institutionally – e.g. eliminate free riders), and then a total of 200 years to properly lay foundations for sustained growth. An additional challenge arises from the fact that given existing distributions of power, wealth and opportunity, efforts to build equity generally requires overcoming power imbalances. For example, many groups may benefit from existing inequities and may be in a better position to block reforms than people who are systematically excluded from the policy process. There may also be prevailing cultural norms which sustain inequity such as attitudes towards girls’ education in many countries that prevent them having equal life chances, or misconceptions of disadvantaged minorities as ‘lazy’. From the donor perspective, these issues are often seen as too politically contentious. Issues of equity thus often fail to make it on to donor policy agendas, at least explicitly.
Tim Horton began his presentation on inequality as it is understood within the UK by returning to the point made by Kate Bird that we do, in fact, already know which types of policies can successfully support equity. Given that point, he argued we must therefore also acknowledge the importance of addressing the constraints to those policies that arise from public attitudes towards poverty and inequality. In other words, we need to address the politics of peoples perceptions. Based on the evidence collected in the survey work presented, Tim argued ‘saying it louder doesn’t help’, and therefore we need to be smarter about how we communicate ideas to support equity.
This theme was reflected in extensive survey work presented on how people conceive of fairness in the UK. Tim suggested two key distributive principles are at work: need and desert, with the majority of UK citizens making their decisions about whether something is fair based on the latter. It should be noted that these different principles can produce similar judgments (i.e. high wages for the super-rich or the level of a minimum wage). The survey work also revealed a belief in fair inequality, that is, that equity and fair procedures can produce unequal outcomes. This suggests abstract calls for egalitarianism may thus fall on deaf ears and that arguments grounded in properly rewarding people for work that is currently under recognized could be far more successful at promoting ‘progressive’ reforms. These reforms did in fact draw strong support from across political parties when framed in the right language.
Another key element in Tim’s presentation was the importance of psychological issues in explaining attitudes towards inequities. One such issue is the presence of cognitive coping in which people will create reasons to explain in a just or fair manner why some people are on high incomes and others low incomes. Interestingly, the credit-crunch shook this to some degree. Coping strategies gave way to asking whether inequalities on the top end are really deserved. The second psychological factor at work is a sense that inequality is inevitable. This fatalism suggests it is important for campaigners to emphasis our ability to do something about it rather than preach the values of egalitarianism.
One point of note, highlighted by Tim during his presentation, was the link to what Harry Jones referred to in his presentation as the instrumental value of equity. Tim’s research suggested this could be a powerful way of reaching people who care little about the intrinsic value of equity. Surveys revealed presenting people with detailed information on relationship between child conflict and inequality moved people, perhaps moreso than arguments about fairness
Tim concluded by highlighting the importance of engaging the public in informed dialogue. This requires us to understand different starting points in peoples’ attitudes, the lack of information held by many people and the tendency to rely on stereotypes that may be inaccurate. Combating fatalism (for example, by presenting information such as that of Richard Wilkinson on variation in inequities among OECD countries) relies on campaigners and policy markers engaging in clear dialogue that speaks to people’s own beliefs. People do care about the impacts of inequality even where inequality itself is not clearly opposed for intrinsic reasons, we just need to recognize this.
Milo Vandemoortele then presented on the causal relationship between inequality and the Global Financial Crisis, suggesting another reason why inequity deserves our attention. Milo’s argument suggested that rising inequality within, and between, countries contributed to financial instability that resulted in the current crisis.
Within countries, rising inequality led to the following conditions:
- A decrease in aggregate demand based on a shift in wealth to portions of the population with a lower propensity to consume
- An increased demand for borrowing among much of the rest of society to achieve aspirational levels of consumption
- Social and political instability
Policies undertaken to counter these effects and to bolster aggregate demand, support stability and enable consumption growth have fuelled financial instability. Such policies include, lax regulation, the proliferation of complex financial instruments and loose monetary policy. Milo argued that more unequal societies are prone to follow boom-bust policies because inequality engenders a political stalemate to address issues of instability, vulnerability among poor and small investors and the tragedy of the commons.
At the same time between-country inequality, also referred to as global imbalances, aggravated financial instability in the system. These trends were the result of the use of asingle national currency as an international borrowing standard, the destabilising effect of large and largely unregulated speculative capital flows, and the reduction of fiscal space to pursue counter-cyclical policies in developing countries.
Milo then noted the mutually reinforcing nature of these two types of inequality. Industrialised country policymakers, aiming to avoid economic and social instability associated with rising inequality, have relied on external financing to subsidise consumption and easy credit for the middle-income income earners experiencing stagnant real wages.
She then concluded by presenting a number of policy recommendations at both national and global levels including:
- Making investments in infrastructure and human capital to reduce inequality and promote a sustainable recovery
- Implementing policies to reduce country-level vulnerability
- Enacting institutional reforms including stronger regulations and early warning systems in financial sector
- Reconsider US$ as sole international borrowing standard
- Reduce incentives for middle-income countries to ‘self-insure’ by accumulating excessive reserves
- Strengthen and democratise international financial governance
- Enhance fiscal space for developing countries
Claire Melamed presented a set of ideas building an agenda for a global welfare state. In this presentation she argued global inequality is important part of poverty reduction agenda. There is, she argued, a consensus that global inequality exists, and possibly that it is has a negative impact. She then questioned why, given that redistributive policies are heavily debated at the domestic level as a method of tackling poverty, policies to look at international inequalities absent from the debate. She argued that the current context, emerging from the financial crisis and approaching the post-MDG era in 2015, might be the right time to put inequality on the policy agenda.
Claire then suggested some details about what an international redistributive agenda would look like. A ‘global welfare state’, she argued, would shift from development targets based on global or country level averages (MDGs) to a commitment to ensure every individual has access to basic minimum of services and income. The responsibility would still be with national governments to deliver, but would incorporate an international effort that addresses all people not those needed to be reached to achieve targets. This agenda, intended to be more inspiring than just halving poverty would be based on rights rather than charity, thus avoiding the decline of public support for aid.
Claire then addressed two points as to how to afford the figure of US$ 1-4 trillion she suggested as the total cost to provide the services of a very basic welfare state. First, she argued for shifting funding mechanisms from uncertain ‘aid’ to more predictable redistributive mechanisms like carbon taxes, or taxes on foreign transactions. The programme would then ultimately depend on a combination of national and international level redistribution adjusted according to levels of wealth and inequality at the national level.
Kate Bird then drew the formal presentations to a close, highlighting a small number of key points that had emerged across the presentations with particular resonance for her, including equal life chances, equal needs, meritocracy as varying definitions in different circumstances, the stickiness of inequality and the political challenge of overcoming that stickiness, the need to change to a more positive discourse that emphasizes success to overcome feelings of fatalism and the need to demonstrate those successes to voters and taxpayers.
A number of issues were raised during the discussion that followed the presentation. The first question raised the issue of whether the financial crisis might be creating a more positive image of the poor. While the view of the panel was that it was not doing so precisely, it may have increased awareness of the structural factors leading to poverty. There was also a question as to whether the discourse on inequality is too limited, dealing on with donors and the poorest of the poor. Other questions dealt with the need for more discussion of why we should be doing these things (promoting certain aspects of development policy), as opposed to always focusing on ‘how’ to do things and the way in which efforts to support equity in different spheres may be in conflict (i.e. support to domestic businesses acting abroad).
The final debate centered on the argument that inequality is ok as long as there is growth as well, and the suggestion of a trade-off between growth and inequality. The views of the panel varied to some degree. Some members suggested this might vary between countries in different places on the development spectrum. The panel agreed that for relatively rich, developed countries, we do seem to be past the point where growth needs to be prioritized over equity. However, Kate Bird made the point that a good deal of literature and experience has demonstrated that there is not an inevitable trade-off between promoting growth and promoting equity, but about making decisions which enable a pace and pattern of growth in which the poor can participate and from which poor people can benefit.