The eradication of poverty has traditionally relied on growing the economy, combined with redistribution: GDP growth, in this approach, is essential to the fight against poverty, a condition for financing public services and social policies.

Prof Olivier De Schutter argues that we now need to move beyond this approach, and to expand our toolkit in the fight against poverty. Understood as the increase of the output of economic activity measured in monetary terms, economic growth remains important in certain areas, such as housing, education or public transport, especially to raise living standards in low-income countries. This is especially true if it is guided by the duty to realise human rights.

Well-Being without growth? A new approach to combating global poverty – Institute of Development Studies (ids.ac.uk)

Workers drill holes in the roof of a building where refugees, denied the legally provided shelter, are protected from snow, rain and wind. This is Belgium

Zo, even snel gaatjes boren zodat er water binnen sijpelt… pic.twitter.com/3a5Qd4TSSE

— Thomas Willekens (@ThomasWilleken1) March 10, 2023

New data on inequality show probably the greatest reshuffling of world incomes since the industrial revolution, Branko Milanovic writes.

Read the interesting article

In a certain way, it is funny to see how a debate on an essential element of social policies can go on for decades. Then, implode because of the semantic confusion that was created about the idea that had hitherto been so passionately promoted. The essential element of social policies was “Income Security.” The idea passionately promoted was “Universal Basic Income.”

In 1986, a Belgian philosophy professor, Philippe Van Parijs, created BIEN, the Basic Income European Network, in which ‘European’ was later replaced by ‘Earth’. The idea was simple. The liberal idea of freedom could never become concrete because inequality of resources was too important. To promote more equality, the best idea was considered to be an equal sum of money given to everyone in society, whether rich or poor, working or not working, ie the Universal Basic Income. It was considered to be the condition for real freedom and real equality of opportunity. The payment had to be unconditional, i.e. without any means of testing. The main goal was to promote social justice.

Read the article by Francine Mestrum

Also in French and Spanish:

Le revenu de base est-il basique ? | Meer

¿Qué tan básica es la renta básica? | Meer

On the multidimensionality of poverty and inequality

It sounds so very reasonable to look at all the different dimensions of poverty and inequality. But is it? Always? Is poverty, in every market economy, not mainly a question of lack of money? Is inequality of income and wealth not the most important aspect of all sorts of differences and discriminations?

Read the article by Francine Mestrum

(also available in French and Spanish)

ANNEX

This is not an exhaustive study. I have limited myself to the two most important global and institutional authors in the field of development thinking: the U.N. and its subsidiaries on the one hand, the Bretton Woods institutions on the other (World Bank and IMF). All documents dealing with the specific topic of inequality since the beginning of this century and until 2020 have been included in this analysis. In the first place, some of the annual reports of the World Bank on ‘global development’, together with the annual reports on the currently most important policy priority of ‘sharing prosperity’. Follows its sister organisation, the International Monetary Fund, which is particularly sparse in its knowledge on inequality, although interesting research has been published by its research department. For the U.N., reports on the social situation in the world that deal more specifically with inequality. For UNDP, UNRISD, and UNICEF, these are documents that, like those of the U.N. itself, are at the root of the broader institutional interest on the topic of inequality.

A third institution, the International Labour Organisation (ILO), which also deals with inequality, was not included in this analysis.

This research therefore deserves further expansion to obtain a more complete view of the treatment of the topic and the knowledge produced.

A. Analysed Documents:

WB00                   World Bank (2000), World Development Report 2000/2001. Attacking Poverty, World Bank Document

WB6                     World Bank (2005) World Development Report 2006. Equity and Development, WDR 2006 – English.pdf (worldbank.org)

WBStrat               World Bank (2013), World Bank Group Strategy, October 2013, World Bank Group Strategy

PSP16                   World Bank (2016), Poverty and Shared Prosperity: Taking on Inequality, Poverty and Shared Prosperity 2016 : Taking on Inequality (worldbank.org)

PSP18                   World Bank (2018), Poverty and Shared Prosperity: Piecing together the Poverty Puzzle, Poverty and Shared Prosperity 2018 : Piecing Together the Poverty Puzzle (worldbank.org)

PSP20                   World Bank (2020), Poverty and Shared Propsperity: Reversals of Fortune, Poverty and Shared Prosperity 2020 : Reversals of Fortune (worldbank.org)

IMF                       IMF (2017), Fiscal Monitor. Tackling Inequality, IMF Fiscal Monitor: Tackling Inequality, October 2017

WSS5                    United Nations (2005), The Inequality Predicament. Report on the World Social Situation 2005, Book FF.indb (un.org)

WSS10                  United Nations (2010), Rethinking Poverty. Report on the World Social Situation 2010, fullreport.pdf (un.org)

WSS13                  United Nations (2013), Inequality Matters. Report on the World Social Situation 2013, RWSS 2013- 20 Jan.indd (un.org)

WESS                    United Nations (2014), Reducing Inequality for Sustainable Development. World Economic and Social Survey 2014, Etpu (un.org)

UNDP                   UNDP (2013), Humanity Divided: Confronting Inequality in Developing Countries, Humanity Divided: Confronting Inequality in Developing Countries | United Nations Development Programme (undp.org)

HDR                      UNDP (2019), Human Development Report 2019. Beyond Income , Beyond averages, Beyond Today. Inequalities in Human Development in the 21^st Century, Human Development Report 2019 | Human Development Reports (undp.org)

UNRISD                UNRISD (2010), Combating Poverty and Inequality. Structural Change, Social Policy and Politics, untitled (unrisd.org)

UNICEF                Ortiz, I. and Cummins, M., (2011), Global Inequality: Beyond the Bottom Billion. A rapid Review of Income Distribution in 141 countries, Microsoft Word – Global Inequality REVISED – 5 July.docx (unicef-irc.org)

B. Methodology

The methodology used for this contribution is based on Foucault’s concept of discourse. This means that it looks beyond language and text and places itself in a perspective of sociology of knowledge.

This involves deconstructing and reconstructing various documents by one or more ‘speakers’, bringing out the intertextuality, exposing the continuities and discontinuities between them and looking for the ‘order of discourse’, that is the field of knowledge that is delineated, and for a ‘dispositif’ of knowledge and power.

The aim is to identify the knowledge that is built up and disseminated by the ‘speakers’, with the awareness that this knowledge is always and inevitably interpreted by the ‘reader’, or in other words that the meaning that the ‘speaker’ gives to his words will never be exactly the same as the meaning that the ‘reader’ gives to them. This is inherent in language and speech. No discourse is totally transparent. A good discourse analysis will try to reconstruct the original meaning as well as possible by broadening the analysis in time and space. Every discourse analysis produces a discourse about a discourse.

Such an analysis consists of at least two, but may also involve three or four steps:

1. Observing what is said, using a reading schedule prepared in advance (in this case, five questions) for what exactly one wants to find out. All statements are accurately recorded. In this phase, ICT can be used, although a ‘close reading’, although time-consuming, will be more reliable because even small shifts can be identified.

This is the ‘scientific’ phase, similar to the exact sciences and/or the ‘questioning’ of the ‘speaker’ in order to precisely define the object of the research.

The result of this first phase is not included in this contribution due to its length.

2. The second phase is the hermeneutic approach in which the researcher tries to understand the speaker and find the meaning of his statements. This requires looking at the relationships between various documents and speakers. This is an interactional process that requires a great deal of effort on the part of the researcher in order to avoid lapsing into cognitive relativism.

The result of this second phase can be found in the annex to this contribution, see below (Mestrum, 2022).

3. The researcher can still go further to try and explain why a speaker says what he says: the critical analysis. What is the field of knowledge in which the statements can be situated? How can the discourse be understood in its historicity? How does it determine itself in the symbolic universe of the speaker? In this phase, it is important to look beyond the surface of the language utterances, without searching for a hidden content. This is neither a critique of ideology nor a search for the ‘truth’ behind the discourse, but a search for its conditions of existence.

The result of this analysis is contained in point 5 of the contribution.

4. Finally, in a fourth phase, the (potential) performative character of the discourse can be indicated: what possibilities – knowledge and practice – does this discourse create? To what policy or resistance can it give rise? In this phase, the researcher produces knowledge about the knowledge produced by the ‘speaker’. This fourth phase was not applied in the contribution.

C. How to read and understand the documents? Five questions:

5.1. What inequality are we talking about?

No document systematically addresses the many different forms of inequality.

For the World Bank and the IMF, inequality of opportunity is initially the main concern, although they also deal extensively with income equality. This can be deduced from the final version of WB6 in which most references to income inequality were deleted from the draft texts. It is inequality of opportunity that causes poverty (WB6, 6). The IMF is the only institution to add ‘lifetime’ inequality, referring to how incomes may change in the course of life (IMF, 2).

Without making much of a distinction, it is most of all the inequality within countries that is under scrutiny, which also appears from the new strategy that the World Bank developed. In this strategy, income inequality is given priority, with an emphasis on the lowest incomes that need to be raised (WBStrat, 6; PSP16, 1) (see further 5.5). The World Bank measures income inequality in terms of income and/or consumption, but for its elimination, equality of opportunity remains the most important strategy (WBStrat, 6; PSP16, 3).

The World Bank and IMF do not address wealth inequality.

Unicef speaks of global, regional and national income inequality and also mentions wealth inequality (Unicef, 10, 25).

UNDP deals with income inequality, especially between people, but, through its focus on human development, looks at equality of opportunity to eliminate it. Human development is, by definition, about inequality which, in principle, can also disappear completely. After all, you cannot stretch life expectancy indefinitely, nor can you literate more people than your population. For the UNDP, by the way, it is not so much about ‘opportunities’ as about the ‘capabilities’ of A.K. Sen (Sen, 1992). At the same time, UNDP does pay attention to various forms of income inequality and explains the link between different inequality dimensions. Output inequality and inequality of opportunity cannot be viewed separately and must both be addressed (UNDP15, 6).

UNDP also points out that all inequalities are important and that the debate is all too easily and excessively simplified, which leads to a distorted and misleading picture. Hence, attention is also paid to subjective perceptions and the socio-psychological dimension of inequality (UNDP19, 23, 58, 64).

The U.N. discusses all the different forms of inequality in its various reports, with a focus on income, opportunity in general and education and health in particular. WESS also pays attention to wealth inequality.

5.2. What is the situation today?

All institutions point to growing inequality, usually with some numbers, but without always giving a systematic overview.

The World Bank observes that economic growth in many countries is accompanied by rising inequality (WBStrat, 1, 10). Measured over a long period of time (1820 to 1990), global inequality has in fact increased, but since then, it has been on the decline, primarily thanks to China and India. However, inequality within countries has become more important (PSP16, 9). In many countries, the poorest 40% improved between 2008 and 2013, but not in 23 of 83 countries studied, and in 15 of them the income share of the poorest 40% even declined (PSP16, 53). A few years later, in the midst of the COVID-19 crisis, the balance is much more negative: overall, shared prosperity continues to advance, but much more slowly. Inequality is bound to increase (PSP20, 4, 18, 81).

The UN also points out that global inequality is decreasing thanks to China and India, but also that the improvement for the poor is at the expense of the middle classes in these two countries (WSS5, 2, 44).

Most U.N. documents do have a separate chapter on the major trends and note that income inequality is increasing (WSS10, 7, 63; WSS13, Preface, 23, 25, 33; WSS20, foreword, 3, 20).

WESS pays attention to wealth inequality. Wealth is concentrated at the global level, with the top 1% owning 40% and the richest 85 owning as much as the poorest half of the world’s population. The richest 10 % own 70-90 % of total national wealth (WESS14, 3, 18). The majority of the world’s population lives in countries where inequality was higher in 2010 than in 1986. Inequality has risen significantly over the last decade (WESS14, 4) and inequality between countries has started to decline slightly (WESS14, 5). Global inequality remains very high. The middle-income countries are the most unequal, according to Unicef, and this should make us question the current development model (Unicef, vii).

In fact, according to UNDP, these large differences mainly reflect a difference in power. Even in most European countries, inequality has increased (UNDP19, 123).

UNRISD provides a brief overview of different stages in the evolution of inequality within countries (UNRISD, 69).

5.3. Why is attention being paid to inequality today?

Equity is fundamental to reducing poverty, and inequality of opportunity is a source of poverty. The greater the inequality, the slower the reduction of poverty. It may also jeopardise economic efficiency and inequality may cause social conflict. In most societies, there is a strong preference for more equality, it is an intrinsic value, for with too great an inequality, the sense of justice is offended (WB6,18), just think of the Arab Spring that was associated with it (PSP16, 70).

Mobility, too, is impeded by too much inequality. Yet, output equality must not be targeted, for this would lead to taxation and income redistribution and, consequently, to less investment, less innovation, and less growth (WB6, 2).

Equality of opportunity is a good objective for preventing extreme poverty, an increase in crime and violence (WB6, 18). Greater equality can lay the foundations for better economic institutions (WB6, 111).

Shared prosperity is incompatible with rising inequality, and high inequality may even put a brake on shared prosperity (WBStrat, 6). In order to achieve the poverty objective and more general welfare, inequality absolutely must decline (PSP16, 9, 59, 69, 75; PSP20, 97). Less inequality need not be in conflict with a desire for more growth (PSP16, 70).

Growing inequality and slower growth have drawn attention to policies to support inclusive growth. Some inequality is inevitable in a market economy but too much inequality can undermine social cohesion, lead to political polarisation and ultimately slow economic growth (IMF ix, 1).

For the UN, the reasons for reducing inequality are the same everywhere: poverty cannot be reduced quickly if inequality between and within countries is not also addressed, and the UN points to the MDGs (WSS20, 20, 45; WSS5, Preface). The Millennium Declaration’s global commitment to fighting inequality is fading, and it is necessary to achieve social justice and better living conditions (WSS5, 1). Real poverty reduction has a social, economic and political dimension (WSS5, 1). Economic growth is necessary, but it is not enough (WSS5, 1).

A race to the bottom has been created at the global level, through liberalisation policies, the new open trade regime, structural adjustment, financial liberalisation, in short, globalisation, labour market reforms, greater wage flexibility, the erosion of minimum wages, the reduction of the public sector, less employment protection and regulation, all of which lead to greater inequality and are a cause of international migration, social disintegration and increased violence (WSS5, 3, 5, 6, 105). It is this inequality that threatens social justice and development (WSS5, 6).

Poverty reduction has become the major objective of development policy, but with the exception of China and Southeast Asia, little has changed in the last twenty years (WSS10 Preface). As a result, the effectiveness of economic liberalisation and privatisation is increasingly being questioned (WSS10, Preface). There is no direct link between growth and poverty reduction (WSS10, 7; WDSS13, Preface). The MDGs called for a more just world, but it is becoming increasingly difficult to climb the social ladder (WSS13, Preface).

What the influence of inequality is on various domains such as growth, poverty reduction, social mobility, tolerance, etc., is explained in Chapter 3 of WSS13, 61. It is a question of social justice, people want their work to be rewarded with better socio-economic conditions (WSS13,23). Conflicts are increasing and populism is on the rise (WSS20, 51). Technological developments also have winners and losers (WSS20, 51). It is not just a question of a moral imperative, but of putting development on a sustainable path (WSS13,41).

Finally, it should be noted that in 2014, 60 % of respondents in rich and poor countries considered the ‘gap between rich and poor’ to be very large. This is also due to the differences in political power (WSS20, 162).

WESS and UNRISD also state that high inequality over a longer period makes it difficult to sustain growth (WESS14, 2, UNRISD, 60, 61). High inequality has negative consequences for the construction of inclusive States with economic and social redistribution policies (UNRISD, 62).

In many countries, people take to the streets to protest, which shows that the system is not working. Too many people are completely powerless and therefore other dimensions than just income need to be considered. A new generation of inequalities is emerging, related to climate change, gender and violence. These power imbalances play a major role (HDR, iii, 3, 4, 14, 60). There is inequality that is easily accepted, but there is also inequality that causes legitimate anger (HDR, 73).

Inequality slows down economic growth and is dysfunctional, says Unicef. Equity must be at the centre of the development agenda and there is an urgent need for equitable policies: employment, commodity prices and public spending must be considered nationally and internationally (UNICEF, vii)

Income inequality has negative implications in terms of health and social problems, citing Wilkinson & Picket (Wilkinson & Picket, 2010). Political instability can be jeopardised (Unicef, 10,32,33, 35, 36). After the crisis, there is a need for a recovery policy to prevent inequality from continuing to grow. The high asymmetry of income distribution is a sign of social injustice (Unicef 42, 43, 45).

5.4. What is the link between inequality, poverty and sustainable development?

According to the World Bank, there is a clear link between economic success, inequality and poverty (WB6, 9). The smaller the inequality, the more easily growth leads to poverty reduction (WB6, 9, 84). Half of the poverty reduction can be attributed to growth (WB6, 85). The major cause of poverty is a combination of power deprivation and investment opportunities (WB6, 227). Shared prosperity has a direct link to both poverty reduction and the sustainable development of the Sustainable Development Goals (SDGs) (PSP16, 2, 81).

Inequality must be reduced because there is a clear link to climate change (WSS20, 82).

Climate change is likely to affect inequality (WESS14, 2); there is a clear negative relationship, through four channels: individual, local communities, national and international. Gender inequality will also reinforce environmental destruction. A reduction in inequality may be useful in promoting environmental sustainability (WESS14, 7-11).

Inequalities cannot be separated from other dimensions of human development, economic growth and structural change (HDR, 82). Inequality is closely linked to climate change and will not benefit human development (HDR, 173, 175).

A whole range of policies is needed to address the complexities of human development, but inequality requires correct measurement in the first place (HDR, 15, 103). A single policy will not suffice and some policies are not appropriate for all countries. We do have a choice (HDR, 171, 223). What is needed most is convergence, the elimination of gender inequality, inclusive income increases and truly universal systems (HDR, 224, 225).

There is a causal link between inequality and poverty and it works both ways, unfortunately it is still too little addressed in the poverty agenda to also benefit human rights and citizenship (UNRISD, 59, 61).

5.5. How to fight inequality?

Redistribution is indeed necessary, but mainly of assets such as land, education, health… Political power must also be better distributed (WB6, 108). Taxes can bring efficiency costs (WB6, 10, 22). The fundamental labour law of the ILO must be respected (WB6, 15), trade unions can be positive and negative (WB06, 189), while minimum wages can also have efficiency costs (WB6, 189).

Transfers are not recommended, although a targeted form of social aid can help to give people more opportunities (WB6, 148). There is also room for charities (WB6 221). Taxes must be kept as low as possible, with a preference for VAT and flat taxes (WB6, 176). Furthermore, it is mainly the markets that must be made fairer (WB6, 207).

In 2013, the World Bank Group defined a new strategy. Since then, it not only aims for poverty reduction, but also for ‘shared prosperity‘. This means that the incomes of the 40% poorest people in a society must grow faster than those of the rest. The WB, then, anticipates the post-MDG era, as in 2015 the Sustainable Development Goals were adopted at the UN, which include ‘reducing inequality’ as Goal 10, with exactly this definition from the World Bank. It indicates that the global economy is changing, with a shift towards East and South, and with a greater role for the private sector.

Economic growth, equality of opportunity and the role of the private sector remain paramount in achieving the objective (WBG 1, 6, 19; PSP16, 2, 120; PSP20, 88). While a certain level of inequality is necessary to provide sufficient incentives, there remains sufficient room to promote growth (PSP16, 3). In five countries studied (Brazil, Tanzania, Mali, Bangladesh and Peru), minimum wages and an appropriate safety net have contributed to the transformation of economic growth into inequality reduction, but good macroeconomic governance remains the number one priority (PSP16, 12, 101). It comes down to making good policy choices (PSP16, 15). Taxes can have a direct redistributive effect but they can also slow down growth (PSP16, 16, 131, 148). Early childhood care, education and health care are crucial (PSP16, 132). One must be particularly careful with universal models because they do not necessarily lead to a reduction in inequality (PSP16, 17, 129). Transfer systems generally have a limited role (PSP16, 114).

Fiscal policy can help to achieve redistribution. Tax rates at the top of the income distribution, a possible universal basic income (UBI) and public spending on education and health should be considered (IMF, ix, 2).

Direct taxes and transfers are a key element of efficient fiscal redistribution. (IMF, ix, 6). But how progressive should taxes be so as not to impede growth? One has to be very careful, because taxes can be an obstacle to economic success. The empirical evidence is inconclusive regarding their distributional effect. Richer families have more chances of escaping taxes. Progressivity has fallen, but there are no rational arguments for this. There is certainly room for more progressivity, but it is politically difficult because the rich have a lot of influence (IMF, ix, 10, 11). One can think about different forms of wealth taxation. Many countries need to reduce opportunities for tax avoidance and evasion. An appropriate tax on capital incomes is needed (IMF, x).

UBI (Universal Basic Income) is difficult to define, but universal child allowances and social pensions already exist; the problem is affordability. UBI depends on the administrative capacity of governments and the ability to improve targeting. Safety nets can be strengthened, but it all depends on the level (IMF, x, xi). UBI can be very expensive, even at the level of a quarter of median per capita income. The redistributive effect depends on how it is financed (IMF, 16).

Investing in education and health can help reduce inequality in the medium term (IMF, xi, 21, 22).

Transfers/distributions must also be handled with care to avoid creating disincentives (IMF, 15).

Fiscal policy can be a powerful tool if the aim is to reduce inequality, but be careful with design!

For the U.N., the fight against inequality must be explicitly included in any policy designed to reduce poverty. The MDGs cannot possibly replace the much broader UN development agenda. What is needed is social protection with universal access to health and education, democracy and respect for the rule of law (WSS5, 4-6, 21). The State and the public sector remain primarily responsible for the provision of social services (WSS5, 24; WSS10, iii). Economic growth is not a panacea (WSS5, 26). The entire Chapter VI of WSS5, 131 is about possible policies to combat inequality, with a broad policy approach that puts people at the centre of development. Economic growth can be a means but not an end. What certainly needs to grow is the standard of living. Social and economic development are two sides of the same coin (WSS5, 131).

A strategic shift away from market fundamentalism is needed, with national development strategies and a totally new approach (WSS10, iv, 63). A basic social protection package is achievable and affordable everywhere (WSS10, 119). There are strong ethical and strategic reasons for moving towards a universal approach and focusing on a development process, rather than on poverty (WSS10, 151). The State must become a developmental State (WSS10, 151). An effective fight against inequality requires a three-dimensional approach: economic, social and environmental.

In concrete terms, this means a universal provision of social services, investment in education and health care and in infrastructure with better paid jobs (WSS13, 97).

The government can do more if it also has a better tax base, taxes must be made more progressive; indirect taxes can be so negative that they wipe out the positive effects of cash transfers (WSS13,105). There is an urgent need for more redistribution and public spending, through taxes, including investment in infrastructure (WSS20, 14, 158, 159).

With the right conditions, international migration can become a positive force against inequality (WSS20, 10, 128). Equal access to opportunities, fighting against prejudice and discrimination, for equality and social justice (WS20, 10, 12, 13, 14, 164).

Multilateral action is needed because inequality is a global problem (WSS20, 148, 168).

Specific national circumstances will always have to be taken into account (WESS14,1,2). Gender equality and employment can reduce inequality. The share of income from labour will decrease (WESS14,11, 12, 13).

A redistribution policy can be a powerful weapon in the reduction of inequality, through taxes and transfers, social protection, pursuit of greater tax justice (WESS14, 15, 16, 18).

Sustainable development must be a global process, away from an asymmetric globalisation with capital flows and limited labour mobility – an international dimension is needed; migration is an integral part of it, as is cooperation on fiscal matters (WESS14, 19-20) – international minimum social standards should be agreed upon, as should minimum living wages.

Justice/equity must be put on the development agenda and mainstreamed into it; transfers from North to South can be increased, South-South plays a bigger role today and a lot can be done nationally as well (Unicef, 38, 41).

An effective State with a strong government is important to play a redistributive role (UNRISD, 6, 13, 60, 77) while global reforms are necessary (UNRISD, 79). Growth and equity can reinforce each other with determined policies (UNRISD, 79).

Note:It should be noted that the documents published by the various institutions never constitute an ‘official position’ of those institutions. Official positions are exclusively political, taken by the highest authorities, led by the Member States. This is particularly important in the case of papers of their research departments that are by no means always converted into policy.