Rising inequality--how to reverse it?

Author:Etienne, Dominik

30 October 2014

The last decade has witnessed a revival of concern over the impact of high-income concentration on economic development and wellbeing. The global distribution of income has for decades resembled a 'champagne glass' (figure 1).

Today, the top 20 per cent receive more than 70 per cent of the global income, and the top 1 per cent (70 million people) earn as much as the poorest 3.5 billion people--that is half the world population. Some positive news can be found, for example in the case of Latin America, but progress is much too slow. Yet, at the current rate of progress it would take 800 years for the bottom billion to get even 10 per cent of the global income.

On 23 October UNU-WIDER, ILO, and UNCTAD organized a policy seminar to discuss why it is crucial to integrate the economic equity perspective to national and international development processes, with examples of policies that have worked. More than 50 representatives of over 20 international organizations--among them 13 UN agencies and bodies--and permanent missions to the UN followed the invitation and engaged in the discussions with the expert panel consisting of Isabel Ortiz, Richard Kozul-Wright, and Giovanni Andrea Cornia (LINKS). The meeting was chaired by Tony Addison, Deputy Director and Chief Economist of UNU-WIDER.

New policy model--key for falling inequality in Latin America

Many observers ask how rising inequality could be halted and reversed--through policies in the areas of trade and banking regulation, labour markets, social transfers, and others. This debate can benefit from the evidence of a significant decline in inequality recorded in much of Latin America in the first decade of the millennium (figure 2) as presented by Giovanni Andrea Cornia, Professor at the University of Florence and former Director of UNU-WIDER.

The UNU-WIDER research project led by Andrea Cornia suggests that the drop in income inequality in nearly all of the Latin American countries was mainly due to: a fall in the skilled-unskilled wage ratio; an increase in social assistance transfers, and a lower concentration of capital incomes.

According to Andrea Cornia, the drop in inequality in the region is structural rather than cyclical, as inequality continued falling during the crisis of 2009-12 and based on the most recent data from 2014 is still doing so. The positive trend does not seem to have been due to improvements in the global economic conditions, but rather to the rapid...

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