The Shifting Landscape of Inequalities—What Have We Learned?

This contribution is published as part of the UNRISD Think Piece Series, Overcoming Inequalities in a Fractured World: Between Elite Power and Social Mobilization, launched to coincide with a major UNRISD Call for Paper Conference by the same name. In this series, experts from academia, advocacy and policy practice engage with the topic of inequality by critically exploring the various causes of deepening inequalities in the current context, their implications for sustainable development, and strategies and mechanisms being employed to reverse them as part of the global conversation on inequalities leading up to the review of Sustainable Development Goal 10 at the UN High-Level Political Forum in July 2019.

While inequality has now firmly positioned itself as a key public policy issue, the development community still tends to focus in large part on the bottom of the pyramid, the poorest of the poor. This think piece rounds out a series which was launched as a way of continuing the conversations that began during the UNRISD conference and seeks to shift the perspective towards the top of the pyramid. It asks how the growing concentration of wealth and income globally, and those actors who are at the centre of this trend—elites—are reshaping our world and touching the lives of those at the other end, from Ugandan forest-dwellers to social economy producers in Argentina, from indigenous Mexican students to Vietnamese farmers and working class people worldwide. In this context, these think pieces explore drivers and impacts of inequalities, but beyond that reveal ways that people, communities, social relationships and institutions are shifting, adapting and innovating in response to them.

Maggie Carter is a Research Analyst and Katja Hujo is Senior Research Coordinator at UNRISD.

How did we get here?

Income and wealth inequality is increasing at an alarming rate. The global top 1 percent of earners captured 27 percent of real income growth between 1980 and 2016, more than twice the amount of the bottom 50 percent (World Inequality Lab 2018). This unprecedented concentration of wealth and income, popularly referred to as the 1 percent economy, is in part enabled by a global financial landscape in which weak tax governance marked by regressive policies and lack of oversight and regulation mean more wealth stays in fewer hands.

Andrés Solimano illustrates how various loopholes and privileges available to the super rich, such as storing wealth in the art market and freeports, and the use of investment migration regimes as well as tax havens, in effect facilitate this wealth accumulation and compound inequality. With an estimated 10 percent of global GDP currently held in offshore tax havens, massive amounts of funds and potential tax revenue is lost. This hit to state revenue goes in parallel with recent moves towards austerity, which in many places have reduced already minimal public spending, as Fariya Mohiuddin from the Tax Justice Network illustrates, which has led to “the erosion of rights … especially with regard to health, housing and food … for those unable to pay for private services where public provision is either scant or of very poor quality”. Such policies have further compromised the state’s ability to collect revenue, both through the lowering of corporate tax rates and the reduced capacity of the state to detect tax evasion (Mohiuddin). The Tax Justice Network estimates the global revenue loss to corporate tax evasion at around USD 500 billion annually. This cycle of wealth concentration alongside reduced state spending has increased inequality across the globe and left many people without sufficient resources to access their most basic rights.

Two of the featured think pieces hone in on regional examples of this global turn, laying out its causes and consequences. Andrew Wells-Dang and Vu Thi Quynh Hoa of Oxfam explore the recent historical trajectory of wealth inequality in Vietnam, as the country’s promising period of growth and poverty reduction in the 1980s gave way to growing inequalities in income, opportunity and participation in the last 12 years, which were marked by a shift from agriculture and small business development towards export-led industrialization. Recent Oxfam research, summarized in the think piece, shows the impact this has had on social mobility, particularly for marginalized groups. Data show that upward mobility for the poorest quintiles declined for all ages, genders and regions between 2010 and 2014, whereas previously it had been on the rise.

Luciano Enrique Andrenacci explores how access to rights and social inclusion of the poor and marginalized has shifted as conceptions of citizenship have evolved in Latin America. While the twenty-first century saw a shift to “inclusionism”, in which “democratic political regimes reassessed and resumed economic development, and launched remarkable drives to acknowledge and tackle enduring inequalities”, this trend has reversed in the last decade. Today, recently established inclusive citizenship regimes are unravelling, as economic slowdown and fiscal constraints have reduced access to economic opportunities and social protection, and corruption, bad governance and limited state capacity have further alienated people from their rights.

Ultimately, we can see from many of the articles included in this series that inequality is a compounding process, a cycle in which the poor or already disadvantaged groups become further marginalized and the rich gain more power. So, what, if anything, can break this cycle?

Breaking the cycle from above…

There are many lessons to be drawn from the think pieces in this series about ways to reverse this trend of growing inequality. On one hand, many technical solutions have been proposed. First of all, halting the massive accumulation of wealth requires progressive taxation systems and globally coordinated regulations. Preventing tax evasion is essential, for example through the creation of global public registers of assets, but it is equally important to dismantle tax systems that place the majority of the burden on low- and middle-income earners, while the wealthy benefit from tax breaks and loopholes (Mohiuddin, Solimano).
However, increasing tax revenue through just tax systems is not enough; how those revenues are used is key to address inequality. Various authors stressed the importance of universal services and social policies, which ensure all citizens have equal access to rights, regardless of race, gender, socioeconomic status or ethnicity (Andrenacci, Fogou, Mouhiuddin).
However, while technical solutions for reducing inequality have been widely identified, by UNRISD and many others, the question that remains is how to implement such changes when those in power benefit from the status quo. Wealth inequality has strong political implications, as the concentration of economic resources translates into power and influence. As Matias Lopez illustrates, even though inequality has negative consequences for the whole of society, including the very wealthy, such as crime, political instability and reduced labour productivity, elites are generally opposed to redistribution, “acting,” as he says, “against their own interests”, a phenomenon he attributes in part to elites’ perceptions of poverty and preconceived notions about the poor. Elites can also coopt institutions in political arrangements that are actually meant to guarantee broad and equal political inclusion, such as the system of ethnic federalism in Ethiopia and Cameroon (Fogou). Facing strong opposition from elites, many of whom are the ones making or influencing political decisions, addressing inequality is an issue of political will. This idea is explored by Martyna B. Linartas’ piece, which compares the perspectives of several key thinkers on the issues, some of which see policy space constrained by economic imperatives, while others see a stronger role for policy interventions, such as Thomas Piketty who recognizes the “vital importance of political institutions to change existing patterns of wealth distribution.”

…and from the grassroots

In the face of these barriers to reducing inequality, how can actors come together to make sure everybody, and specifically disadvantaged minorities and those left behind and facing multiple layers of marginalization, are able to enjoy their human rights and live a dignified life in inclusive and socially just societies? Various authors offer insights into possible approaches and pathways. Peter Westoby lays out a framework for community organizing that uses a “scaled-across approach” ranging from micro-level community-based work to meta-level community development, which brings actors together nationally and internationally through various networks and alliances. This approach, he argues, “enables local work to scale across levels and ensures people have more collective power than if only working locally.”

Other authors highlight the importance of engaging local communities, specifically those most affected by inequalities. Karen Bell emphasizes the need to engage working classes in movements towards sustainability, those who bear a “disproportionate burden” of the climate crisis, while often not being sufficiently taken into account by environmental movements, or in environmental policies and transition strategies. Bell suggests six areas of change to ensure working class people are key agents in the sustainability process, ranging from participatory practices to legislative changes, as well as political and economic changes. Baptiste Godrie explores the relationship between social inequalities and knowledge production systems such as universities, insisting that efforts must be made to overcome hierarchies of knowledge, or epistemic inequalities. When seeking solutions to global issues, we must turn to participatory research and local knowledge systems of those most affected in order to fully understand and combat inequality, creating a new ecology of knowledge.

Several think pieces also offer concrete examples of inclusive and participatory efforts to reduce inequality. Felipe J. Hevia and Samana Vergara-Lope explore an educational programme targeted at rural indigenous communities in Mexico which engages whole communities in an innovative learning approach. This programme came about through an alliance of civil society organizations, academics and communities to address a key barrier to the upward mobility of marginalized communities. Malena Victoria Hopp discusses the possibilities for alternative approaches to inclusive social policy, outlining Argentinian state-run cooperative programmes meant to target vulnerable groups excluded from formal labour markets. While the programmes had positive results, she finds, as they were financially dependent on the government, they had limited autonomy, and following a rightward political shift, were replaced with cash transfers. These, she laments, have been unable to match the positive impacts of the cooperatives which reduced unemployment, supported economic development, created social cohesion and empowered communities.

The pieces in this series have covered a wide range of topics and regions, from youth migration in Vietnam, to the impact of the global art market on tax revenues; from the evolution of citizenship regimes in Latin America, to the politics of ethnic inclusion in Ethiopia and Cameroon, among others. Yet while these issues seem, in many cases, worlds apart, by examining such topics side by side, we see how they are interconnected and tied to a larger global story—one of inequality, exclusion and power asymmetries. In order to break through the adverse cycle of compounding inequalities, we need a better understanding of what drives inequalities in different contexts and at the global level, and what economic spaces and political strategies can be harnessed to overcome them. By identifying drivers of inequality and barriers towards change in specific contexts, the authors in this series have shared a range of positive examples of transformative change, identified progressive policies which enhance equality, and discussed concrete proposals on how to make the economy, public institutions, taxation, research, education, citizenship regimes, community development and environmental movements more inclusive and effective. Sharing and learning from these experiences is a key step in overcoming the multiple fractures wrought by inequality and injustices and building better future societies.