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High Levels of Inequality Can Escalate Political Instability

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By Santo D. Banerjee

NEW YORK (IDN) – As the United Nations prepares to mark its 75th anniversary in September, the Organisation has yet to fulfil the obligation enshrined in the mandate of the Charter: “to promote social progress and better standards of life in larger freedom“ by employing “international machinery for the promotion of the economic and social advancement of all peoples“.

The authors of the landmark World Social Report 2020 point out that fifteen years ago, the Report on the ‘World Social Situation‘ had warned that  growing inequality could jeopardize the achievement of internationally agreed development goals.

The report noted that the world was at a crossroads. If the vision of a shared future is to be carried forward, world leaders have to seize every opportunity to take bold and decisive action to reduce inequality, says the report.

This view is as valid today as in 2005. More than two thirds of the world’s population today live in countries where inequality has grown, and inequality is rising again even in some of the countries that have seen inequality decline in recent decades, such as Brazil, Argentina and Mexico, states the report.

The impacts of inequality are being felt at the personal and national levels. According to the report, which is produced by the UN Department of Economic and Social Affairs (UNDESA), highly unequal societies are less effective at reducing poverty, grow more slowly, make it more difficult for people to break out of the cycle of poverty, and close the door to economic and social advancement.

This is how UN Secretary-General António Guterres describes the situation. “’The World Social Report 2020: Inequality in a rapidly changing world’ comes as we confront the harsh realities of a deeply unequal global landscape. In North and South alike, mass protests have flared up, fueled by a combination of economic woes, growing inequalities and job insecurity. Income disparities and a lack of opportunities are creating a vicious cycle of inequality, frustration and discontent across generations,” he writes in the foreword.

The report provides evidence showing that technological innovation, climate change, urbanization and international migration are affecting inequality trends. The Secretary-General added, “The World Social Report 2020 sends a clear message: the future course of these complex challenges is not irreversible. Technological change, migration, urbanization and even the climate crisis can be harnessed for a more equitable and sustainable world, or they can be left to further divide us.”

The Sustainable Development Goals (SDGs), unanimously adopted by countries in 2015, contain a specific goal (goal 10) aimed at reducing inequality. Embodied in the Goals is the principle to “leave no one behind”. The report finds hat the extraordinary economic growth over the last several decades has failed to close the “deep divides within and across countries”.

These disparities between and within countries, the report says, will inevitably drive people to migrate. The report notes that, if it is well managed, migration will not only benefit migrants, but it can also help reduce poverty and inequality.

According to the report, powerful economic, social and environmental forces are affecting inequality. “The  implications of these global forces – or megatrends – are broad and varied. Some can help equalize  opportunities, while others are exerting mounting pressure on income inequality, mainly through their effect on labour markets.“

The report, released on January 21, examines  the  impact of four such megatrends on inequality: technological innovation, climate change, urbanization and international migration.

While technological change can be an engine of economic growth, offering new possibilities in health care, education, communication and productivity, it can also exacerbate wage inequality and displace workers.

The ‘accelerating’ impacts of climate change are being felt around the world, but the  poorest countries and  groups are suffering most, especially those trying to eke out a living in rural areas.

Also urbanization offers unparalleled opportunities. But, the stark reality of cities is that the poor and wealthy live side by side exposing acute inequality all the more glaring.

International migration enables millions of people to seek new opportunities and can, in principle, help reduce global disparities, but only if it occurs under orderly and safe conditions.

While these megatrends and the policies aimed at managing them interact with each other in multiple ways, the World Social Report 2020 focusses exclusively on the direct impact of each megatrend on inequality.

“Whether these megatrends are harnessed to encourage a more equitable and sustainable world, or allowed to exacerbate disparities and divisions, will largely determine the shape of our common future,” states the report.

It found that inequalities concentrate political influence among those who are already better off, which tends to preserve or even widen opportunity gaps.  “Growing political influence among the more fortunate erodes trust in the ability of Governments to address the needs of the majority.”

Even in countries that have fully recovered from the 2008 financial and economic crisis, popular discontent remains high.

The growing inequalities are benefitting the wealthiest.  Top income tax rates have declined in both developed and developing countries, making tax systems less progressive. In developed countries, the top income tax rates fell from 66 percent in 1981 to 43 percent in 2018.

And in developing countries, children in the poorest households—and those from the most disadvantaged ethnic groups—have experienced slower progress in secondary school attendance than those from wealthier families, who are increasingly sending their children to better quality schools.  Disparities and disadvantages in health and education are being transmitted from one generation to the next.

The report uses positive examples and presents concrete policy recommendations that can promote access to opportunity, allow macroeconomic policy to focus on reducing inequality, and tackle prejudice and discrimination.

How far the solutions the report offers, would go into the analysis and policy recommendations to frame the global conversation on reducing inequality as a key condition for building the future we want, remains to be seen. Equally important is the extent to which these will be put into action. [IDN-InDepthNews – 22 January 2020]

Photo: Millions of people are not benefiting from progress, with the gap set to widen unless deep-rooted development barriers, including discrimination and unequal political participation, are tackled. Credit: UNDP Peru/Mónica Suárez

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