February 12, 2006 562 VIEWS
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By Jomo KS Macroeconomic policies, financial globalisation and changes in labour market institutions have exacerbated inequality in recent decades, not only in income and wealth, but also in access to education, healthcare, social protection and political participation and influence. Even within countries experiencing rapid economic growth, an array of factors, exacerbated by tremendous demographic changes, has conspired to transmit inequality of knowledge, social responsibility and life chances from one generation to the next. Of course, there is no simple causal relationship linking poverty and inequality to violence. But inequality and a sense of deprivation do contribute to resentment and social instability. Nor is there a simple explanation of what causes poverty. Clearly, though, poverty arises from various complex conditions, and its amelioration requires a multi-dimensional approach. The world has in recent decades seen progress on some fronts. Access to education for girls has improved, and some gender gaps have been reduced. Despite Aids and the resurgence of malaria and tuberculosis, life expectancy has increased in much of the world due to improved public health systems. Overall, however, the inequality gaps are large and, in many cases, growing. The most important determinant of income inequality today is wealth inequality, with the increasing concentration of asset ownership principally responsible for greater income inequality in most countries. Meanwhile, growing unemployment, widening skill and productivity gaps, and the \"casualisation\" of labour markets have exacerbated income inequalities worldwide. Nor have stabilisation and structural adjustment programmes delivered on their promise of higher economic growth. Growth in much of the world during the past 25 years was slower than in the previous 25, despite more rapid growth in East Asia and India and other countries. Such growth differences suggest that, overall, global inequality may not have increased unequivocally. But inequalities at the national level have deepened in most countries, largely due to economic liberalisation at the national and international levels. Indeed, such reforms have sometimes undermined growth as well as the progressive role of government, while otherwise increasing overall inequalities. The few exceptions have been due largely to state interventions. But they are exceptions: the cumulative impact of these reforms over the past 25 years has been greater inequality, with rising unemployment, greater earnings disparities, reduced social protection, and environmental degradation. International financial liberalisation, for example, has undermined the use of more inclusive and targeted developmental credit to promote desired economic activities. In addition, contrary to the promises of its proponents, financial liberalisation has actually resulted in net capital flows from the capital-poor to the capital-rich over the long term, while increasing financial volatility and weakening economic activity. Meanwhile, free trade talks seem to ignore historical trends. Developing countries\' global trade terms have worsened: primary commodity prices have fallen in relation to manufactures, as have tropical vs temperate agriculture prices, and prices of generic manufactures have fallen relative to output protected by intellectual property rights. As a result, trade liberalisation of manufactures has resulted in de-industrialisation and greater unemployment in much of the world, as in the case of garments. And, while agricultural trade liberalisation may enhance export earnings for some poor countries, the main beneficiaries will be the more well-to-do agricultural exporters. Countries that import currently subsidised food will be worse off. The retreat of the state in much of the developing world has involved a generally reduced role for government, including the capacity to lead and sustain development, as well as its progressive social interventions in areas such as education, health and housing. The economic liberalisation carried out in the last 25 years was a flawed policy from the start, and its consequences are glaringly obvious. Unless the world refocuses policies to address the adverse impact of economic inequality on growth and poverty reduction, the poor and the privileged will continue to live worlds apart. - Project Syndicate Jomo KS is assistant secretary-general for economic development in the UN department of economic and social affairs - busrep
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