Inequality, a major cause of instability and conflict, has increased in 14 of 18 G20 countries since 1990 as economic growth has too often failed to benefit poor people, according to new figures in a report published by Oxfam today.
Too many governments and policy makers have put economic growth first and the interests of poor people second, allowing their incomes to fall further behind those at the top and leaving them to bear the costs of economic growth such as environmental degradation.
Anger about inequality has been a key driving force behind the Occupy protests that swept around the world last year. Protests have taken place in more than 80 countries amid anger that the top 1% is capturing a disproportionate share of the economic cake. Just last week a panel of experts assembled by the World Economic Forum identified severe income inequality as the biggest threat facing the world.
The study, “Left behind by the G20?”, presents a new analysis of inequality in G20 countries which shows that inequality increased fastest in Russia, China, Japan and South Africa over the period 1990-2010. It predicts that more than a million more people will be pushed into poverty in South Africa during the next decade unless rapidly growing inequality is addressed. Inequality also increased in rich countries such as Canada, the UK and Germany.
Extreme inequalities in wages have exacerbated the problem in some countries. A May 2011 report by the UK’s High Pay Commission indicated that on current trends, top executives would be paid 214 times the average wage by 2020. South Korea is the only rich country that has succeeded in reducing inequality during the last two decades. Of the emerging economies only Brazil, Argentina and Mexico have done so, though inequality remains high and further progress is needed.
Oxfam will present the report to the Mexican President at the World Economic Forum in Davos next week. Mexico is this year’s G20 chair.
Caroline Pearce, co-author of the report, said: “This analysis explodes once and for all the complacent assumption that governments can wait for economic growth to trickle–down to the poorest. “The fact is poor people missed out on their fair share of the prosperity of the boom years and have been hit hardest by the crisis that followed.
“If the G20 wants to tackle poverty it needs to go do more than promote growth – it needs to adopt policies that boost the incomes of the poor and protect them from environmental degradation. “Contrary to popular myth, a rising economic tide does not necessarily lift all boats and can in fact sink some of them.” The US remains the most unequal rich G20 country followed by Japan and the UK.
Half the world’s poorest people live within the G20, making it a key battleground in the fight against global poverty. The G20 is formally committed to promoting inclusive and sustainable growth. The report finds that reducing inequality is not only the right thing to do; it also makes sound economic sense. While rising inequality has in the past been viewed as an inevitable result of economic progress, the report identifies a growing body of evidence, including from the International Monetary Fund, which shows that inequality acts as a brake on growth.
In Brazil between 1999 and 2009, nearly 12 million people escaped absolute poverty (income less than $1.25-a-day) bringing the proportion of people living in poverty from about one in nine to fewer than one in 25 thanks to economic growth and reductions in income inequality. Reducing inequality at a similar rate over the next decade would reduce poverty by a further 80 per cent.
Pearce said: “The contrasting fortunes of poor people in South Africa and Brazil – two countries with similar growth rates – show the crucial role governments play in reducing poverty and inequality.”
The report lists five key policies governments can adopt to reduce inequality and recommends that the mix of policies should be tailored to the national context. The five are: redistributive transfers; universal health and education; progressive taxation; removal of barriers to equal rights and opportunities for women; and land reform.
