Inclusiveness and the SDGs: Can income inequality be reduced? by Rolph van der Hoeven and Peter van Bergeijk

About the authors: 

rolph 1

 

Rolph van der Hoeven is Emeritus Professor of Employment and Development Economics at the ISS. He is also member of the Committee on Development Cooperation of the Dutch Government and of several other Dutch development organizations. Earlier he was Director Policy Coherence and Manager of the Technical Secretariat of the World Commission on the Social Dimension of Globalization at ILO Geneva. Other positions included Chief Economist of UNICEF in New York and policy analyst for the ILO in Ethiopia and Zambia. His work concentrates on issues of employment, inequality and globalization.

pag van bergeijk

 

Peter van Bergeijk (www.petervanbergeijk.org) is Professor of International Economics and Macroeconomics at the ISS and co-editor (with Rolph van der Hoeven) of The Financial Crisis and Developing Countries: A Global Multidisciplinary Perspective.

 

 


Our recently published edited volume Sustainable Development Goals and Income Inequality1 can be considered a milestone for the ISS research agenda of Global Development and Social Justice, illustrating how social impact and academic rigour can go hand in hand. Contributors to this volume argue that the economic debate in the policy institutions and leading development studies institutions should definitely be informed by but not exclusively based on current statistics of GDP and other economic phenomena. A broader set of indicators including alternative measures of development such as the Human Development Index and greening economic progress is available to inform this debate2.


 

Toward inclusive development

Income inequality remains an important and highly relevant subject, as illustrated by the findings of the recently published World Inequality Report 20183, which shows that income inequality has increased globally and in nearly all world regions in recent decades, and highlights the important roles of governments in mitigating inequality. The United Nations Millennium Development Goals (MDGs), one of the major instruments of global governance and development in the period 2000 to 2015, did not consider inequality at all. Indeed, this was a great omission in an era of increasing inequality.

SDG10NewIcon-1
Source: United Nations

While the Sustainable Development Goals (SDGs) as successors to the MDGs contain a goal to reduce inequality (Goal 10), the target related to this goal is insufficient, as it relates only to progress at the very bottom of the income distribution scale4. As a consequence, the SDGs do not pay sufficient attention to income inequality, because there is no sensible indicator to attest the growing importance of the growing cleavages between income of work, income of capital, the income of the extremely wealthy (the top 1% of the population in terms of income), and the average income level of the population.

This gap manifests itself in a much more visible form in emerging and in developed countries. Yet it is important to give attention to the behaviour of the rich, as ignoring their ascendency through ever-increasing wealth to the very top of the income pyramid will put the social fabric under strain, as is already evident in some Latin American, Asian and African developing countries, as well as in many developed countries. This is thus a highly significant weakness of the SDGs, because inequality in the end co-determines success and failure on many, if not most, of the SDG targets. The new publication Sustainable Development Goals and Income Inequality provides an in-depth analysis of the link between SDGs and measuring income inequality informed by different development studies perspectives (policy-making, econometric analyses, and discourses) and covers global trends with particular attention for Africa, Asia and Latin America. The focus is on the international community and its role in making development more inclusive.

The SDGs: Critiques and commentary

9781788110273
Source: Edward Elgar Publishing

In the volume, a number of authors provide interesting discussions of the SDGs and income inequality. Richard Jolly analyses the SDGs from the perspective of five fundamental objectives – universalism, sustainability, human development, inequality and human rights – linking these objectives to teaching and research in the field of development studies. Jan Vandemoortele provides a critical reflection on the SDGs. He points out the strengths of the SDGs in getting the message across to the public at large and is positive about the consultation process informing the development and selection of SDGs. However, Vandemoortele is critical about the inclusiveness of the SDGs, particularly due to their formulation in absolute numbers that reduces their universality and inclusiveness. Rob Vos focuses on financing the transformation process required to achieve the SDGs. Trillions of dollars are needed, he argues, as well as new modes of finance. Clearly this cannot be achieved with traditional instruments such as Official Development Assistance. However, it seems possible to leverage the large amounts of international reserves, which have great potential.

Rethinking income inequality measures

The issue of inequality on the other hand requires both a discussion of measurement (within countries and between countries) and of developments for specific regions and country groupings. Andy Sumner points out that the World Bank’s new poverty line and accompanying narrative on the successes of reduced poverty misses the point. He argues that income levels below US$10 per head do not provide sufficient certainty against a fall back into poverty. Furthermore, scenarios for future numbers and the location of the global poor point to many problems and uncertainties. Andrea Cornia, by focusing on developments in Latin America and using a political economy perspective, challenges the idea that recession by definition increases inequality. Tony Addison critically reflects on the African experience where structural reform did lead to increased growth, albeit such grown was unequal. He points out the futility of quick ideological answers to the continent’s problems related to inclusive development. Malte Luebker, citing experiences in Asia, argues that focussing only on employment and productivity results in growing functional income inequality and that strong labour institutions are needed to counter this trend. Focusing on the Next-14 (the top-14 non OECD countries, including the BRICS countries), Deepak Nayyar formulates two interlinked hypotheses that sum up one of the main threads of the book: Economic growth (catch-up) is essential to reduce inequality, but, at the same time, such growth will be unsustainable lest inequality is reduced.

Piecing together the puzzle

The volume  does not provide a panacea to tackle all of the income inequality problems that increasingly emerge, but brings together the pieces of a coherent puzzle. Importantly, the contributors propose innovative ideas that may strengthen the SDG approach. These ideas comprise of proposed new and better measures of inequality, new evidence-based policies, demand measures stretching beyond the design of some of the vaguely formulated goals and targets, and the active involvement of civil society in order to call governments in the Global North and Global South, as well as in the UN system, to task on growing national and international income inequalities. Indeed, (thus strengthened) SDGs could form the basis of a global social contract for an effective development partnership.

Elements of such a global social contract should include, firstly, the right to development, especially the economic, social and cultural rights and the basic elements thereof in the form of non-discrimination, participation and accountability. Secondly, the contract should include the introduction of a global social floor, which is financially possible, provided that the international financial system is reformed. Importantly, SDGs offer an opportunity to strengthen the coherence, at the national and international level, between social, economic and environmentally sustainable policies.


1The book is based on a seminar series on new modes of development cooperation that the authors co-hosted with INCLUDE, the knowledge platform on inclusive development policies of the Netherlands Ministry of Foreign Affairs (http://includeplatform.net/)
2In the use of any such measures, special attention should be paid to the bottom 40 per cent of the population in relation to the top 10 per cent of the population (the so-called Palma ratio).
3World Inequality Report 2018 (http://wir2018.wid.world/)
 4SDG 10: Reduced Inequalities focuses on reducing inequalities ‘within and among countries’, primarily  through poverty reduction (http://www.un.org/sustainabledevelopment/inequality/)

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