Inequality

• Inconsistent with UN Charter vision• Worsened by aspects of globalization• Confounds poverty reduction efforts• Not only in developing countries• Multidimensional and compromises

development, security and human rights

• Frustrates achievement of MDGs

We cannot advance the development agenda without addressing the challenges of inequality within and between countries – the widening

gap between skilled and unskilled workers, the chasm between the formal and informal

economies, the growing disparities in health, education and opportunities for social and

political participation.

Kofi Annan, Secretary-General, UN

Lack of economic

power• Low income • Low assets

• Denial of human rights• Discrimination

Lack of socio-political power

Inequality hinders growth and increases poverty

Poverty

Unequal GDP distribution

Per capita GDP in 20 poorest and richest countries

Income gap widened in recent years

• Since 1980s, inequality has risen in most countries in all world regions

• Income inequality trends in 73 countries for which data are available (1950s-1990s)• Risen in 48 countries• Relatively constant in 16 countries• Declined in 9 countries

• Wealthiest 10% of global population increased share of global income from 51.6% to 53.4% (1980-92)

• Related to greater wealth concentration

Global income inequalities (Gini coefficient values)

Shares of Global Private Consumption

Hunger and Malnutrition

• Since 2000, the average number of food emergencies per year has been 30, compared with 15/year in 1980s

• Sustained nutrition deprivation affects 852 million people

• 1 billion overweight adults globally

Inequality Exacerbates Poverty

Income distributionPolitical

representationProductive resources

Basic social services

Markets and information

Opportunities

77

77

47

25

23

20

% living on < $2/day in 2001

106

134

-252

3

19

70

-9

2

-23

-3

2

15

South Asia

Sub-Saharan Africa

East Asia + Pacific

Latin America + Caribbean

Middle East + North Africa

East Europe + Central Asia

53 81-8World

Change in proportion and number of poor people between 1981 and 2001 % millions

PovertyLevels and Trends

Unemployment• Remains major source of inequality • Between 1993 and 2003:

• Global number of unemployed rose by 31% to 186 million

• Unemployment rates decreased slightly in developed countries while increasing in most other parts of the world

• Spread of jobless growth

The informal economy

Likely to be:

• Excluded from legal protections• Precluded from enjoying basic rights and benefits of formal economy

• Working in hazardous conditions

Those in informal economy typically “have-nots” in society- 60% women- 535 million earn less than $1/day

Share of informal workers in

non-agricultural workforce by region:• North Africa: 48%• Latin America & Caribbean:

51%• Asia: 65%• Sub-Saharan Africa: 78% (excl. South Africa)

Informal employment dominant in many regions

Informal economy share of Gross National Income, 2000

• Developing countries: 41%• Transition economies: 38%• OECD Countries: 18%

Why Rapid Growth of Informal Economy?• Jobless growth

• Labour market flexibility

• Reduction in public sector jobs

• De-industrialization

• Economic crises

• Greater “outsourcing”

• Household survival strategies

Health Inequalities• Great differences between and

within countries• Access to healthcare• Life expectancy• Under-five mortality

• Intellectual Property Rights and Patent Monopolies• High drug prices• Unequal access• Compromised capacity to react to

crises

HIV/AIDS• Highly unequal global and regional

impacts

• Lowers growth, increases dependencies

• Worsens existing inequalities between women and men

• Depletes human resources, threatening stability, security and development

Education, 2001Despite progress, substantial inequities exist by region

Indicator Highest LowestNet Primary Enrolment Ratio

95.7%Latin America &

Caribbean

62.8%Sub Saharan Africa

Net Secondary Enrolment Ratio

89.2%N. America & W.

Europe

21.3%Sub Saharan Africa

Girls Primary Enrolment per 100 boys

99-100CIS, Europe, E. Asia

76Southern Asia

Girls Secondary Enrolment per 100 boys

107Latin America &

Caribbean

79Southern Asia

Financial Liberalization

• Net capital flows from ‘capital poor’ to ‘capital rich’

• Increased financial volatility

• Undermines use of inclusive targeted developmental credit

• Slower economic growth in recent decades

Trade Liberalization

• International terms of trade moving against developing countries• Primary commodities vs.

manufactured commodities

• Tropical agriculture vs. temperate agriculture

• Generic products vs. those protected by intellectual property rights

Tariffs biased against developing countries

• Imports between developed countries average 1%

• Tariffs on textiles from developing countries as high as 9%

• Tariffs on agricultural products from developing countries as high as 20%

Retreat of the state• Stabilization and structural adjustment

programs• Less progressive taxation• Reduced redistributive role• Reduced role of government in many

developing countries• Public education• Health• Housing• Utilities

High-income countries spend 2½ times more of national wealth for health, education and welfare than low income countries.

Government Spending Priorities

Inequality and Violence• Violence often rooted in inequality

• No simple causal relationship• Vicious cycle mutually reinforcing:

• Poverty• (Horizontal) Inequalities• Authoritarian governance• Lack of opportunities• Armed conflict• Reduced growth and development

• Links between inequalities and extreme aspects of social disintegration

Poor Countries More Likely to Suffer Civil War,

Adversely Affects GrowthPredicted probability of onset of civil war within 5 years

Global Economic Agenda Dominated by Issues Important to Developed Countries

Investment protection

Financial Liberalization

Free Trade IntellectualProperty Rights

Capital AccountLiberalisation

…While Issues of Importance to Developing Countries

Can’t Make it to the AgendaInternational

EconomicGovernance Dominated

By Rich

Capital Flight

Doha Round, IPRs, etc. Not

Developmental

Washington Consensus

Not Developmental, Not Equitable

International Economic Instability

Meaningful Debt Relief

Thank you