No, we don’t need an MDG for inequality

Inclusive Economy,Poverty & Inequality17 Dec 2012Stephan Klasen

Inequality is firmly back on the policy agenda in many parts of the world. Many believe it should have a prominent position on the post-2015 agenda. I disagree. Please let me explain why.

Inequality is firmly back on the policy agenda in many parts of the world. A major factor for this renewed attention has, of course, been that (within-country) inequality has been rising substantially in the emerging countries of Asia (including China, India) as well as in most industrialized countries. As substantiated by a large body of evidence, high and rising inequality is undermining economic growth and social stability. In addition, high inequality is reducing the pace of poverty reduction. In many countries, high or rising inequality has been on the domestic policy agenda for some time. Many countries in Latin America have, in fact, been quite successful in reducing their – often very high – levels of inequality.

This renewed attention has also lead to considerable discussions about whether inequality should somehow be included in a system of development goals that are now being devised for the time after 2015, when the MDGs expire. In fact, most documents from the UN on the issue suggest that a focus on inequality is one of the critical ways in which the MDGs must be expanded in scope. There is, however, some confusion which types of inequalities are meant. Sometimes global inequality is referred to, which is driven mainly by income growth differences between rich and poor countries. Sometimes national inequality is meant, linking the literature on the political, social and economic problems associated with rising inequality.

I am not sure how one could conceive of a goal of reducing global inequality in a way that is substantially different from what international cooperation already aims to achieve. Even the narrowest focus on promoting economic growth in poor countries can clearly be seen as a way to reduce global inequality: the faster poor countries grow relative to rich countries, the lower global inequality will be. Of course global inequality could be decreased through negative growth in rich countries (as many have experienced since 2008 ) but this is unlikely to generate a global consensus, given the social problems associated with that negative growth in these countries. I will therefore focus on whether the post-2015 development goals should include a goal to reduce income inequality in developing countries (or possibly in all countries).

While I am in favour of greater attention paid to the issue of inequality and personally believe that most countries would be better off if they succeeded in lowering inequality, I do not think that the post-2015 development agenda is the right place to approach this issue.

There are three reasons for this:

  • The current MDGs already implicitly embrace an inequality agenda. As has been demonstrated many times, reducing income poverty will be much more successful if growth is accompanied by declining inequality. This is even clearer in the case of the non-income MDGs. Universal primary education or massive reductions in mortality cannot be achieved without reducing inequality in health and education. The rich, healthy, and educated are already doing so well on mortality and education indicators that further improvements for them will simply not even come close to achieving the large reductions called for by the MDGs. Declining income, education and health inequality is thus a critical means to achieving the MDGs. In that sense a separate inequality goal seems redundant.
  • The MDGs were quite successful in generating a global consensus by focusing on acute deprivations suffered by people across the developing world and formulating goals to overcome these deprivations. It was possible to forge a consensus on reducing poverty, under-nutrition and mortality, improving education and increasing access to water and sanitation. This was a great success in that the world community agreed on a common set of indicators that describe human well-being in its multidimensional complexity. I fear that no such consensus will be forthcoming for a goal to reduce national inequality. A certain level of inequality is not an end in itself, but a means to achieve greater growth, well-being and social cohesion. Moreover, it is (and will remain) unclear what the optimal level of inequality will be. While we can easily agree that the optimal level of poverty and child or maternal mortality is 0, it is unclear that the optimal Gini coefficient is 0 (as that is essentially incompatible with a market-based system and thus one would have to forgo all the advantages of such a system). I agree that for most countries, the optimal level of inequality is lower than the current level, but I cannot say for sure (nor, I would submit, does anyone else with any precision) whether the optimal Gini is around 0.2 (the lowest currently observed in the world), 0.3 or 0.1. This discussion is the perfect way to derail the debate on a post-2015 development agenda that focuses on eliminating deprivation from the planet.
  • While I think it is easy and desirable (and, as the MDGs showed, possible) to forge a global consensus on reducing deprivation wherever it occurs, distributional questions are much more issues where we will ultimately have to defer to the local processes in each country to define what type of inequality is intolerable, what can and should be done about it, and how to do that. Having the international community prescribe a goal for each country seems neither feasible nor desirable. Here each country has to make its own choices.

In short, it is clear that tackling inequality will typically have to be an important part of any agenda to eliminate extreme deprivations across the globe. But that is not a justification to formulate a contentious specific goal as part of the post-2015 development agenda.