Summaries of the most relevant reports

Inclusive Economy19 Dec 2012Frans Bieckmann

An overview of the most important reports and other publications used for this Dossier on Inequality.

  1. UNODC, 2011 – Global Study on Homicide
  2. ECLAC, 1 June 2010 – Time for Equality: Closing Gaps, Opening trails
  3. UNICEF, April 2011 – Global Inequality: Beyond the Bottom Billion. A Rapid Review of Income Distribution in 141 Countries
  4. UNICEF, 2010 – Progress for Children: Achieving the MDGs with Equity
  5. Development Research Group, World Bank, 2009 – Why Don’t We See Poverty Convergence?
  6. Oxfam blog 2012 – ‘Is the IMF getting serious about inequality? Looks like it’ – Duncan Green; ‘What kind of inequality matters most? The case for unfairness’ – Ricardo Fuentes; ‘Oxfam versus the World Bank? Maybe not’ – Martin Ravallion
  7. IMF, April 2011 – Inequality and Unsustainable Growth: Two Sides of the Same Coin?
  8. Oxfam, January 2012 – Left Behind by the G20? How Inequality and Environmental Degradation Threaten to Exclude Poor People from the Benefits of Economic Growth
  9. The Broker, Richard Jolly, October 2011 – Reducing Inequality is Crucial to Global Recovery
  10. Luxembourg Income Study Working Paper Series, September 2008 – Standardizing the World Income Database
  11. UNRISD 2010 – Combating Poverty and Inequality: Structural Change, Social Policy and Politics
  12. OECD report 2011 – Divided We Stand: Why Inequality Keeps Rising
  13. Norwegian People’s Aid (NPA) 2012 – Inequality Watch
  14. Joseph Stiglitz, 2012 – The Price of Inequality
  15. UNCTAD 2012 – Trade and Development Report
  16. Earth Institute, April 2011 – World Happiness Report
  17. World Bank, World Development Report 2006 – ‘Equity and development’,
  18. UNU- WIDER, 2006 – The World is not Flat: Inequality and Injustice in our Global Economy
  19. AIV (Advisory Council on International Affairs), 2012 – Unequal worlds: Poverty, growth, inequality and the role of international cooperation

1. UNODC, 2011 Global Study on Homicide

Authors: Angela Me, Enrico Bisogno, Steven Malby

This study brings together global, regional, national and sub-national homicide data in one publication. The United Nation Office on Drugs and Crime sees “a clear link between violent, crime and development: crime hampers poor human and economic development; this, in turn, fosters crime. Improvements to social and economic conditions go hand in hand with the reduction of violent crime.” (p5) “Higher levels of homicide are associated with low human and economic development. The largest shares of homicides occur in countries with low levels of human development, and countries with high levels of income inequality are afflicted by homicide rates almost four times higher than more equal societies.” (p10)”Women may make up the majority of victims of intimate partner/family-related homicide, but the bigger picture reveals that men are those most often involved in homicide in general, accounting for some 80 per cent of homicide victims and perpetrators.” (p11)

2. ECLAC, 1 june 2010 – Time for Equality: Closing Gaps, Opening Trails

Authors: Alicia Bárcena, Antonio Prado, Martín Hopenhayn

This document contains the proposals formulated during the Thirty-third Session of the Economic Commission for Latin America and the Caribbean (ECLAC). The main working document in the meeting was presented by ECLAC Executive Secretary Alicia Bárcena. The ECLAC describes four main structural changes in Latin America and the Caribbean which make a new development paradigm for the region necessary: climate change, technological change, demographic transition, cultural change. The new paradigm they propose, consists of the following recommendations:- the state should provide a stable macroeconomic environment- the production structures should be transformed; internal gaps and gaps between countries should be diminished, their production should converge (to prevent dependence)- the GDP and productivity gaps between and within countries should be reduced- increasing inclusiveness and combating inequality in the labour market- improvement of the welfare state, more direct redistribution and basic insurance (e.g. basic system of guaranteed partial income), improve and extend education- strengthening the redistributive role of the state and turning the tax system progressive”The new development paradigm must be made to do everything possible to build a model of globalization that breeds greater collective awareness of global public goods; awakens democracy across the planet by affording a voice to the most diverse range of actors in the open concert of global governance; and provides excluded sectors with the tools needed to close gaps in capacity, citizens’ rights and access to well-being. The new model of globalization must develop policies with a long-term vision —but start one step ahead of the climate, technological, demographic and cultural scenarios that current trends are now projecting.” (p52-3)

3. UNICEF, April 2011 – Global Inequality: Beyond the Bottom Billion. A Rapid Review of Income Distribution in 141 Countries

Authors: Isabel Ortiz en Matthew Cummins

This working paper focuses on income inequality and (i) provides an overview of global, regional and national income inequalities; (ii) discusses the negative implications of rising income inequality for development [slows economic growth; results in health and social problems; generates political instability; leads to severer social inequalities, especially among children]; (iii) calls for placing equity at the centre of development in the context of the United Nations development agenda; (iv) describes the likelihood of inequalities being exacerbated during the global economic crisis; and (v) advocates for urgent policy changes at national and international levels to ensure a “Recovery for All”. (p10)“The top 20 percent of the population enjoys more than 70 percent of total income, contrasted by two paltry percentage points for those in the bottom quintile in 2007 under PPP-adjusted exchange rates; using market exchange rates, the richest population quintile gets 83 percent of global income with just a single percentage point for those in the poorest quintile. […] Middle-income countries appear the most unequal. As an alternative [to the current development model], the paper summarizes the United Nations development agenda, which aims to strike the right balance between growth and equitable development progress. […] [T]he paper argues that the urgency for equitable policies has never been greater.” (p vii)

4. UNICEF, 2010 – Progress for Children: Achieving the MDGs with Equity

In this study UNICEF presents evidence of its achievements to date, but also reveals the glaring disparities – and in some cases, the deepening disparities − that we must address if we are to achieve a more sustainable, more equitable progress towards the MDGs and beyond. The report proposes focusing on equity for children because: – the growth of the 1990s and 2000s failed to diminish disparities between nations in children’s development- there is widening inequality in children’s development and access to public services at sub-national level- the hard-won MDG gains for children are under threat again due to global crises.

5. Development Research Group, World Bank, 2009 – Why Don’t We See Poverty Convergence?

Author: Martin Ravallion

This study by Martin Ravallion, head of the Development Research Group of the World Bank, tries to explain what is missing from ‘stylized facts’ in economics. Two prominent stylized facts about economic development are that there is an advantage of backwardness, in that in a comparison of two otherwise similar countries the one with the lower initial mean income will tend to see the higher rate of economic growth, and that there is an advantage of growth, whereby a higher mean income tends to come with a lower incidence of absolute poverty. Past empirical support for both stylized facts has almost invariably assumed that the dynamic processes for growth and poverty reduction do not depend directly on the initial level of poverty. Under that assumption, the two stylized facts imply that we should see poverty convergence: countries starting out with a high incidence of absolute poverty should enjoy a higher subsequent growth rate in mean consumption and (hence) a higher proportionate rate of poverty reduction.That poses a puzzle. The data on poverty measures over time for 90 developing countries assembled for this study reveal little or no sign of poverty convergence. […] Intuitively, one hypothesis is that either the growth rate in the mean, or the impact of growth on poverty, depends directly on the initial poverty rate, in a way that nullifies the “advantage of backwardness.” […] The results suggest that mean-convergence is counteracted by two distinct “poverty effects.” First, there is an adverse direct effect of high initial poverty on growth—working against convergence in mean consumption. Second, high initial poverty dulls the impact of growth on poverty. On balance there is little or no systematic effect of starting out poor on the proportionate rate of poverty reduction.” (504-505)The lack of poverty convergence—despite mean convergence and that growth generally reduces poverty—suggests that something about the initial distribution is offsetting both the “advantage of backwardness” and the “advantage of growth.” That something turns out to be poverty itself. The study’s findings point to three distinct consequences of being a poor country for subsequent progress against poverty: (p521)- poor countries experience a lower rate of growth- “a high poverty rate makes it harder to achieve any given proportionate impact on poverty through growth in the mean.” (p521)- “the two “’poverty effects’ work against the mean convergence effect, leaving little or no correlation between the initial incidence of poverty and the subsequent rate of progress against poverty.” (p521)

6. Oxfam blog, 2012 – ‘Is the IMF getting serious about inequality? Looks like it’

Author: Duncan Green

Duncan Green is the strategic advisor for Oxfam GB and author of the influential blog From Poverty to Power. In his blog post ‘Is the IMF getting serious about inequality? Looks like it’ (november 2010) he reflects on the position of the IMF in relation to inequality. He points out that in 2010 IMF director Dominique Strauss-Kahn was proposing almost ‘socialist’ solutions in his speech ’Human Development and Wealth Distribution. Green quotes DSK as saying: “An inequitable distribution of wealth can wear down the social fabric. More unequal countries have worse social indicators, a poorer human development record, and higher degrees of economic insecurity and anxiety. In too many countries, inequality increased and real wages stagnated—failing to keep up with productivity—over the past few decades. […] Inequality goes against notions of fairness and solidarity, but it also threatens economic and social stability. This is especially true in poorer countries. Inequality can dampen economic opportunity, by preventing the poor from accessing the financing needed to pursue profitable investments. It can divert people toward unproductive activities. It can make countries more prone to adverse shocks—with fewer people able to dip into savings during bad times, the decline in growth is larger. The invisible hand must not become the invisible fist.”Green doubts the IMF is turning socialist, but expects DSK to want to run for president in France. That’s why he is promoting growth for decent jobs, job creation, better education, progressive taxing, adequate social safety nets, decent unemployment benefits, adequate bargaining power for workers, collective bargaining. He wants to avoid dual labour markets. Green didn’t know that, at the time he wrote this blog, that DSK had resigned as director of the IMF following allegations that he had sexually assaulted a hotel employee.

– ‘What kind of inequality matters most? The case for unfairness’

Author: Ricardo Fuentes

In this guest blog, Duncan Green gives the floor to his colleague Ricardo Fuentes, Oxfam’s head of research. Fuentes takes a look at the term inequality and starts a discussion with the World Bank. What are we talking about when we’re talking inequality? Is it inequality in outcome, opportunity, capabilities, power? Is it income? Is equality the same as fairness and equity? Is pro-poor growth the way to diminish inequality?According to Fuentes, the World Bank changed its views on inequality when it adopted equity as its vision instead of pro-poor growth in 2006 . (Before, they “claimed that income inequality was not relevant as long as the poor benefited. For instance, Ravallion and Chen from the World Bank defined ‘pro-poor growth’ as ’growth that reduces poverty’ regardless of what happened to the incomes of the rich.”) It is clear now that inequality matters, also to the Bank, but inequality of what? That’s what we need to discuss. You can find Fuentes’ blog post here:

– ‘Oxfam versus the World Bank? Maybe not’

Author: Martin Ravallion

In a reaction to this debate Martin Ravallion, head of the Development Research Group of the World Bank, states that, although he defined pro-poor growth as “growth that reduces poverty” and contrary to what Ricardo Fuentes might think, he does not believe that inequality does not matter. He argues that inequality is bad for the poor and that “certain kinds of inequality are particularly harmful to pro-poor growth–both in generating less growth and in making that growth less poverty-reducing.” He concludes that there’s not that much difference between Oxfam and the World Bank.Ricardo Fuentes replies: “If I should point to one difference, it is that I think that issues related to inequality are important in themselves, not only for their impact on poverty reduction. That’s where fairness comes in – we need more research on the direct effects of inequality on well being.” You can find Ravallion’s blog post here:

7. IMF, April 2011 – Inequality and Unsustainable Growth: Two Sides of the Same Coin?

Authors: Andrew G. Berg and Jonathan D. Ostry

In this study, researchers Berg and Ostry, commissioned by the IMF, asks themselves whether growth can in fact be sustained in the face of a highly uneven income distribution. “Does less inequality help to increase the duration of growth? Are inequality and unsustainable growth two sides of the same coin, or largely unrelated issues?”Some of their conclusions: “Some inequality is integral to the effective functioning of a market economy and the incentives needed for investment and growth. But inequality can also be destructive to growth. […] [S]ome find that average growth over long periods of time is higher with more initial equality; others find that an increase in equality today tends to lower growth in the near term. The empirical literature on growth and inequality, however, has missed a key feature of the growth process in developing countries: namely, its lack of persistence.[…] [M]any of even the poorest countries have succeeded in initiating growth at high rates for a few years. What is rarer—and what separates growth miracles from laggards—is the ability to sustain growth. […] We find that longer growth spells are robustly associated with more equality in the income distribution. […] The immediate role for policy, however, is less clear. Increased inequality may shorten growth duration, but poorly designed efforts to lower inequality could grossly distort incentives and thereby undermine growth, hurting even the poor. […] Over longer horizons, reduced inequality and sustained growth may thus be two sides of the same coin.” (p3)

8. Oxfam, January 2012 – Left Behind by the G20? How Inequality and Environmental Degradation Threaten to Exclude Poor People from the Benefits of Economic Growth

Authors: Richard Gower, Caroline Pearce and Kate Raworth

This Oxfam report states that inequality is rising in all but four G20 countries, while it is falling in many low- and lower middle-income countries. The report focuses on income inequality within countries and sets out three economic arguments for policies that favour equity:1. The poverty-reducing effects of growth are limited by inequality.2. Reducing inequality offers a double dividend: reducing poverty directly and making future growth more pro-poor3. Inequality is a barrier to growth.Environmental degradation exacerbates social inequalities (12)1. Poor people depend most on natural resources for their livelihoods.2. The impacts of climate change fall disproportionately on poor countries3. Resource degradation exacerbates social conflict over resource use.Oxfam therefore advocates sustainable, green growth. This means that the G20 economies should decouple growth from carbon emissions. In addition, global CO2 emissions must at least fall by 90%by 2050 to prevent dangerous climate change.Income inequality is rising in G20 countries. Oxfam proposes “shared growth”. Tackling inequality is key to reducing poverty. At the end of the report Oxfam makes several policy recommendations.

9. The Broker, October 2011 – ‘Reducing inequality is crucial to global recovery’

Author: Sir Richard Jolly

In this guest blog published by The Broker, Sir Richard Jolly, research associate and former director of the Institute of Development Studies (IDS), emphasizes that reducing inequalities is a crucial factor in the recovery of the current global economic crisis.Jolly’s main argument is that combating inequality can contribute to economic growth and the reduction of poverty. However, he critically observers that ”few of the leaders scrambling to avoid another global financial crisis will mention inequality”. This is addressed mainly at the leaders of Europe and the US. This is alarming, since “the incomes of the richest sections of society are soaring in developed, emerging and developing economies alike,”[End of quote??] but meanwhile ”the poorest groups are experiencing only slow improvements or decline.” In reference to ‘The Spirit Level’, Jolly argues that ”highly unequal countries tend to grow more slowly, are more prone to conflict and have weaker civil societies.”Jolly suggests that reducing inequality and facilitating social protection might be achieved by means of progressive taxation systems and/or channelling revenues from mining and oil exports.Interestingly, he emphasizes that ”governments in the US, the UK, and many other developed countries are still turning their backs on equity”, contrary to, for example, Brazil, which launched the successful Bolsa Family programme. Finally, Jolly holds that it is important for the long-run to improve our understanding of “the intersecting inequalities, which trap people in poverty from generation to generation.” Among other things, this requires a focus on human rights.

10. Luxembourg Income Study Working Paper Series, September 2008 – Standardizing the World Income Database

Author: Frederick Solt

Researcher Frederick Solt (University of Iowa) created the Standardized World Income Inequality Database (SWIID) which, in his own words, provides the most comparable data available on income inequality for broadly cross-national research. According to Solt, ”cross-national research on the causes and consequences of income inequality has been hindered by the limitations of existing inequality data sets,” and ”greater coverage across countries and over time is available from these sources only at the cost of significantly reduced comparability across observations.” Accordingly, “the goal of the Standardized World Income Inequality Database is to overcome these limitations” by making use of missing-data algorithms: ”The SWIID provides comparable Gini indices of gross and net income inequality for 153 countries for as many years as possible from 1960 to the present, along with estimates of uncertainty in these statistics.” As a result, ”by maximizing comparability for the largest possible sample of countries and years, the SWIID is better suited to broad cross-national research on income inequality than previously available sources.”

11. UNRISD, 2010 – Combating Poverty and Inequality: Structural Change, Social Policy and Politics’

No authors given

The preparation of Combating Poverty and Inequality, an UNRISD flagship report, was a major research initiative which aimed to contribute to debates on policy approaches to poverty reduction within the context of a post-MDG framework.The report states that contemporary poverty reduction strategies increasingly focus on “targeting the poor”, yet poverty and inequality remain intractable foes. This is because many current approaches to reducing poverty and inequality fail to consider key institutional, policy and political dimensions that may be both causes of poverty and inequality, and obstacles to their reduction.The central question that this report asks is: why are people poor and why do inequalities exist, and what can be done to rectify these injustices?The report is divided into three parts: 1) an analysis of socially inclusive structural change; 2) a review of transformative social policy and poverty reduction; 3) suggestions concerning the politics of poverty reduction. What is of interest, is that inequality is defined along different lines; mainly, the focus seems to be on income inequality (hence the strong connection with poverty), but there are, for example, also chapters that deal with ethnic and regional inequality (chapter 3) and gender inequality with a view to the market (chapter 4).In the concluding remarks, the report makes the following statement: “Reducing poverty and inequality is not just about having the right economic policies; it is also about pursuing appropriate social policies and types of politics that elevate the interests of the poor in public policy. […] [E]fforts to tackle poverty through discrete and standardized policies unrelated to a country’s production and macroeconomic systems, social policies and politics, are of limited impact, and may even be counterproductive. Policies and institutions in the economic, social and political spheres need to be consciously coordinated to achieve maximum impact.”The report emphasizes the importance of complementing a country’s institutional structures, so that they may correct and enforce each other. Additionally, it highlights the relevance of high employment for increasing the effectiveness and reducing the costs of social policy. Lastly, the effectiveness of social protection programmes depends on what kind of economy is dominant in the country.The lack of effective complementarity between labour market participation and social policy in poverty reduction is particularly marked in low-income service-based economies and agrarian economies that are characterized by low productivity. In these types of economies, an overwhelming proportion of the working population is employed in the informal sector and therefore lacks adequate coverage by social protection programmes.

12. OECD, December 2011 – Divided we Stand: Why Inequality Keeps Rising

No authors given

The main question addressed in this report is: what are the underlying causes of the continuous rise of global (income) inequality? Simultaneously, it focuses strongly on governance and policy measures that could mitigate inequality.The report urges that the labour market should be the first place to act, while arguing that whereas technological growth has facilitated economic growth, not everybody has been able to profit from this development. Better-educated workers have benefited (and this is the reason why investing in the workforce is crucial, now more than ever) while less skilled workers have stayed behind. This polarization expresses itself in wage-inequality, which in its turn is reflected in the need for social protection. Generally, growing market-income disparities (which are considered ”the main driver of inequality trends”) have been offset by tax-benefit policies, but at the same time the redistributive capacity of the tax-benefit system has diminished. One of the proposed tax reforms includes tackling offshore tax evasion.In terms of the income-rise of top earners, the report states interestingly: “The rise of the share going to the top earners is also the result of companies operating in a global market for talent, a spectacular rise in pay of executives and bankers, and of the emergence of a winner-takes-all culture in many countries.”In a speech, the OECD Secretary-General sums up the most important findings regarding growing inequality and its causes:1. globalization had little impact on both wage inequality and employment trends;2. gap between high- and low-skilled workers has been growing;3. reforms have strengthened competition in the markets for goods and services and have made labour market more adaptable; as a consequence, more (low-paid) workers were employed, but this logically also contributed to a widening distribution of wages;4. simultaneous increase of part-time labour and the like (I presume flexibility of labour in general) and erosion of the labour unions has contributed to rising earning inequality;5. raising the skills level of labour force had a positive impact on employment growth;6. changing family structures (more single-headed households, participation of woman in the labour market, choosing partners in the same earnings bracket) have also effected the growth of inequality;7. distribution of non-wage incomes has become more unequal;8. the reason of the fact that tax redistribution has become less effective, can be attributed to cuts in benefit levels, stricter policies and the maladjustment of social benefits in comparison to rising earnings.

13. Norwegian People’s Aid (NPA) 2012 – Inequality Watch

Editors: Beate Thoresen, Carol Romay, Inger Sandberg

‘Norway has one of the smallest wealth and income gaps in the world’, writes Liv Torres, secretary general of the Norwegian People’s Aid in her introduction to NPA’s Inequality Watch. “This is the result of political choice, cooperation and negotiation between parties in the labour market, the influence of mature organisations and the willingness to find compromises. This model has proven not only to be a success where stability, growth and development are concerned but is also a major contributor to the building of social capital and social cohesion.”According to the NPA, reducing inequality is in the first place a matter of justice and democracy. Different approaches to tackling inequality have always concerned political choices. Beate Thoreseon, editor of Inequality Watch warns that a too one-sided focus on the poor may prevent understanding of what inequality is in a more in-depth way, which requires an analysis into the structural causes of inequality. It may also lead to a discourse where a strong opposition between us and them becomes dominant, whereas ‘a clear focus on inequality may favour the promotion of negotiations on how the resources in society should be distributed’. According to Thoresen, stimulating economic growth and providing equal opportunities is not enough to combat inequality. Additionally, she emphasizes that each specific country requires its own approach in terms of policy, because ‘one size does not fit all’. The report focuses on four countries with especially high inequality figures: South Africa, Mozambique, El Salvador and Bolivia.One of the articles (by Carol Romay) focuses on the measures of inequality, mapping different methodological approaches.

14. Joseph Stiglitz, 2012 – The Price of Inequality

According to the New York Times, ”Joseph E. Stiglitz’s new book, ’The Price of Inequality’, is the single most comprehensive counter­argument to both Democratic neoliberalism and Republican laissez-faire theories. While credible economists running the gamut from centre right to centre left describe our bleak present as the result of seemingly unstoppable developments — globalization and automation, a self-­replicating establishment built on ’meritocratic’ competition, the debt-driven collapse of 2008 — Stiglitz stands apart in his defiant rejection of such notions of inevitability. He seeks to shift the terms of the debate.”Yvonne Robert’s review in The Observer: ”The inequality gap is becoming a chasm. Stiglitz demonstrates how, in the US, those born poor will stay poor yet nearly seven in 10 Americans still believe the ladder of opportunity exists.””Stiglitz is a powerful advocate for a strong public sector. He argues for full employment, greater investment in roads, technology, education; far more stringent regulation and clear accountability. Culpable bankers, he says, should go straight to jail.”“Gross domestic product is an unsatisfactory measure of progress, he believes. Stiglitz wants to see metrics that include the cost of inappropriate use of resources. He illustrates the price of immiseration and unfairness. Management of Firestone tyres demanded much longer hours and a 30% wage cut. The demand created conditions that led to the production of many defective tyres. Defective tyres were related to more than 1,000 deaths and injuries and the recall of Firestone tyres in 2000. Unfairness affects lives, productivity and, ultimately, Stiglitz warns, the security of the 1%.”Video on Democracy Now:

15. UNCTAD, 2012 – Trade and Development Report

No authors given

The opening statement of this report reads as follows: “In particular, while globalization and technological change, and their interplay, have created both winners and losers, their apparent adverse impacts on overall income distribution in many countries must be understood in the context of the macroeconomic, financial and labour market policies adopted. Those policies have caused unemployment to rise and remain high, and wages to lag behind productivity growth, and they have channelled rentier incomes towards the top 1 per cent of the income ladder.” (p. 2)The report investigates the impact of the crisis on developing and developed countries, and maps global inequality trends over the past decades. In both developed and developing countries (see table for a more detailed overview), the inequality of personal income distribution (reflecting the distribution between profits and wages, disparities between income categories and redistribution by the state) increased in the period 1980 – 2000.The report has the following to say on the question: Is greater income inequality inevitable?: “The shifts in income distribution over the past three decades occurred in parallel with accelerating trade and financial flows, the spread of international production networks and rapid technological change, owing in particular to progress in information and communication technologies (ICTs). This led to the widespread assumption that increasing income inequality is an inevitable by-product of structural changes brought about by globalization and technological change, or even a precondition for such change. However, structural change also occurred throughout the past century, including during periods when inequality of income distribution was considerably lower.’ (p. 12)The report argues that rising inequality is not inevitable, and simultaneously explains which factors contributed to growing inequality: “In order to comprehend the causes of growing inequality, it should be borne in mind that the trend towards greater inequality has coincided with a broad reorientation of economic policy since the 1980s. In many countries trade liberalization was accompanied by deregulation of the domestic financial system and capital-account liberalization, giving rise to a rapid expansion of international capital flows. International finance gained a life of its own, increasingly moving away from financing for real investment or for the international flow of goods to trading in existing financial assets. Such trading often became a much more lucrative business than creating wealth through new investments.” (p. 18)As for solutions, it makes the following suggestions: “All these considerations serve to show that an efficient outcome of market processes in an increasingly globalized economy does not require greater inequality between capital and labour incomes and a greater dispersion of personal incomes. Inclusive growth and development requires active employment and redistribution measures, as well as supportive macroeconomic, exchange rate and industrial policies that foster productive investment and create decent jobs. A better income distribution would strengthen aggregate demand, investment and growth. This in turn would accelerate employment creation, including in high-productivity activities that offer better remuneration and social benefits, thereby further reducing inequality.” (p. 29ff.)

16. The Earth Institute, Columbia University, 2012 – World Happiness Report

Authors: John Helliwell, Richard Layard and Jeffrey Sachs The first ever World Happiness Report, an initiative of The Earth Institute and co-authored by Jeffrey Sachs, was published in April 2012,. Its main findings were: The happiest countries in the world are all in Northern Europe (Denmark, Norway, Finland, Netherlands). Their average life evaluation score is 7.6 on a 0-to-10 scale. The least happy countries are all poor countries in Sub-Saharan Africa (Togo, Benin, Central African Republic, Sierra Leone) with average life evaluation scores of 3.4. But it is not just wealth that makes people happy: Political freedom, strong social networks and an absence of corruption are together more important than income in explaining well-being differences between the top and bottom countries. At the individual level, good mental and physical health, someone to count on, job security and stable families are crucial.The World Happiness Report discusses ways to measure happiness and it gives policy recommendations to improve well-being. It finds that “while basic living standards are essential for happiness, after the baseline has been met, happiness varies more with quality of human relationships than income.”External features that influence happiness and misery include income, work, values and religion, community and governance. Personal features that influence happiness include education, gender, age, mental and physical health, family experience. These factors often have a two-way interaction with happiness – physical health may improve happiness, while happiness improves physical health. “An analysis of all these factors strikingly shows that while absolute income is important in poor countries, in richer countries comparative income is probably the most important. Many other variables have a more powerful effect on happiness, including social trust, quality of work, and freedom of choice and political participation.”

17. World Bank – World Development Report 2006: Equity and Development

Authors: Francisco H.G. Ferreira and Michael Walton; and Tamar Manuelyan Atinc, Abhijit Banerjee, Peter Lanjouw, Marta Menéndez, Berk Özler, Giovanna Prennushi, Vijayendra Rao, James Robinson, and Michael Woolcock

The 2006 World Development Report analyzes the relationship between equity and development. The report documents the persistence of inequality traps by highlighting the interaction between different forms of inequality. It presents evidence that the inequality of opportunity that arises is wasteful and inimical to sustainable development and poverty reduction.The report aims to be very complete and to discuss everything related to inequality.“With imperfect markets, inequalities in power and wealth translate into unequal opportunities, leading to wasted productive potential and to an inefficient allocation of resources.”The World Bank focuses on equity (which is more judicial, parity, as in equal opportunities), not equality (as in equal outcomes). Equal opportunities are necessary for economic growth in the long term. Due to unequal opportunities people with potentially good ideas cannot contribute to economic growth. According to the World bank, these unequal opportunities are caused by market imperfections, which need therefore to be removed.

18. United Nations University – WIDER, 2006 – The World is not Flat: Inequality and Injustice in our Global EconomyAuthor: Nancy Birdsall

In the 2005 WIDER Annual Lecture, ‘The World is not Flat: Inequality and Injustice in our Global Economy’, Center for Global Development President Nancy Birdsall addresses the challenge that global inequality poses for managing globalization so that it works for the developing world. Birdsall argues that inequality can stall growth, tends to undermine good public policy and tends to inhibit effective collective decision making. Globalization tends to augment existing inequalities. This is the case because global markets reward more fully those countries and individuals with more of the most productive assets and because negative externalities raise new costs for the vulnerable and compound the risks faced by the already weak and disadvantaged. In addition, existing rules tend to benefit most those countries and individuals which already have economic power. Those with power try to influence the redesign of these rules in their favor. She concludes by arguing in favour of a global social contract, addressing global market failures and the full and fair implementation of just global rules.

19. AIV (Advisory Council on International Affairs), 2012 – Unequal worlds: Poverty, growth, inequality and the role of international cooperation

In its advisory report ‘Unequal worlds: Poverty, growth, inequality and the role of international cooperation’, the Advisory Council on International Affairs (AIV) provides an answer to the Dutch government’s central question (what are the possible consequences of observed shifting patterns of poverty for the post-2015 agenda and possibly, related changes in inequality within and between countries?) on the base of extensive empirical data on global poverty and inequality (stemming from, amongst others, Andy Sumner and his ‘new bottom billion’ thesis). In the English summary, the following is stated:

“Dutch development policy is facing a major challenge. The traditional approach focuses on providing aid and expertise in the poorest countries. In the AIV’s view, many countries that have developed into MICs have sufficient governance and financial capacity to take on more responsibility. A first response to this is the oft-repeated call to stop providing such countries with aid. However, rather than terminating development ties with MICs, the AIV argues for a different approach. One reason for this is that the dividing line between low- and middle-income countries is very arbitrary. Countries that are just above the line are not always more developed than those just below it. MICs also include a number of fragile states and countries in conflict, where aid remains necessary. In addition, reaching deprived groups in MICs requires a constructive policy dialogue with these countries.

Such a dialogue with middle-income countries offers benefits to all parties. For these countries the AIV recommends a shift from pure bilateral development policy to a policy of international cooperation, based more on multilateral cooperation and the civil society and private sector channels. The bilateral channel can continue to be of great importance to low-income countries, though in light of rapid geopolitical changes it will need to be more flexible and less focused on rigid country choices, and where possible the aid should be provided in cooperation with a number of large middle-income countries (trilateral). The AIV advises the Dutch government to take the lead in setting up a dialogue with other donors, large MICs and low-income countries on a trilateral approach of this kind.”