Inequality post 2015

This post was written by Claire Melamed from the Overseas Development Institute.

It’s just under 1400 days until the end of 2015 – the date which marks the expiry of the Millennium Development Goals. These goals, agreed in 2000, have for the last 12 years provided a globally agreed framework for defining and measuring progress on global poverty. One testament to their success is that the debate about what should follow them is now in full swing.

This debate is a chance to re-evaluate what is meant by progress, and to consider what’s been learnt since 2000 about how to measure it. One of the themes that keeps coming up is the question of how that progress is distributed within societies. There’s a strong desire for a new global framework to have more to say about inequality.

This is partly because of a growing social and political concern for inequality across the world. The impact of the financial crisis and resulting government spending cuts across Europe is shining a spotlight on how the pain from the crisis is distributed – who pays the price and who does not. It’s clear that across whole societies, the richest are bearing little of the burden, while the poorest are suffering most from cuts in government spending and economic instability.

At the same time, in India, China and other fast-growing countries there is increasing concern that growing inequalities threaten both poverty reduction, as inequality reduces the impact of economic growth on poverty reduction,and political stability. While these countries have seen astonishing growth rates and reductions in poverty in recent years, increased inequality threatens both. The example of Brazil and other Latin American countries shows that inequality can be tackled – a number of countries have seen falls in inequality in recent years, falls which are mostly the result of government policy choices rather than market forces.

The MDGs don't have much to say about inequality. The targets are all about averages. The target for income poverty, for example, is to halve it by 2015. For maternal mortality, it is to bring it down by three-quarters. The halving of income poverty, or the reduction of maternal mortality, is of course a tremendous achievement. But the people not reached are unlikely to be randomly distributed within a society – they will be the people most excluded by ethnicity, geography, race or gender. The MDGs don’t provide the incentives for governments to find out who is left behind, or to design special policies to reach them.

How could a new framework be designed to provide better incentives for governments to measure and tackle inequality? A recent ODI paper summarises current proposals, and considers the pros and cons of each. There are two broad choices.

One way is to include measures which focus on inequality across whole societies. A target for the Gini coefficient of income, for example, would encourage governments to measure income inequality and think about how to reduce it. Or, more broadly, targets which give progress on social indicators in the bottom income quintiles a higher ‘weight’ than progress in higher income quintiles would give governments points for both reaching the very poorest and tackling inequality across the board.

A second set of proposals focuses less on measuring inequality for its own sake, and more on providing incentives to ensure that the poorest are not left behind by progress. Specific targets for progress in the bottom twenty per cent is one idea, or universal targets which would mean that leaving behind particular groups would jeopardise achievement. Both of these would focus on bringing the poorest up to a minimum standard, but would not have much to say about inequality across the whole society – which could well be rising at the same time.

Reaching an agreement will involve forming some sort of consensus on what is the bigger political priority – tackling inequality for its own sake (the more ambitious project), or focusing on the gap between the poorest and the rest. Of course, the two aren’t mutually exclusive, and the ideal might be an agreement which combined the two, possibly to different degrees depending on the country concerned. But they have different implications for governments, for the technical issues involved in the measurement of progress, and for the groups whose role is to hold governments to account for the promises they make.

The debate about what comes after the MDG’s can’t just be a technical debate between measurement experts. It’s got to be a political one too – about what kind of societies we want to live in, and about how to get there. Building in a focus on inequality is very firmly at the heart of that debate.