Tuesday, 15 June 2010

Social cohesion in a "shifting world": going up or down?

The soccer World Cup (finally!) kicked off in South Africa last Friday. It is the first one taking place in the African continent and South Africans are rightly quite proud of it. President Zuma claims that the four years of preparation have helped to create cohesion among what is otherwise an often fragmented society. National pride for the bafana, bafana (boys, boys) soccer team may indeed be kicking off a process for more cohesiveness between different social classes, ethnic groups, black and white people in this emerging economy still rattling with high inequality and social polarization. Strengthening social cohesion is not only a key challenge for the South African society in the post-Apartheid area, but also elsewhere around the globe.
Social Cohesion is the glue that holds society together, spans across different groups in a society, and is made of shared values, goals and norms. Social cohesion is dynamic, not static and driven also by perception, not only hard figures. If there is one fundamental change in the last 20 years influencing social cohesion at the global level, it is fair to say that it is “shifting wealth”. What do I mean by this? The emergence of countries like South Africa, Chile, Brazil, Vietnam and obviously China and India as economic powerhouses shape far more than the economic geography of growth. The developing countries have been constantly increasing their piece of the pie: today, non-OECD member economies account for nearly half of global GDP (in PPP terms) and are set to increase their share further in the years to come. This is not a transitory phenomenon but a fundamental shift in the economic centre of gravity with vast consequences for all of us from rich to poor. On June 16th the OECD Development Centre presents the first Perspectives on Global Development around this topic arguing that the rise of the rest should not be seen as a threat to the West.

But what does the shift mean for social cohesion? Skeptics argue that the integration of 1.5bn more workers into the global economy since the 90s has increased competition, down-ward pressure on wages and specialisation processes. If one takes the GINI coefficient as a commonly used measure of inequality, they seem to be right. As Kuznets predicts, during the development process inequalities within countries increase and only at a later stage go down eventually again. Many of the emerging countries like China and India have seen their levels of inequality soaring up shortly during periods of strong economic growth. But is it a natural fate? In fact, the good news seems that something can be done about it. If we look at the example of Brazil in the last decade we can see the impact of determined policy action on reducing inequalities: while Brazil’s overall level of inequality is still high, through social innovations like conditional cash transfers (Bolsa Familia) things have improved substantially. So polices matter as does civic engagement, a common vision and active solidarity.

What does all this tell us? First, in the coming years the further realignment of the world economy will put further pressure on established social systems. From Beijing to Berlin, from Moscow to Manila new models of social protection as well as possibilities for social mobility need to be thought of. Secondly, perceptions matter a great deal. People not only compare themselves to an absolute standard but once basic needs are fulfilled, they often compare themselves to their peers, i.e. neighbors, friends, colleagues. Policy makers need to take this more into account and think about more appropriate communication and media strategies while introducing needed reforms. Third, looking after social cohesion is not only important for the well-being of the society per se but also has an instrumental value. Studies show that innovation depend to a great deal on the effective flow of information which can be eased by social cohesion. Finally, many problems on the global level from climate change to water management, security concerns, financial regulation, etc call for a minimum of social cohesion across states. Without a minimum of understanding between societies, progress within will not be sustainable. Social cohesion is crucially needed, yes, but how to build and foster it in the new global environment and across different groups is a key, yet unsettled issue. As millions of us watch the World’s Cup together this summer, please enjoy and celebrate the social cohesion it generates-- it’s worth thinking about how we can find common ground like this both within our own societies as well as globally more often than once every four years…


Tuesday, 8 June 2010

Equality is so unfair…

Is there any reasonable argument for trading-off some of the efficiency in societies for some more equality among children? For kids in Finland, Korea and Canada PISA shows that both high averages and low inequality are achieved - and no trade-off need be made. But then ask the kids in Turkey with low average and low inequality on the PISA science scale if they would switch with New Zealand with a high average and high inequality? Which is better, to be honest I don’t know… and that is so unfair.

Efficiency and fairness are guiding principles in any civilised society. Equality, on the other hand, is not.

There is no overarching expectation in society for all people to achieve the same outcomes; your outcome is in part a reward for your efforts (or the efforts of someone else on your behalf). In capitalist economies, without some level of inequality, competition would be pointless, development (progress) would falter and efficiency would suffer. People thrive on competition - So why should kids be different?

Ask yourself now how life is treating you? In amongst the reminiscence of times gone by, you think of others achievements, you think relatively, your place yourself in a league table, you compare and you compete. To know whether or not you are happy, you need to gauge whether or not other people are happier than you. Again we can ask - why should it be different for kids?

At the national level inequality in income is not good news. Ideologically you can be of the mind that it shows a society is not good at sharing its resources, or you might think that some people in society are not putting in their shift. In practise higher income inequality has been shown to associate with a range of unpleasant outcomes for children including: higher child poverty rates, more school dropouts, higher infant mortality rates, and lower child well-being: associations which are not always found for average national incomes (see The Spirit Level). Inequality studies of health and education (and the transmission between generations) also give us good reasons for concern.

So presumably inequality in outcomes in the adult world is not good news for children, but the way our societies work make it necessary, and not necessarily unfair if a ‘fair fight’ has been fought. And although inequality can make you terribly unhappy, people can’t be happy without it.

But is inequality in societies inefficient, is inequality the result of fair fights? Findings above suggest that income inequality is inefficient if you want to promote child well-being amongst other things. On the other hand inequality might be efficient if your goal is one of promoting competition and productivity. “Fair fights?” you ask… not likely! Time infinite has passed since people were born into truly equal opportunities. Some of us have more support from day one, support which affects every aspect of our lives. If life were a running race (a marathon not a sprint), some of us were born with running shoes, others weren’t… I expect some people are even born knowing the course!

What is a natural level of inequality for children, and at what point does this inequality become counter-productive harming the broader goals of your society and economy? Some kids will naturally do better at school, the competition it provides gives them some control over future choices, and can produce positive learning environment for them and for their classmates. In today’s societies much of what we do (and how we make sense of it) is driven in part by inequality – the goal is to be different, to be better, and to feel different.

Let’s imagine for a moment that Utopia in our times is unachievable – imperfections require trade-offs – and finding the balance is key. The balance in today’s societies requires some inequality; the challenge now is to make sure we know when we have enough.

P.S Following up on a previous blog. Research in the UK has shown that approximately 57 million GBP is down the back of the nation’s sofas. Annually this would cover the one fifth of the cost the soon to be withdrawn universal baby bond. So digging around down the back of the sofa in the UK could pay for a mean-tested version of a baby bond for around 20% of poorest children in Britain. And you thought I was joking…

Wednesday, 2 June 2010

Dethroning GDP: the King is dead, long live the King?

A couple of months ago I was in New York for what was quite possibly the most interesting meeting I've ever attended. Now, based on most of the meetings I've attended, this is not a great compliment. But when I left the meeting room I was, dare I say it, inspired. I was struck - more than ever - by how important a role GDP plays in all our lives and how important it is that more appropriate measures are used to gauge our progress. We were not so naive, however, to think the revolution would be easy.

The meeting, entitled "Dethroning GDP", was organised by the think tank Demos and the Rockefeller Brothers Fund. It was focused on the USA and aimed to give traction to the movement there to develop alternative indicators of progress and wellbeing. It brought together 30 or so prominent Americans, including senior policy makers, leading thinkers and practitioners, and communications experts. Nic Marks from the New Economics Foundation and I were also invited to give some international perspective.

The highlight was Joseph Stiglitz, who really has emerged since the Stiglitz-Sen-Fitoussi report as the global champion of these ideas. He gave a great opening speech on his Sarkzoy Commission report and the importance of its findings for the US. The Commission looks set to continue its work, and to be associated with the OECD in some way. The details were still to be sketched out but I am sure I was not the only one present to be pleased: the Commision's work has had an impact far and wide, in part because of the quality of the research and in part because such a distinguished of people could work together and agree on something (perhaps Prof Stiglitz's next nobel prize should be for Peace).

I was also interested to hear Joe Stiglitz say he was becoming interested in the potential for conversations about measurement metrics to bring people together and find common ground among those who usually disagree. This was something we saw to an extent in Australia during our work on Measures of Australia's Progress. People with very different political ideologies would walk into a meeting to discuss "Poverty" (or Financial Disadvantage as it is disingenuously called in Australia) on the defensive and ready for a fight. Two hours later, after agreeing on just about everything on the agenda, including why it is important to tackle poverty and how it should be defined and measured, they would walked out of the room and off to the pub with their new found friends (where they perhaps might have got into a fight over what policies were needed to tackle poverty, something we most certainly did not try to agree on in the meeting).

This is a potentially important area, ripe for research, and one which seems to have great potential to engage those who are trying to find policy solutions in areas where people almost always disagree. It might not lead to deciding on what policies are needed. But it can lead to claiming some common ground and building consensus about the outcomes that are being sought. It won't find the solutions for some of our wicked problems, but it can take us several steps in the right direction.

After Prof Stiglitz's talk, discussion quickly turned to the importance of communication and alternatives to GDP. We agreed that we were looking to change society to one where debate about policy effectiveness was couched in terms of wellbeing, not economic output. A society in which if a policy maker announced that such and such a policy would lead to economic growth, the reflex reaction would be "So what? Tell us what it will do to our wellbeing". We also realised that achieving this goal would mean changing the paradigm (a much overused expression I know, but one which is appropriate here). Our overuse of GDP was so pervasive throughout the entire machinery of government, and so habitual, that it needed to be tackled as if it was an addiction. No amount of new indicators alone will dethrone GDP. We need indicators, updated daily and in real time, that could challenge the constant drip feed of economic information that saturate us daily. Something to replace - or at least balance - the Chinese water torture of stock exchange data and currency movements that appear to be so meaningful for our daily lives because we hear about them so often.

When the day ended there was a tangible sense of excitement. 2010 really does feel like the best opportunity since the System of National Accounts was born to dethrone GDP. We might not know how to topple the throne, or where the next monarch will come from, but maybe, just maybe, the right people were in that room to start the revolution.