Close observers of the development scene will have noticed an interesting shift over the past few years. Where once institutions such as the World Bank and charities like Oxfam described their goal as simply ‘ending poverty’, today they tend to frame things in terms of poverty andinequality. Well, that makes sense: doesn’t it seem intuitively obvious that these two things must be connected in some way?
Yet those links can be surprisingly hard to bring into focus. In 15 years of working in the development sector – first for international NGOs and more recently running a research programme on poverty and inequality – I have found myself explaining over and over again exactly what the one has to do with the other. What does it matter to an impoverished farmer in South Sudan if 85 people hold as much wealth as half the world’s population? If those 85 people gave everything away, would that actually help the farmer?
The problem, I have come to think, is that there are two very different ways of thinking about inequality. The first is all about the rich. The second is all about the poor. The first is the one we usually hear about. The second is the one that really matters.
The first, of course, is the one that preoccupies most writers and commentators on the question. The dominant metaphor seems to be a sort of global seesaw, with a few hugely rich individuals weighing down one end and the rest of us clinging for dear life to the other. As Thomas Piketty’s Capital in the 21st Century (2014) demonstrates, the rich have been getting richer much faster than the rest of us, so the seesaw is getting ever more skewed. And so inequality is big news right now. Two things, in particular, are remarkable about the current debate. The first is how many people are having it – not just the usual suspects, but lesser-known lefty agitators including the Pope, President Barack Obama, the managing director of the International Monetary Fund (IMF) and the head of the Bank of England. One would think that a robust response was inevitable.
But perhaps not, because the second remarkable thing is the dearth of actual policy ideas. Piketty’s imagined tax on capital is probably the only part of his book that has not met with near-universal acclaim. Mark Carney of the Bank of England and Christine Lagarde of the IMF talk vaguely about curbing pay and making tax ‘more progressive without being excessive’ (whatever that means), but governments do not seem to be rallying to that call. We are left to pore over cultural artefacts such as the Financial Times’s ‘How to Spend It’ supplement – a publication that might as well be a Trojan Horse operation designed to fan the flames of class warfare. Here we glimpse a world where a special supplement on luxury yachts is a viable commercial proposition, where one might spend £6,000 on a dress because it looked good on the model, and where private jets are simply a practical transport solution. Few people live here, but it’s a very recognisable address.
As a matter of fact, the runaway incomes of the super-rich do have a link to poverty. Where inequality is high and governments are pressured to reduce taxes on the rich, government income goes down and there’s less money for the kind of public spending that reduces poverty. Such considerations lead naturally to the common proposition that we might sort things out by taking money from the rich. We could cut down on tax avoidance, for example, or limit pay, or tax capital. Would that work? Well, it might. Then again, it might not. If governments make very rich people a bit poorer by changing tax or inheritance rules, who’s to say the money won’t just be spent on missiles or grandiose infrastructure projects or other things that people don’t really want, and which certainly won’t help to tackle extreme poverty? This is a story that leaves many questions unanswered. To start filling in the blanks, we need to look, not at the top of the wealth distribution, but at the bottom; not at the inequalities that make people rich, but the ones that keep people poor.
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Look at that seesaw again. It’s tempting to picture the people on it as atomised individuals, randomly distributed between the two sides. But in fact they aren’t like that at all. People don’t end up among the very rich, or languish on the side of the very poor, by chance. Rather, their position depends to a remarkable degree on the groups that they belong to. Where do they live? What is their ethnic group or religion? Do they have a mental illness or a physical disability? What family do they come from?
Take education. Between 1999 and 2011, the number of children in the world who were not in school fell by around half. Good news. But who are the half who didn’t benefit from this general improvement – the children on the wrong side of the education seesaw? The data on this is not as good as it should be (of which more later). But it’s likely, globally, that around two-thirds of children lacking education are from an ethnic minority in their own country. That’s useful information. The deck appears to be stacked against certain people in very predictable ways.
The inequalities underlying patterns of poverty and exclusion are always complicated. In Burkina Faso, for example, just under a third of children complete primary school. Trying to understand the barriers faced by the two-thirds who don’t attend school involves sifting through a lot of data. Sexism is clearly part of the story: 34 per cent of boys complete school compared with only 24 per cent of girls. But in this case the biggest inequalities are not based on gender.
Much more striking is the fact that 53 per cent of children in the central region of Burkina Faso finish primary school compared with 8 per cent of children in the most remote Sahel region; that’s a gap of 45 per cent. And the worst-off are from the minority Tuareg ethnic group, where only 3 per cent finish primary school. If governments want to improve education and get all children into school, they have to understand the pattern of inequalities that underlie the national figures. Otherwise, they can’t make effective use of resources, public education campaigns, political attention or anything else.
Where governments do want to tackle inequalities, doing so on the basis of groups can have impressive results. Take Bolivia, one of the most unequal nations on Earth. The government of Evo Morales came to power in 2005 on the basis of a programme to tackle the quite staggering levels of inequality in the country. In Bolivia, inequality has a racial face: indigenous people have a poverty rate approximately double that of the white population.
Morales made an explicit commitment to tackle the ethnic dimensions of inequality and poverty. The government started a cash-transfer programme. It made road-building a priority in order to link up the remote areas where indigenous people live. It has started programmes to persuade indigenous populations to attend university, and to encourage greater linguistic diversity within the government machinery. These measures seem to be working: inequality in Bolivia, while still high, has started to decline, and extreme poverty is on a steep decline as well. The Gini coefficient, the standard measure of income inequality, fell by 15 per cent in Bolivia between 2001 and 2011.
Governments tend to look after their own, namely the groups close to the top of the wealth distribution
What matters is the combination of policies. Unless ethnic disadvantage is tackled explicitly, attempts to reduce poverty can fail. In Vietnam, for example, the expansion of infrastructure to rural and remote areas often had the effect of widening inequalities within those areas, as the majority Kinh households were better able to take advantage of the new opportunities offered by roads or irrigation, while minorities found themselves falling further behind. Simply taxing and spending wasn’t enough. More specific policies were needed.
So that’s the first major benefit of this bottom-up perspective on inequality: it is very practical. If we ask which groups are getting left behind, we suddenly find ourselves with an agenda for effective action against poverty. A second benefit also becomes clear: once we know which groups are impoverished and excluded, we can often get a better sense of the political context that explains both action and inaction. Ethnic minority groups such as the Tuareg in Burkina Faso usually have little power and influence. Governments tend to look after their own, namely the groups close to the top of the wealth distribution. It is common to find that disadvantaged groups are actively excluded from power, in the name of prejudice, political expediency or some long-held grievance – the reasons vary. Once we understand what’s going on in each particular situation, we can try to change it.
That’s the upside. But this kind of analysis presents risks as well as rewards. Appeals to ethnicity or other group markers can be divisive, if not dangerous. Most of the wars in the world today take the form of clashes between ethnic or religious groups, and organisations that focus on such group characteristics very often turn out to be intent on violence. When we enter this territory, we have to tread carefully.
All the same, the Bolivian story should persuade us that the risk is worth running. In Bolivia it was an appeal to the most excluded groups that gave Morales his electoral victory and, with it, the power to tackle the problem. In Ethiopia in the early 1990s, the nation-building project that followed the civil war included a deliberate programme of education investment among excluded groups. Again, the reduction of group-based inequalities was a key part of the new government’s strategy for holding on to power. A clear view of the obstacles that trap the bottom end of the wealth distribution can deliver the political conditions for action, as well as the insight to show what that action should be.
Here, though, we hit a further problem. There is a pitiful lack of information about the key group-based inequalities that underlie poverty. International household survey programmes offer patchy and partial data on ethnicity – one important source of inequality, as the examples above demonstrate. But it is incredibly poor information; just enough to make some general points, but not enough, in most countries, to track changes over time, or to drill down into the combinations of ethnicity, geography and gender, for example, that are likely to act together in important ways to keep people poor.
We know a little more about education, and the fact that we do is thanks almost entirely to the team behind the Education For All global monitoring report, which maintains a database recording inequalities in that sector. A lot less is known about the causes of other key dimensions of poverty. We don’t have the same comprehensive database about health, for example, or income, or vulnerability to crime and violence. Even less is known about the factors that determine access to services that help people to change their situations: finance, transport, electricity, telecommunications. For many aspects of inequality, the information simply isn’t there, even for the most well-meaning governments.
the absurdities of boardroom pay and tax avoidance might prick our sense of fairness, but this has only a limited amount to offer the analysis of extreme poverty
What information there is tends to focus on a small number of inequalities, such as ethnicity or geography. These are highly important, but they can’t be the whole story. In most countries, to pick an especially glaring example, we know nothing at all about the number of children out of school who are physically disabled, or about rates of extreme poverty among the mentally ill, despite anecdotal evidence suggesting that such factors have a huge amount to do with discrimination and exclusion.
So let’s look again at our two inequality stories. The mainstream narrative – about the runaway incomes of the richest people in the richest countries, the absurdities of boardroom pay and tax avoidance and so on – might prick our sense of fairness, but it has only a limited amount to offer the analysis and treatment of extreme poverty. The second, lesser known, inequality story is about the things that keep people poor. This story offers fertile ground for the coalitions and policy agendas that can actually address both poverty and inequality.
These stories are, of course, linked. Concentrations of income and opportunity at the very top might well make progress at the very bottom harder, in some cases – for political, economic or social reasons. And more money, generated by taxing the super-rich, would give more options to those governments that do want to act.
But at present too much analysis and attention in the development sector is given to the first story. This has led to a situation where people want to believe that inequality is important, but they don’t quite know why. Answering that question requires us to grapple with the second type of inequality. And that, in turn, requires better information. At present, the empirical foundations of our inequality debates are far too weak. Perhaps that is the most basic inequality of all: between those of us who are counted, and those of us who are not.
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is the Director of the Growth, Poverty and Inequality programme at the Overseas Development Institute in London.