A call for more equitable economies and some ideas on how to get them

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I am increasingly optimistic that lessons from the economic crisis might not only have been learned but may even be acted on. It’s not just positive-thinking arriving with Spring, there are real green shoots of change in economic policy circles.

It might seem self-evident that economies that marginalise a significant majority and disproportionately benefit an increasingly small number are not a good idea. But it is really only since institutions such as the IMF and World Bank started to question the contribution of inequality to instability and poor economic performance that it has become politically palatable to raise the issue. (And conversely, the benefits to be had from unlocking the potential of those currently excluded from economic life.)

Although we still have some way to go, there was a clear call from governments and international organisations at the UN’s Leadership Meeting on Inequality, held last month in Copenhagen, to directly address inequality in any successor framework to the Millennium Development Goals (which expire in 2015).

There are three good reasons for tackling inequality, we call them the three E’s:

Efficiency: Without tackling inequality, the lion’s share of the benefit from economic growth goes to the richer parts of society, while benefits to the poorer parts will be few and far between. By focusing on directly and disproportionately benefiting the poorest, the overall level of growth and resources needed will be far lower and results will be quicker. This is good news in the face of serious environmental constraints.

Effectiveness: Although the MDGs had some successes, a lot of their shortcomings can be laid at the door of their failure to tackle inequality. Whilst some targets will be met, critics argue that this has been by plucking low-hanging fruit and leaving the poorest still out in the cold. The MDGs may have focused the minds of donors and governments, but they have not challenged unfair economic rules and systems in order to truly eradicate poverty for the long run. A focus on inequality means a focus on the poorest, and tackling these structural barriers that perpetuate inequalities head-on.

Ethics: Often overlooked as a reason for tackling inequality, but it is simply not right that whilst we are born equal in rights (as enshrined in UN treaties), in reality the fairness ends there. The situation into which you are born determines much of your life chances and outcomes, regardless of your own efforts.

So what can we do collectively to tackle inequality? Here too, promising ideas are beginning to blossom.

The first is ensuring that governments are providing proper support to livelihoods of poor men and women. There is a long way to go. Research commissioned by Traidcraft and supported by CAFOD found that governments are a very long way from knowing if the money that they are spending on economic development is having an impact on poor entrepreneurs.

But at the end of last year, over 180 governments did sign up to guaranteeing their citizens a minimum level of income and access to basic services.  This means that poor men and women will have the basic capabilities to participate in economic life. Put simply, it’s hard to have a successful livelihood if you have poor education, poor health, no income to invest, and operate in local markets which are highly risky where your potential customers are equally poor. Now governments need to be held to account for delivery on these commitments, and this is something a successor framework to the MDGs could help to achieve.

The second is to ensure that the rules of the game governing our economies are not stacked against the poorest. Even if you are healthy and educated, if markets are too distorted or too unfair, you still won’t be able to achieve much in the way of a successful livelihood. How can a poor, small business owner be expected to thrive in an economy where large multinationals don’t pay tax, but the local government lacks the resources to provide an accessible energy supply or maintain basic roads? Or where global investment rules are weighted in favour of foreign investors, but can undermine local land rights and even food security (as this briefing by Traidcraft explains)?

Many of these issues need to be addressed collectively by governments, a good reason to include them in an international setting. Taxing companies that operate across borders requires governments in different tax jurisdictions to cooperate.

And even on these difficult, structural issues green shoots are emerging. George Osborne led the call for a crack-down on tax-dodging multinationals at a G20 meeting last month. Last year, governments agreed to rethink investment rules at a United Nations conference in Doha.

Spring fever may be here to stay.

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