Social tensions due to inequality are increasing across the globe
By Stefano Scarpetta – The Daily Star
When the benefits of economic growth are distributed very unequally, social bonds fray. Those losing ground, especially the young, may well grow disaffected, then resentful.
This was a key factor behind the Arab Spring revolts; and as protests in Chile, Brazil, Israel, Turkey and India have shown, social tensions stemming from inequality are mounting around the globe.To be sure, income inequality has been increasing worldwide for decades.
Even while many developing and emerging economies lifted millions of people out of extreme poverty, the perception that growth meant greater inequality was always bubbling below the surface. But now increasingly persistent unemployment and under-employment are giving new impetus to the rise in inequality, as the Organization for Economic Cooperation and Development reported to the G-20 in July.
Indeed, in the wake of the 2008 financial crisis, youth unemployment now averages 16 percent in advanced countries, and exceeds 40 percent in some European countries.
As a result, the challenge of inclusive growth has moved to the top of the global economic-policy agenda. Indeed, according to the World Economic Forum’s Global Agenda Outlook, widening income disparities will be the second most important world trend in 2014, behind only Middle East tensions.
Income gaps are growing for many reasons, ranging from “skill-biased” technological progress to corruption. But whatever its causes, putting people back to work at productive, rewarding jobs can help a great deal, and this demands the best efforts of governments, employers and civil-society groups on many fronts.
For starters, it means providing populations with access to quality schooling and health care: a healthy, educated person is an employable person. In many countries, this remains a major challenge. But the large strides already made in some low-income countries reveal great potential.
Consider Brazil, which enjoyed a long boom in the 2000s, during which income inequality actually declined. One contributing factor was the bolsa familia (family grant), now a decade old. This monthly cash payment goes directly to mothers, provided that they keep their children in school and send them for regular medical checkups.
This innovative program is not only a human-capital investment in millions of children; it also allows mothers to work. Such well-designed subsidies for socially useful behavior can lift millions out of poverty.
But education and health are just the first step. For practical and political reasons, redistributive programs, while essential, are not enough to ensure inclusive growth by themselves.
It is often said, for good reason, that the widening income gap largely reflects technological change, which has drained many economies of blue- and even white-collar jobs, while channeling the fruits of improved productivity to high-skilled elites. But the digital revolution can also enable inclusive growth. Internet applications and other communications advances are spreading knowledge and information to millions of poor people.
