Inequality Inconsistent with UN Charter vision Worsened by

Inequality • Inconsistent with UN Charter vision • Worsened by aspects of globalization • Confounds poverty reduction efforts • Not only in developing countries • Multidimensional and compromises development, security and human rights • Frustrates achievement of MDGs

We cannot advance the development agenda without addressing the challenges of inequality within and between countries – the widening gap between skilled and unskilled workers, the chasm between the formal and informal economies, the growing disparities in health, education and opportunities for social and political participation. Kofi Annan, Secretary-General, UN

Inequality hinders growth and increases poverty Poverty Lack of economic power • Low income • Low assets Lack of sociopolitical power • Denial of human rights • Discrimination

Unequal GDP distribution

Per capita GDP in 20 poorest and richest countries

Income gap widened in recent years • Since 1980 s, inequality has risen in most countries in all world regions • Income inequality trends in 73 countries for which data are available (1950 s-1990 s) • Risen in 48 countries • Relatively constant in 16 countries • Declined in 9 countries • Wealthiest 10% of global population increased share of global income from 51. 6% to 53. 4% (1980 -92) • Related to greater wealth concentration

Global income inequalities (Gini coefficient values)

Shares of Global Private Consumption

Hunger and Malnutrition • Since 2000, the average number of food emergencies per year has been 30, compared with 15/year in 1980 s • Sustained nutrition deprivation affects 852 million people • 1 billion overweight adults globally

Inequality Exacerbates Poverty Income distribution Productive resources Opportunities Markets and information Political representation Basic social services

Poverty Levels and Trends % living on < $2/day in 2001 Change in proportion and number of poor people between 1981 and 2001 % millions World 53 -8 81 East Europe + Central Asia 20 15 70 Middle East + North Africa 23 2 19 Latin America + Caribbean 25 -3 3 East Asia + Pacific 47 -23 -252 Sub-Saharan Africa 77 2 134 South Asia 77 -9 106

Unemployment • Remains major source of inequality • Between 1993 and 2003: • Global number of unemployed rose by 31% to 186 million • Unemployment rates decreased slightly in developed countries while increasing in most other parts of the world • Spread of jobless growth

The informal economy • • • Those in informal economy typically “have-nots” in society - 60% women - 535 million earn less than $1/day Likely to be: • Excluded from legal protections • Precluded from enjoying basic rights and benefits of formal economy • Working in hazardous conditions

Informal employment dominant in many regions • • Share of informal workers in non-agricultural workforce by region: North Africa: 48% Latin America & Caribbean: 51% Asia: 65% Sub-Saharan Africa: 78% (excl. South Africa)

Informal economy share of Gross National Income, 2000 • • • Developing countries: Transition economies: OECD Countries: 41% 38% 18%

Why Rapid Growth of Informal Economy? • Jobless growth • Labour market flexibility • Reduction in public sector jobs • De-industrialization • Economic crises • Greater “outsourcing” • Household survival strategies

Health Inequalities • Great differences between and within countries • • Access to healthcare Life expectancy Under-five mortality Intellectual Property Rights and Patent Monopolies • • • High drug prices Unequal access Compromised capacity to react to crises

HIV/AIDS • Highly unequal global and regional impacts • Lowers growth, increases dependencies • Worsens existing inequalities between women and men • Depletes human resources, threatening stability, security and development

Education, 2001 Despite progress, substantial inequities exist by region Indicator Net Primary Enrolment Ratio Net Secondary Enrolment Ratio Girls Primary Enrolment per 100 boys Girls Secondary Enrolment per 100 boys Highest Lowest 95. 7% 62. 8% Latin America & Caribbean 89. 2% Sub Saharan Africa 21. 3% N. America & W. Europe Sub Saharan Africa 99 -100 76 CIS, Europe, E. Asia Southern Asia 107 Latin America & Caribbean 79 Southern Asia

Financial Liberalization • Net capital flows from ‘capital poor’ to ‘capital rich’ • Increased financial volatility • Undermines use of inclusive targeted developmental credit • Slower economic growth in recent decades

Trade Liberalization • International terms of trade moving against developing countries • Primary commodities vs. manufactured commodities • Tropical agriculture vs. temperate agriculture • Generic products vs. those protected by intellectual property rights

Tariffs biased against developing countries • Imports between developed countries average 1% • Tariffs on textiles from developing countries as high as 9% • Tariffs on agricultural products from developing countries as high as 20%

Retreat of the state • • Stabilization and structural adjustment programs Less progressive taxation Reduced redistributive role Reduced role of government in many developing countries • Public education • Health • Housing • Utilities

Government Spending Priorities High-income countries spend 2½ times more of national wealth for health, education and welfare than low income countries.

Inequality and Violence • Violence often rooted in inequality • No simple causal relationship • Vicious cycle mutually reinforcing: • • • Poverty (Horizontal) Inequalities Authoritarian governance Lack of opportunities Armed conflict Reduced growth and development • Links between inequalities and extreme aspects of social disintegration

Poor Countries More Likely to Suffer Civil War, Adversely Affects Growth Predicted probability of onset of civil war within 5 years

Global Economic Agenda Dominated by Issues Important to Developed Countries Free Trade Intellectual Property Rights Investment protection Capital Account Liberalisation Financial Liberalization

…While Issues of Importance to Developing Countries Can’t Make it to the Agenda Doha Round, IPRs, etc. Not Developmental International Economic Governance Dominated By Rich Washington Consensus Not Developmental, Not Equitable Capital Flight International Economic Instability Meaningful Debt Relief

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