Inequality rises across the G20 as economic growth leaves the poor behind
January 18, 2012
Strong economic growth since 1990 has failed to lift people out of poverty in almost every G20 country, according to a study by international agency Oxfam.
Left behind by the G20? shows the importance of policies to address inequality if growth is to benefit those living in poverty.
“This report shows why anger about income inequality sparked protests that have swept the world, from Tahrir Square to Wall Street,” said Oxfam Canada Executive Director Robert Fox. “More than half of the world’s poorest people live in G20 countries, making them a key battleground in the fight against global poverty.”
Since 1990, income inequality has increased in 14 of the 18 Group of 20 countries for which there are comparable statistics, says Oxfam’s report card. Inequality increased fastest in Russia, China, Japan and South Africa, with Canada following close behind. Oxfam’s study predicts that more than a million more people will be pushed into poverty in South Africa alone during the next decade unless rapidly-growing inequality is addressed.
Over the same period, most low-income countries managed to reduce inequality. Mali, Malawi Sierra Leone and Ethiopia made huge strides toward the equality needed if economic growth is to reduce poverty.
Korea is the only high-income G20 country that succeeded in reducing inequality during the last two decades. Of the emerging economies, only Brazil, Argentina and Mexico did so, though inequality remains high and further progress is needed. In those three countries, the middle class gained income share at the expense of the richest 10 per cent. The poorest people were still left behind.
The report finds that reducing inequality is not only the right thing to do; it also makes sound economic sense. While rising inequality has in the past been viewed as an inevitable result of economic progress, the report identifies growing evidence that inequality acts as a brake on growth.
Oxfam’s inequality report card measured net household income within all G20 countries but Saudi Arabia, for which comparable data is not available. France has the lowest inequality, followed by Korea, Germany, Canada and Italy. The most unequal are emerging market economies.
”Reducing inequality is within policy-makers’ powers,” Fox said, ”whatever the level of economic development. There is no shortage of potential government action.”
Policies that have worked include income transfers, investments in health and education, progressive taxation, removal of barriers to equal rights and opportunities for women ensuring access to land and other resources, minimum wage laws and investment in small-scale food producers.
“To tackle poverty G20 countries need to do more than promote growth – they need to adopt policies that boost the incomes of the poor and protect them from environmental degradation,” said report co-author Caroline Pearce.
Oxfam will present the report to the President of Mexico at the World Economic Forum in Davos next week. Mexico is this year’s G20 chair. Last week a panel of experts assembled by the WEF identified severe income inequality as the biggest threat facing the world.
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