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How Economic Inequalities Harm Societies
The idea that economic inequalities are socially corrosive has been around for decades. But there now exists statistical evidence substantially supporting the notion.

Since Richard Wilkinson’s enlightening TED talk presented the impact of income gaps and unequal societies on the wellbeing of both the rich and the poor, the issue has received unprecedented attention. A professor emeritus of social epidemiology, Wilkinson based his results upon statistical data, presenting conclusive, irrefutable evidence to prove how economic inequalities harm societies.

He chose widely accepted parameters of quality of life to draw the comparison between societies. These parameters include:

  1. Life expectancy
  2. Infant mortality
  3. Teenage births
  4. Imprisonment
  5. Obesity
  6. Mental illness
  7. Social mobility
  8. Homicide
  9. Math and literacy

However, the 15-minute presentation focused on developed countries only. Other studies in the recent past have revealed a similar pattern in developing and impoverished economies. In nations like India and China, where glaring income gaps continue to exist despite steadily increasing rates of economic growth, data illustrating how economic inequalities harm societies has been found. A United Nations Development Programme (UNDP) report published in November 2013 gives a lucid explanation of what inequality is and how economic inequalities harm societies.

According to the report, inequality within a society takes two main forms: inequality of outcomes and inequality of opportunity. Inequality of outcomes includes income inequality resulting in inequalities in nutrition, education, etc. On the other hand, inequality of opportunity refers to unequal access to education and basic resources, among other things. As the report notes, both types are “opposite sides of the same coin” and cannot be viewed as independent.

More importantly, to answer the key question of how economic inequalities harm societies, it is important to note the relationship between factors that were earlier assumed to be independent. For example, poor countries with unequal distribution of income face greater political instability, lower investment in human development, higher taxation, less secure property rights and negative impacts on growth. Moreover, surveys conducted by UNDP found that citizens in such countries showed little or no trust in government policies formed to bridge income gaps.

Both Richard Wilkinson’s research and the UNDP report found that even the rich in unequal societies suffer from lack of trust, harsher sentencing (partially because of stricter laws), greater incidence of physical and mental illness (due to the pressure to “watch your back”) and higher taxation, among several other crucial indicators of quality of life. Undoubtedly, an equal society is in the best interest of all people.

– Himja Sethi

Photo: Flickr

Women's Empowerment in CambodiaSlightly smaller than the state of Oklahoma, the Southeast Asian country of Cambodia has a population of about 16 million, with over half being women. The country is rich in natural resources and has very low levels of unemployment. Despite the high levels of employment, there remains an economic gender gap and a need for women’s empowerment in Cambodia.

This gender gap is not only related to the unequal pay of women compared to men, but women in Cambodia often lack job opportunities and career versatility compared to their male counterparts. Women’s empowerment in Cambodia is paramount because it can have profound impacts on the number of individuals living in deep poverty.

Economic Inequality and Lack of Education

Women in Cambodia who fall under wage employment, make approximately 80.8 percent of men’s earnings. According to the World Bank, there is evidence that this wage gap is growing, from 20 percent in 2009 to 30 percent in 2011. Additionally, approximately 53 percent of women between the ages of 15 to 64, work in agriculture production. This is considered to be a vulnerable type of employment.

According to the International Labour Organization, vulnerable employment is the sum of own-account workers and unpaid contributing family workers. Vulnerable workers often have poor and inadequate working conditions and frequently live in deep poverty.

Women also often have less career versatility and opportunities compared to men due in part to a lack of education and low literacy rates.  In 2012, the literacy rate among women in Cambodia was 73.2 percent, an increase of nearly 13 percent in 2004. However, the literacy rates for men remain much higher at about 87 percent. Girls often tend to drop out of school in greater numbers compared to boys, in turn limiting their job potential later in life.

What can be done?

There are a number of obstacles to women’s empowerment in Cambodia, all of which are primarily related to education. In 2013, the Ministry of Women’s Affairs (MOWA) became more active in Cambodia, working to reduce poverty, improve health and raise educational levels for women. The goal of their work is to provide women with the necessary skills and resources and economically empower women in Cambodia.

The desperately needed economic women’s empowerment in Cambodia can be achieved through education. Once women are educated and empowered, more individuals and families can be lifted out of poverty and the livelihood of millions can improve.

– Sarah Jane Fraser

Photo: Flickr


In India, 1.2 million children die every year from preventable diseases. Pneumonia, which is preventable through a vaccine, is the single-largest cause of death among children under the age of five. Nearly one of every four deaths of children under five years old is caused by pneumonia. As part of India’s Universal Immunization Program (UIP), the government will begin to provide the Pneumococcal Conjugate Vaccine (PCV) for free beginning in 2017. By offering PCV in India for free, up to 180,000 lives may be saved annually.

As Indian health minister JP Nadda notes, pneumonia kills more children under five than it does adults. Their weaker immune systems make it more difficult to fight off the illness’s symptoms as compared to older children and adults. Thousands of children have been hospitalized annually due to the spread of pneumonia. The inability of underprivileged families to afford the PCV in India has been a direct cause of increased illnesses among the child population.

Before now, the vaccine was accessible only via the privatized market to those able to afford it. By adding PCV to the vaccines given for free under the UIP, the underprivileged population will be on more equal footing in terms of health care access.

With free access to the PCV in India, child mortality rates are expected to decrease substantially. Millions of children will be protected against pneumonia in various states throughout India, including Uttar, Himachal Pradesh and Bihar. In addition, global healthcare alliance groups such as the World Health Organization and UNICEF remain dedicated to providing aid in support of the immunization plan.

The introduction of the vaccine will not only save children’s lives, but it will also drastically reduce health care costs for their families. Free and readily available access to the PCV in India will inevitably result in a healthier population and stronger economy.

Lael Pierce

Photo: Flickr

Saudi Arabia
King Salman of Saudi Arabia traveled to Indonesia in March to promote economic ties, and the visit sparked some discussion on the current state of inequality in Saudi Arabia. The cost of the trip was estimated at $18 million, involving six Boeing passenger jets and a military transport aircraft, which held two electric elevators and a limousine.

The Saudi family is the richest in the world, worth an estimated total of $1.4 trillion, predominately due to its assets in petroleum. However, Saudi Arabia is still relatively poor; with 20 percent of people living in poverty, the problem of income inequality in Saudi Arabia is quite evident.

Despite an annual oil revenue of more than $200 billion, most Saudis lack adequate housing, healthcare, sanitation and education. Author Karen House highlights these issues in her book On Saudi Arabia. Most of the oil revenue flows right into the hands of the royal family. At least 80 percent of the revenue in the Saudi treasury comes from petroleum, but the average Saudi citizen does not benefit from those gains. The central government in Riyadh, where the royal family is settled, receives most of the oil profits. This sustains a strong monarchy and keeps the majority poor and powerless. The public simply has no say in how the government spends its money.

Moreover, with so much revenue coming in from oil, the government is still unable to provide jobs for its citizens. Saudi Arabia provides one in four barrels of oil exported around the world, yet 40 percent of Saudi youth between twenty and twenty-four are unemployed. The unemployment is partly due to the fact that 90 percent of all employees in the private sector are foreign workers.

The consequences of having a corrupt government are highlighted in times of chaos. In January 2011, during the Cairo revolution, the city of Jeddah flooded because the monarchy failed to establish basic protections against the weather. Ten people died due to improper sewerage and drainage. The inadequate preparation was blamed on corrupt businesses and government stealing money from both sewer and drain-related construction projects.

Education in Saudi Arabia is of a poor quality and tends to exclude females. The government restricts the economic opportunities of women, who are denied the same rights as men. The lack of economic freedom also correlates with the high rates of poverty as 40 percent of Saudis live in poverty and at least 60 percent cannot afford a home.

Saudi Arabia is one of the richest nations in the world, yet the majority of the population lacks basic amenities. The poverty rates show clear income disparity in Saudi Arabia and it needs to be further addressed.

Marcelo Guadiana

Photo: Flickr

Poverty in Australia
Poverty in Australia is a fact of life for many residents. The country is one of the wealthiest developed countries in the world, but that does not mean the country doesn’t have poverty. Even though the country’s economy has grown in the last two decades, there are still issues of poverty in Australia.

 

What to Know About Poverty in Australia

 

  1. Child poverty is rising in Australia. Almost 30 years ago, then-Prime Minister Bob Hawke promised that “No child would live in poverty by 1990.” Unfortunately, that promise has not been fulfilled. According to the Australian Council of Social Service (ACOSS), more than 730,000 children are living in poverty, which is about one in six children in Australia. Child poverty in Australia has also increased by two percent in the last decade.
  2. One in four Australians who apply for homelessness services are indigenous. Indigenous people make up only three percent of the overall population in Australia, so race and diversity are a factor in someone’s earnings.
  3. The people most likely to be part of the lowest 20 percent income group are the elderly, single parents and indigenous people.
  4. One person in the top 20 percent has 70 times more income than someone in the bottom 20 percent. There is huge economic inequality in Australia, and the gap continues to widen in both wealth and opportunities. This inequality is also a global issue since the world’s top one percent own more than the bottom three billion people in the world.
  5. Young people aged 15-24 are the most likely to be unemployed. A January 2016 report studying Australia’s poverty suggested that the youth unemployment rate was more than twice the overall unemployment rate.

Australia’s government has been trying to solve the problem by creating more jobs, but there are more ways that economic equality can be achieved. Some solutions include free education and healthcare for everyone, affordable housing, and having everyone pay a fair share of taxes.

Emma Majewski

Photo: Flickr

Inequality-Is-Bad-For-Business
What do poverty, inequality and economic flexibility have to do with each other? Well, according to a recent report co-authored by consulting firm KPMG and economic think-tank Oxford Economics, these three things are intimately intertwined. The report, called the Change Readiness Index (CRI), ranks 127 countries in order of their ability to resist economic shocks, natural disasters and social unrest. The report measures several indicators such as macroeconomic stability, ease of doing business and rule of law, which reveal the effects that inequality tends to have on each country’s society.

Inequality has traditionally been seen as a by-product of developmental challenges which would disappear with increased growth and poverty reduction efforts. However, inequality is increasingly seen as a problem unto itself which needs to be the focus of international initiatives as the Millennium Development Goals expire. This is because increased economic growth isn’t necessarily evenly dispersed, leaving those at the bottom of the economic ladder behind. Thus, poverty reduction needs to be combined with a more equitable distribution of resources to be effective.

There are certainly ethical and social reasons to favor a more economically equal development model. Societies that have lesser income disparities tend to be more socially and politically stable, and have much lower rates of poverty. However, there are also significant economic reasons why inequality reduction is a pathway to poverty reduction. Simply put, economic inequality and poverty are bad for business.

The big-picture macroeconomics of inequality warrants an explanation.

Plainly put, extreme income inequality, such as the kind found in Sub-Saharan Africa and South Asia, cause economic inefficiency. The relatively wealthy tend to save a much higher proportion of their income than the poor. In order to grow economically, a society must have robust rates of consumption. However, if most of the wealth of a country is owned by a very small percentage of its population, that wealth is saved, not spent. These savings are then invested by individuals and financial institutions.

In recent history, excess savings have fueled speculative investments, exacerbating asset price collapses like real estate bubbles, such as the ones that occurred in Spain, Ireland and the U.S. during the 2008 economic crisis. Furthermore, if consumption rates are low due to excess savings, the central bank of a country may lower interest rates to increase the availability of credit, which can further fuel speculative investment. Inequality peaked just prior to the Great Depression of the 1930s and the 2008 financial crisis, contributing to the underlying economic instability which caused those events.

Instead, if the wealth is more evenly distributed among the lower income earners of a society, who spend much more of their income, consumption goes way up. Thus, the poorest individuals, if they are empowered through greater income equality, may drive consumption, opening up new markets and creating increased economic growth.

So, how would income equality be implemented as a pathway to poverty reduction? According to ActionAid, a U.K.-based poverty-reduction organization, one way would be to empower women in the developing world. Up to 60 percent of the world’s poor are women, and only about half of them participate actively in the labor force. If developing societies became more inclusive of women in the labor market, they would represent a huge capacity to work, earn and spend, driving economic growth. This economic growth would act as a positive feedback mechanism, further increasing economic opportunity and pulling people out of poverty.

Something that the Change Readiness Index reveals is that the countries which have the highest levels of inequality also tend to have more persistent levels of poverty despite growth, and tend to have far less spending on public goods like healthcare and education, which are instrumental in reducing poverty. One example is Nigeria, where incredible oil wealth has reached only a tiny portion of the population, and social, political and economic instability abounds. Oil revenues tend to elude taxation, which limits funds available for public spending. Furthermore, Nigeria ranked 90 out of 127 on the CRI and 79 out of 86 countries in the OECD Social Institutions and Gender Index, which measures gender inequality, revealing the link between disparities in income and the participation of women in economic and political life.

As the Millennium Development Goals expire this year, policy makers are increasingly sensitive to the importance of reducing inequality as a pathway to reducing poverty. In 2013, the U.N. published a comprehensive report on global inequality acknowledging it as the greatest barrier to poverty reduction, emphasizing solutions such as the economic and political inclusion of marginalized groups such as women.

Furthermore, 90 economists, academics and development experts recently submitted a letter to Dr. Homi Kharas, leader of the panel on the post-2015 development agenda for the United Nations. The letter urged increased emphasis on reducing inequality as a set of Sustainable Development Goals are being crafted to replace the Millennium Development Goals.

Prominent economist Joseph Stiglitz suggests a Sustainable Development Goal on inequality which follows the style and spirit of the original eight Millennium Development Goals. The goal consists of two targets; by 2030, reducing “extreme income inequalities in all countries such that the post-tax income of the top 10 percent is no more than the post-transfer income of the bottom 40 percent.” And by 2020, establishing a commission in each country which will track and report the effects of inequality.

It’s clear that inequality needs to be a top priority to achieve effective poverty reduction in the next 30 years. Not only could income equality pull millions out of poverty, it could also open up new markets and be the new driver of global economic growth.

– Derek Marion

Sources: The Guardian 1, KPMG, The Guardian 2, ActionAid, Ethics and International Affairs, Save the Children, UN
Photo: Arts.Mic

essen
Last year Essen, Germany became famous for paying its homeless in cigarettes and alcohol. According to an article by NBC, the highly controversial program was intended as a way to get the homeless off the street. While this action was highly sensationalized, the coverage of this program failed to highlight the center of the issue: the rising poverty in Essen and Germany as a whole.

The World Socialist Web Site (WSWS) highlights that, “at the end of August, while 14.7 percent of the population were poor in Germany’s 15 largest cities in 2005, by 2012 the rate had risen to 15.2 percent.”

The gap between rich and poor has been widening from gap, to gulf, to chasm since the 1980s, and Germany is no exception.

This rise in wealth inequality is particularly concrete in Essen, Germany. In Essen the wealth gap is conveniently shown through geography. According to the article by WSWS, the northern parts of Essen are becoming poorer while the southern regions are becoming richer. Specifically, the site says that in the Southern part of the city, the number of millionaires is growing.

When looking at the travel site Rough Guides, the South is described as the place to go for food and sightseeing, while the “gritty north” in contrast, “preserves reminders of the city’s industrial greatness.” This indicates, perhaps, that development is exclusive to the southern region of the city.

In addition to the geographic economic segregation, Essen has one of the highest unemployment rates in Germany. According to Zeit Online, in February of 2015, the unemployment rate in Essen was 12.5 percent. At the same time the average unemployment rate in Germany was 6.9 percent.

Essen is located in the Ruhr region of Germany, a region that, overall, is facing heightened poverty. Businesses in the Ruhr, such as the Steel Plant, are closing, while the German government is simultaneously cutting social welfare programs. Cutting these programs inevitably leads to the unemployment of the people who previously worked in this sector.

Why is the German government cutting programs essential to so many citizens’ survival?

Perhaps the government is trying to redistribute wealth, but the wealth is not going in the direction it needs to go. In the coming year, Germany needs to bring back the programs it has cut and find a new solution to many of its cities’ growing debts. While paying the homeless in cigarettes and alcohol to clean the streets may clean the streets of the homeless, it is not a solution to poverty. Rather than cutting programs that aid its people, Germany needs to recreate programs that bring jobs. Job creation equals wealth creation, which becomes a contribution to local city and national economies. Finally, Essen needs to stop spending its money on cigarettes and alcohol, and, instead, put it towards lasting change to the lives of its homeless.

– Clare Holtzman

Sources: NBC, Rough Guides, WSWS, Zeit Online
Photo: Flickr

poverty_alleviation
The main problem with congress is that there is an inability for Democrats and Republicans to agree on how best to handle poverty in the U.S. and around the globe.

In 1964 Lyndon Baines Johnson addressed a joint session of congress and introduced his war on poverty. He introduced poverty alleviation strategies that left a lasting legacy in the minds of the American public. He stated, “Some because of their poverty, and some because of their color, and all too many because of both. Our task is to help replace their despair with opportunity. This administration today, here and now, declares unconditional war on poverty in America.”

Today many Americans and people around the world reside in poverty. Some experts say that LBJ’s war on poverty was not a success, although it did bring the issue to the center stage for the first time on a national scale.

Today, parallels are being drawn between LBJ and Obama in their conviction to eradicate poverty.

Author Sasha Abromsky notes that President Obama, “understands the impact of poverty on people’s lives better than almost any other of his predecessors.” LBJ’s $20 trillion dollar strategy was much more aggressive than Obama’s poverty alleviation strategy. Obama supported economic packages that benefit those living in poverty, for example, the 2009 stimulus package increased funding for services such as food stamps. The Affordable Care Act is a safety net for Americans unable to afford the rising price of health care. Not only have his policies been aimed aid the poor, they also have prevented millions of Americans from falling into poverty.

Today, bipartisanship in congress remains the biggest obstacle for government assisted social service programs that support low income families. The fundamental problem remains that conservatives and neo-liberals hold vastly different beliefs when discussing the root problems of poverty. Liberals and neo-liberals believe that long-term poverty within certain demographics correlates with long-term structural problems and ongoing economic inequality within society. On the other hand conservatives and, most notably, conservatives like Paul Ryan hold that poverty is associated mainly with culture.

These distinctly different ideologies shed light on one of the reasons why Republicans and Democrats support separate economic and social service policies. The new Republican congress is pressing to reverse Obama’s second term packages that focused on providing substantial packages that supported the lower and lower middle classes. Obama’s policies show that he is aware of how the increasing income gap aversely affects low-income Americans. The Republican majority House and Senate has the ability to repeal legislation enacted during Obama’s terms in office.

It is likely that many of his bills will be on the chopping block next year.

– Maxine Gordon

Sources: NPR, New York Magazine Washington Post
Photo: The Daily Beast

Financial Reform Law in Bolivia
Last August, Bolivian President Evo Morales signed a bill that would reform the country’s financial sector. The reform bill has more than 550 articles and is expected to force the private sector banks in the country to become more competitive as interest rate ceilings and mandatory-lending quotas are implemented. The law will boost the competitiveness of state-owned bank Banco Unión and the many microfinance institutions operating in the region.

The reform is also intended to focus on financial inclusion and reducing economic inequality, an issue that is extremely important for Morales and his large indigenous following. The private banks in the region will need to become more efficient as well, but fortunately for the banks the Bolivian government has been implementing the changes gradually. It is unknown how much the reform will cut into the bank’s profitability.

During the last few years, however, Bolivia has enacted harsh taxes designed to reduce its “excess” profitability. The private banks’ average return on equity fell from 21% in 2007 to 17.5% in 2012, then to 14% in 2013. This latest dip came from the imposition of additional taxes on extraordinary earnings and a tax on exchanges related to foreign exchange.

The law also states that at least 60% of a bank’s loan portfolio should go to financing the productive and social sectors. This will be difficult for Bolivia’s banks, however, as they are currently focused on specific markets. Despite this new requirement, the government is giving the banks a period of two years to four years to implement it.

Another requirement states that the interest rate ceiling on loans for houses to be set at 5.5 to 6.5%, a figure that depends on the value of the house. Banks currently set the loan ceiling to a figure of 7 to 8%. This loan ceiling is designed to allow more people to be able to better afford a house and is a part of the movement towards more financial inclusion in Bolivia.

Bolivia’s private banks should be able to weather this new reform with continued profitability as the Bolivian economy is buoyed by its 6.5% growth rate in 2013 and its credit growth of 20%.

– Jeff Meyer

Sources: BNamericas, BNamericas, laRazon
Photo: The Telegraph

Niger-agriculture
Niger is one of the least developed nations in the entire world. It has around 16 million people and their population is growing at a rate of 3.3% annually. Around 84% of the country lives in rural areas and 52% of all of the population in Niger is under the age of 15. They also have very low education levels with around one-third of adults not being able to read. With approximately 76% of the country living on less than two dollars a day, Niger was ranked last in the 2013 Human Development Index of the United Nations Development Programme (UNDP).

Social inequality and poverty have not decreased very much at all, even though there have been improvements in education, per capita GDP and infant mortality. The regions of Dosso, Tillabery and Maradi have some of the worst poverty in the country because they are the most rural areas, and that is where many women and girls are among the most harmed by poverty’s power over access to credit, employment and basic social services.

The Niger economy is extremely susceptible to climate shocks because of the large amount of rain-fed crops they produce that depend on having the perfect climate. Even though national food production remains at an insufficient level, the macroeconomic state of the country has improved a great deal recently with positive growth rates coming from the agricultural sector. Less than one-third of farmable land has been developed in Niger, so there is a large prospect for additional growth in the economy, especially by improving crop yields with better irrigation techniques.

The agriculture sector of Niger generates around half of the country’s GDP, though the government is trying to put more emphasis on raw resources like gold, oil and uranium. Irrigated farming accounts for about 90% of the country’s agricultural exports and around 30% of its agricultural production. The agricultural system of Niger is mostly dependent on the work of small-scale family farms. On these farms, rural families combine beans, cereals and other rain-fed crops with other irrigated types of food like sesame, peas, onions and other cash crops.

The population of Niger deeply relies on local and traditional medicine because there are not many facilities for medical care, with only a few in even the Capital of the country. There is a severe shortage of trained medical experts and the clinics and hospitals that are state-run frequently lack the essential drugs and equipment to properly treat their patients. For this reason, when most people become sick, they turn to local healers that use traditional herbal medicines and perform rituals; sometimes they follow Koranic/Islamic methods of healing as well.

The best way to reduce the poverty that is so prevalent in Niger is to invest even more in their agricultural systems, so they are less susceptible to things like climate shocks. United Nations Secretary General Ban Ki-moon and World Bank President Jim Yong Kim have teamed up to bring more stability to this country in its trek to become a more developed nation. Among the toughest challenges ahead, the country needs to be able to recover in the resources it has lost from climate shock, but it is very difficult right now with a lot of the country’s budget going toward their military.

– Kenneth W. Kliesner

Sources: Relief Web, Our Africa, Rural Poverty Portal
Photo: Australian Aid