MON 16 - 5 - 2022
Aug 8, 2018
The Daily Star
Fighting inequality with inclusivity
Despite all the apparent progress made over the years, the current level of inequality across the world – the gap between the richest and the poorest – may be one of the highest in history. According to Oxfam, 1 percent of the population controlled more than 80 percent of wealth last year. Billionaires earned $762 billion, which accounts for an almost 13 percent increase in their net worth, whereas average workers had around a 2 percent increase.
One of the reasons for this discrepancy is that although these facts are well-known, with plenty written on the subject across different fields, policymaking has failed to introduce relevant, meaningful examples with which to ground the discussion.
Hyman Minsky’s work, for instance, focuses on the stabilization of economies and fighting poverty through job creation.
Elsewhere, Joseph Stiglitz – Nobel laureate in economics – has criticized classical economics, and stated that inequality and unearned income kill an state’s economy. While there is a lot of noise made about inclusive growth and development, what is apparent is more depth is needed to translate what this means for real-life, relevant policymaking.
One of the developments in the inequality discourse is the convergence between classical, conservative financial institutions and the academic world in recognizing the importance of inclusive growth – meaning economic growth that creates opportunities for all, and is evenly distributed.
The OECD has, for the first time in its history, stated that “our work on inclusive growth has clearly shown that there doesn’t have to be a trade-off between growth and equality. On the contrary, the opening up of opportunity can spur stronger economic performance and improve living standards across the board,” according to its secretary-general.
The World Bank moreover, emphasizing the need to reduce inequality to reach the goal of ending extreme poverty by 2030, wrote that “the shared prosperity goal reflects the fact that as developing countries grow their economies and lift millions out of poverty, they may also experience growing inequality.”
On the other hand, the International Monetary Fund stated in its Fiscal Monitor for 2017 that “rising inequality and slow economic growth in many countries have focused attention on policies to support inclusive growth.
“While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization and ultimately lower economic growth.”
The MENA region, while having levels of inequality below the global average, has had slow increase in per capita income – of 0.8 percent per year – from 2013 to 2016, according to the IMF.
This is adding to the gap between the richest and the poorest compared to other regions in the world.
Inequality in the region appears becomes starkly clear when considering the high youth unemployment rates.
The region, the second-youngest in the world with 60 percent of its population under 30 years old, is facing an enormous challenge to create jobs for youth in order to facilitate their social inclusion and empowerment.
In Lebanon, there is scarcity of data about the state of inequality. The IMF estimates that the Gini coefficient (a common measure of wealth distribution) is around 0.32, which places Lebanon in the same inequality bracket as Egypt, Jordan, Pakistan and Iraq.
Youth – 55 percent of Lebanese population – are severely affected by inequality. Youth unemployment for those aged 15-24 is 16.5 percent, according to the World Bank. Women are in no better position when it comes to economic activity and inequality – the female to male labor force participation rate is 32.6 percent.
Fighting inequality requires actions that embrace multilateralism – governments must join forces with civil society, the private sector and academia.
According to the IMF, Lebanon’s private sector, similar to that of Djibouti, Egypt and Tunisia, has a “mix of relatively high labor productivity and lower total factor productivity.”
This indicates that companies are using capital and labor inefficiently. Therefore, the private sector would do well to work closely with other stakeholders to become more productive, more efficient. Its agenda needs to be nudged toward a model that addresses the country’s fundamental problems in order to make best use of its human – and natural – resources.
Hiba Huneini is manager of the youth and civic engagement program at the Hariri Foundation for Sustainable Human Development.
A version of this article appeared in the print edition of The Daily Star on August 08, 2018, on page 3.
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