Good news on Inequality in Latin America – Highlights from the UNU-WIDER Inequality Conference 5-6 September, Helsinki

Something ought to be done on inequality…..

I have just got back from a major UNU-WIDER conference on Inequality (5-6 September). Inequality is big news.

Something ought to be done.

It’s not just me that says so. Even the World Economic Forum has realized – and they should know about inequality. They live it. (Although Oxfam turned up this year and spoilt the fun with a report arguing that 85 people own as much as half the world population – quite brave really in a gathering which is reputed to attract 70 billionaires.)

It reminds me of the joke during the Yugoslav wars, when the international community was going through one of its all too frequents bouts of not knowing what to do. The cartoon showed an international general instructing peacekeeping troops – “On the command ‘do something’, do something”.

Something ought to be done ….. but what? Brazilian experience

The keynote address was by Marcelo Cortes Neri, Minister for Strategic Affairs in the Brazilian government. In an intellectual tour de force, he deployed a bewildering array of indicators to show how Brazil is doing on inequality and poverty reduction. See Inequality in Brazil: measurement, trends, impacts and policies (pdf)

Perhaps the most dramatic figure presented by Neri is the 69% fall in absolute poverty (US$ 1.25 per day PPP) in only 10 years from 2002-12. Half of this is accounted for by income growth and half by decreased inequality. So the good news is not restricted to cash transfers (Bolsa Familia) but is indicative of a much deeper social transformation. Declining inequality is illustrated by progress in the Gini coefficient from 0.607 in 1990 to 0.526 in 2012. The chart illustrating the trend in the Gini coefficient showed 30 years of increasing inequality to 1990, followed by over 20 years if decrease to a level below that of 50 years ago.

Per capita income for the poorest 5% (where the contribution of the Bolsa Familia is primarily felt) of the population has grown 138% in the period 2001-12, compared with 26% for the top 5% . Bolsa Familia is good value for money.

The Minister noted the contribution of education, but showed that there is much more to be done on quality (using the low maths ranking in the Pisa/OECD comparative chart, despite recent improvements).

Using the UNDP Human Development Index (HDI), 41% of municipalities showed a very low HDI in 2000. Ten years later, this figure was only 0.6%.Neri also argued that citizens seem determined to take matters into their own hands rather than wait for the authorities to help them. Improvement of housing conditions and acquisition of household durables serve as indicators, but so do studies of perceptions which show that people are more positive about improvement in their own living conditions than they are about the general society. In the Gallup World Poll rankings, Brazil’s score (averaging 8.69 out of 10) has been the highest in the world every year from 2006-14 (measuring self-perceptions of “highest future life satisfaction”). Bolsa Familia recipients showed the greatest increase in present happiness compared to past happiness. It is a scheme which covers 25% of the population at a cost of 0.5% of GPD and has a higher multiplier effect than other social transfers. Without Bolsa Familia, the numbers in extreme poverty would rise by 36%.

Income inequality remains high, but Brazil has the second lowest inequality of expected future life satisfaction (a Gini of expected life satisfaction in five years) – after Belgium.

The Minister used a telling image – that there is much to be done on inequality so that many of these snapshots represent a good frame in a bad movie. Inequality in 2011 was still 18^th highest of 155 countries (calculations based on data from Milanovic and Neri). The presentation was  remarkably un-complacent – and he spent some time explaining the profile of those involved in the recent demonstrations (younger, better educated, mobilized through social networking).      

Although growth has slowed, Neri concluded that continued progress was achievable and sustainable because of the rising indicators for education, labour, HDI and housing.

Brazil is in many ways a microcosm of the world. As Neri showed the poorest in Brazil would be poor by Indian standards, and the rich are rich like rich Americans. Brazil’s growth in GDP per capita was similar to change in the world average (3.5% to 3.6% from 2002-12).

The conclusion which I feel one must draw is that policies matter. I first visited Brazil in 1983 and visited Diadema where Lula’s PT had just taken control locally and I saw early housing projects. I also saw some of the slum conditions and the work being done by progressive sectors of the Catholic church. The work of the social movements over the past thirty years has been the foundation for changed social attitudes – and has provided the bedrock of support which makes policies of this kind sustainable. It is a remarkable achievement – but not so remarkable that it cannot be replicated in different ways in different contexts. Policies matter. Redistribution is easier to finance in a growing economy.

Not just Brazil

Brazil is special – but also part of a continental trend. This is suggested by detailed work conducted in a UNU-WIDER project led by Giovanni Andrea Cornia which analysed Falling Inequality in Latin America since 2000. See Falling Inequality in Latin America: Policy Changes and Lessons.

Inequality, as measured by the Gini coefficient, has fallen in almost all of the 18 countries studied (exceptions being Nicaragua and Costa Rica) returning the region to pre-liberalization levels (early 1980s) of inequality. It seems that the impact is lasting, not cyclical as inequality (unlike in other world regions) continued to decline during the crisis of 2009-12.

This is not only a story about social transfers. Accumulation of human capital by workers (education and training) has led to a decrease in the skilled-unskilled wage ratio, rising demand for less skilled workers and increasing minimum wages. Cornia and colleagues argue for a comprehensive understanding of the decline in inequality pointing to a range of factors: a shift towards left-of-centre governments committed to reversing inequality; prudent macro-economic policies; careful fiscal and monetary policies; commitment to using redistribution decrease net inequality (after taxes and transfers); avoiding financial crises, reducing dependence on foreign borrowing and increasing trade (intra-regional – and with Asia).

In this context, social expenditure and labour policies also play their role. A better protected and better educated work force, as well as policies designed to address inherited problems of the past including unemployment, informality and weakened collective bargaining institutions.

An even fuller picture can be gained by putting these results alongside the Commitment to Equity project coordinated by Nora Lustig. When I spoke with her at the UNU-WIDER conference, she explained that its purpose is to assess the readiness of governments to use the tax system and social transfers to address poverty and inequality. 

Other insights: Databases and beyond

Lustig was also the opening speaker in a significant panel on the evaluation of international databases on inequality, put together by the Journal of Economic Inequality. The timing was good as it coincides with an update of the World Income Inequality Database (WIID) which was developed and is maintained as the only fully global source. Stephen Jenkins (London School of Economics) expressed a clear preference for WIID (, albeit with some caveats on data ) over SWIID – the Standardized World Income Inequality Database devised by Frederick Solt which is entirely based on imputational methodology. 

There was much more to praise and think about at the UNU-WIDER inequality conference, including:

• Good presentations from IMF specialists Andrew Berg and Michael Keen – Berg addressing some of the issues taken up in the paper Redistribution, Inequality and Growth favourably reviewed by Carlos Fortin; Keen presented a compelling case to show that general subsidies are unlikely to be an efficient way of helping the poorest. For those who wish to follow the BRICS track, there were two sessions on South Africa which provide important insights into the stubbornness of inequality 20 years into democratic government.
• Finally, it is essential to be informed not only on income inequality, but also wealth inequality. Tony Shorrocks and Jim Davies returned to share the work that they initiated at WIDER which is now presented annually as the Credit Suisse Research Institute’s Global Wealth Report. 

     

Material presented at the UNU-WIDER Inequality Conference can be accessed here (see presentations, papers, and video)

by Roger Williamson 

Jobs, light manufacturing and structural transformation - a comprehensive package for poverty reduction

The best thing about being a Visiting Fellow (in my case both at IDS and UNU-WIDER) is that you meet people from very different networks. Another good thing is that sometimes you stop “visiting” and get to sit down and record what you have learnt. Today is that day.

I was recently in Vietnam at the UNU-WIDER conference on “Institutional Reforms for Transformation, Inclusion and Sustainability”. Vietnam used to be one of the most aid-dependent countries in the world, but has posted sustained and remarkable growth rate figures, privatised most of its state-owned enterprises, the private sector has got into manufacturing, and the country has significantly reduced poverty rates. Is there a message here? Yes.

In the immortal phrase of The Economist, it is important to “make things you can drop on your foot”.

One of the things I do for UNU-WIDER is interview some of the brilliant conference presenters for their website. It is a crash course in their thinking for me, and an easy way in for viewers. I now want to give you some snapshots of what I learnt on work at the conference.

Think of the “new structural economics” and you think of Justin Yifu Lin, former World Bank Chief Economist. 

In his conference presentation on how to avoid the “middle income trap”, he gave a six-step toolkit for growth identification and facilitation, showing how to spot industries and competitors who are ahead which are “ripe for the taking" - provided a government in the poorer country can remove binding constraints and cash in on latent comparative advantage. He shows how to develop a sensible industrial policy and avoid the traps of the old structuralism, primarily “comparative advantage defying economics”. That sounds bad. It is. It does not fly. It costs money and wastes resources.

Hinh Dinh and colleagues have spent years looking at light manufacturing in great detail – both all over Africa also in China. Certain industries are key to getting industrialisation going – light manufacturing tasks such as clothes, footwear and leather, woodworking, basic metal work, agroprocessing. In short, stuff people need for daily life, shoes, a shirt, a table. If you can make them, you can sell them, and you can eventually move up the value chain in manufacturing. Hinh Dinh’s work is full of detailed case studies. Reading the Africa accounts, you can also learn that cherry tomatoes have more value to growers in West Africa than bigger ones, and the story of Michelle Obama’s “inauguration shoes” – and how Ethiopia (with Chinese investment and know-how) broke into designer footwear. (It also helps to have a lot of cattle in your country. The shoe industry – it’s what you can run if you have the hides.)

 

Martin Rama gave us a global run-down on jobs based on the huge amount of work put into the 2013 World Development Report. Surprisingly enough, it is only the second time in 35 years that the WDR has focussed on employment. This report is a comprehensive approach to making good that omission.

Gary Fields has spent a lot of time talking to ordinary people in the informal and the formal sectors about their working experience in different parts of the world. This wisdom and experience is distilled in his book Working Hard, Working Poor. Fields goes back to basics – for him economic development means “improvements in people’s material standards of living”. One of his key messages is that given the extent of informal and self-employment among the poor, rather than wishing it did not exist, ignoring or even repressing informal workers, policy makers should understand their lives, the decisions they have to make and finding policies which help them.

There was much more good work presented – and the outlines by Lin, Hinh Dinh, Fields and Rama can be found among the conference presentations on the website. Of course the real scholars among you will read the entire works – cover to cover – with much benefit! 

By Roger Williamson

Going beyond sports: The Commonwealth has an important role to play in development

What remains of the Commonwealth?

Watching the teams march past for the opening ceremony of the Commonwealth Games remains as stirring as ever, for the handsome diversity of the athletes themselves and the dazzling colours and contrasting styles of their uniforms: 73 teams from 53 countries for "the friendly games." But is this the best that remains of the Commonwealth today?

If so, it is a bit sad and perhaps a challenge to remember and revive some of the Commonwealth's earlier achievements. At its best, the organisation's Secretariat provided practical and highly professional support for countries coping with the early challenges of independence or grappling with such divisive issues as negotiating fair deals with mining companies or multinational corporations.

The Commonwealth also produced policy reports on topics such as ending corruption or engendering development. The Institute of Development Studies provided some of the experts contributing to these activities - Mike Faber, Roland Brown, Richard Longhurst and others.

Interaction and shared learning should not just be confined to the sports arena

Many of us believe that the Commonwealth could and should still have a role in such activities, providing support and speaking out with frankness on difficult topics in a way which too readily get lost or distorted in the larger UN or in more limited regional organisations such as the OECD or EU or ESCAP. The Commonwealth has English as a common means of communication but otherwise is a microcosm of the larger world, with rich, middle income and poorer countries and many of the LDCs and Small Island States which need special consideration.

Corruption, financial regulation, reporting on assets held in overseas tax havens are only the beginning of a list of hot economic topics suitable for Commonwealth consideration. What also about topics such as diffusing tensions arising from religious or cultural differences, on which many Commonwealth countries have rich experience to draw on? Or multicultural education? The UK as well as other rich members of the Commonwealth now have as much to learn as they have to contribute in these areas.

Sport should not be the only arena for interaction and mutual learning, or the only place where Commonwealth countries, large and small, can gain medals and recognition from such friendly participation.

By Richard Jolly

Sharing ideas and learning lessons about social protection

Last week the Centre for Social Protection (CSP) welcomed a group of enthusiastic and committed participants to the CSP short course ‘Social Protection: Policies, Programmes and Evidence’. After having developed and run multiple courses and trainings in recent years for professionals in international organisations such as UNICEF and FAO, donors including DFID and governments in Rwanda, Ethiopia and Nepal, this is the first short course that was open for all applications.

We shared an exciting and stimulating four days together. With a group of participants bringing together experiences from 17 different organisations spanning 23 countries across the globe, this was very much a two-way learning and sharing opportunity. Sessions covered topics ranging from conceptual frameworks and institutional approaches to targeting and delivery of social protection and the creation and assessment of evidence. Training methods included presentations, group exercises and ‘buzz-group’ discussions.

A particularly valuable element of the course was the ‘Social Protection Marketplace’. A self-selected group of participants occupied ‘stalls’ that served as a platform for sharing experiences and questions that they are grappling with in their work on social protection and receiving feedback on those. We discussed the challenges of monitoring and evaluating a cash transfer programme in the extremely volatile and rapidly changing situation in Iraq where people are constantly ‘on the move’. We learned about efforts to make the Productive Safety Net Programme (PSNP) in Ethiopia more ‘climate smart’ and debated what this actually means and how such additional goals and components can be added on to a well-established social protection programme. We were also presented with the Egypt dilemma: there is political appetite for and commitment to promoting social justice but how can social protection play a role in a context of stringent fiscal constraints?

The four days of intensive interaction in Brighton provided participants with a stronger knowledge base about social protection and allowed for reflections about current practices in social protection, either in their own current work or future initiatives. Participants told us that the course “was extremely rewarding and very informative” and that they “will definitely recommend this to other colleagues”.

Following our own positive experiences and the participant feedback, we look forward to offering this course again next year. So spread the word and watch this space: join us in July 2015!

By Keetie Roelen, IDS Research Fellow

Anyone but al-Shabaab: Kenya’s political divisions laid bare by spiraling attacks

Weeks after deadly attacks killed 60 at Mpeketoni in Kenya’s Lamu County, new raids on July 5th in Lamu and Tana River counties left over 20 dead, sowing fear anew in a country growing accustomed to sophisticated attacks of murderous brutality. As before, a heavily armed group came during the night, striking the local police station, torching homes and businesses while targeting men on a killing spree that was rumoured to last for hours.

Less than a day after the latest raids on the settlements of Hindi in Lamu and Gamba in Tana River, Deputy Inspector General of Police Grace Kaindi claimed in a press briefing that the outlawed Mombasa Republican Council (MRC) was behind the attack. This was despite a broadcast on an al-Shabaab-affiliated radio station which stated that the Somalia-based group was responsible for the raid on Hindi (no group has thus far claimed responsibility for the Gamba attack). Explaining the police thinking, Kaindi revealed that a board had been placed at a road junction, with the following message scrawled in chalk:

‘Raila Tosha (Raila is enough, the one who should lead)
MRC munalala (MRC is sleeping)
Waislamu Ardizenu (Muslims, it’s your land)
Sina nyakuliwa (Your land is being taken away)
Amkeni mupigane (Wake up and fight)
you invade Muslim county
and you want to stay in peace 
Kick Christians out Coast
Uhuru down’

While Kaindi acknowledged that the board may have been intentionally placed to divert the attention of investigators, the initial police response to the raids is the latest episode in an unseemly politicisation of recent attacks that have shaken the country. As the al-Shabaab threat looms ever larger in Kenya, its divided political leaders risk leaving Kenyans even more vulnerable to appalling violence.

Westgate horror, political indifference

How did Kenya come to this point? Kenyans briefly united after the assault on the upscale Westgate shopping centre left 67 dead in September of last year. Across social media, Kenyans and friends of Kenya changed their profile pictures to an image of a lone-candle burning, emblazoned with ‘Kenya’. Ordinary Kenyans from across regional and religious divides brought food and thermoses of hot tea to the military personnel stationed at the blockades set-up in the city’s Westlands neighbourhood, as gunfire continued to ring out from the complex. President Uhuru Kenyatta, whose nephew was amongst those killed, cut a unifying figure on national television.

Days later, walking hand-in-hand with Deputy President William Ruto and Opposition Leader Raila Odinga into an inter-faith prayer service at the city’s eponymous Kenyatta International Conference Centre, the President announced that he would establish a Commission of Inquiry into the attacks. Nearly 10 months later, the Commission has yet to be created, and Kenyatta has been silent on the matter. In the weeks after the attack, CCTV footage aired on a Kenyan television network showed members of Kenya’s military looting a supermarket. Later, two soldiers were jailed, leaving bigger concerns of discipline and professionalism in the security services unaddressed.

Today, the partially-scaffolded, boarded-up Westgate centre stands as an eerie reminder of death and ineptitude. Surprisingly, the issue has generated very little public debate, even though attacks have multiplied, from bombed markets in the city’s working class neighbourhood of Gikomba, to exploding matatus on the Thika superhighway, to village massacres. Writing in Kenya’s Standard broadsheet, Kethi Kilonzo, an Advocate of the High Court of Kenya, wrote, ‘to date the country does not know how, why, who, where, and when. Terrorism and the terrorists have not been stopped. The question — what next? — remains unanswered. If the failings leading to Westgate had been uncovered, and these gaps and the persons responsible dealt with publicly and resolutely, would this have stopped the terrorism acts that have followed Westgate?’

Although Kenyatta’s failure to establish a Commission of Inquiry has not caused a public backlash – perhaps owing to the fact that past Commissions of Inquiry have been a way for Kenya’s politicians to bury difficult issues – the lack of any official investigation feeds a feeling of despondency and fear over when and where attacks might happen next. In the UK, an inquest into the 7/7 bombings of London’s tubes and buses – the verdict of which was delivered in 2011 nearly six years after the attack – was significant as part of a longer process of reckoning and healing following the seemingly indiscriminate violence.

Although the then-Home Secretary, John Reid, ruled out a public inquiry into the bombings, as a number of bereaved relatives demanded, the inquest presided over by the high court judge Lady Justice Hallett shared considerable insight and findings on possible shortcomings in intelligence and emergency service responses.

So, Kilzono’s question stands: ‘What next?’ For the moment, neither the government nor the opposition seem to have much to say.

Mpeketoni and ‘anyone but al-Shabaab’

Since Westgate, grenade attacks, bomb explosions, ambushes and village massacres have affected Kenyans of many stripes – commuter, police officer and farmer, better off and poor, Somali, Luo and Kikuyu. Yet, as the violence spreads, affecting more and more aspects of ordinary Kenyans’ daily life, a creeping politicisation of the violence has polarised attitudes and occasioned greater discord in the face of a perilous threat. While al-Shabaab claimed responsibility for the Mpeketoni massacres, in a televised address, President Kenyatta attributed the attack to unspecified ‘local political networks’, leaving little doubt that he blamed the political opposition. Kenyans from many tribes were killed in the massacre, yet Kenyatta’s Kikuyu tribesmen, who settled the area in the 1960s on land given by Kenyatta’s father and first President, Mzee Jomo Kenyatta, were disproportionately affected.

Vanished is the presidential figure who originally sought to unite and reassure shocked Kenyans after Westgate. Instead, Kenyatta has stepped right into the fray of politicians’ acrimonious statements as well as hate speech spread by social media and text messages. Already, even before the Mpeketoni attacks, loyalists of Kenyatta’s ruling Jubilee Coalition sought to portray the earlier attacks as targeting Kikuyu. This, in turn, has fed a perception that the attacks were in fact ethnically-motivated violence perpetrated by sympathisers of the Odinga-headed opposition Coalition for Reforms and Democracy (CORD). The fact that no one claimed responsibility left open the possibility that al-Shabaab was not to blame.

The Daily Nation columnist Machario Gaitho wrote, ‘By the time the Mpeketoni attack came about, it was almost as if to confirm the prevailing narrative about a domestic anti-Kikuyu plot. President Kenyatta’s statement now takes that out of the murky realm of Jubilee social media activism and soapbox political rhetoric and elevates it to the official government position on a key national security issue.’

Fast forward two weeks to the Gamba and Hindi attacks and Kaindi’s claim appears less a statement born from extraordinarily efficient investigative abilities by Kenya’s police service and more a knee-jerk reaction to sully Jubilee’s opponents. Anyone but al-Shabaab is now responsible for the attacks. Thus, Kenya has moved in the past two months from suffering a series of attacks that no one claimed responsibility for – but which were thought to possibly be part of an intensifying al-Shabaab campaign in Kenya – to a succession of massacres claimed by al-Shabaab, but which the government and police blame on a range of political dissidents and outlawed domestic groups.

People die, politicians fight

As Kenya’s politicians continue to fight, Kenyans continue to die. The one thing Kenyatta’s blundering response to the Mpeketoni attacks did – and leaving aside whatever the truth may be of who carried out the attacks (Commission of Inquiry anyone?) – is to highlight how effectively al-Shabaab has come under the skin of Kenya’s domestic politics.

A widespread misconception at the moment is to externalise the al-Shabaab threat. This is not of course unique to the current juncture at which Kenya finds itself. In 2009, after al-Shabaab militants kidnapped British holidaymakers at an exclusive idyllic hideaway miles away from Kenya’s border with Somalia, Kenya Defence Forces poured into southern Somalia in an operation dubbed ‘Linda Nchi’ (‘Protect the Country’). Its purpose, ostensibly, was to lend force to the establishment of the pseudo state of Jubaland as a ‘buffer zone’ protecting Kenya from the conflict in Somalia. Subsequently, the Kenyan government pursued a policy of repatriating Somali refugees to Jubaland. A more recent operation in April and May this year, ‘Usalama Watch’ (‘Security Watch’), rounded up thousands of Somalis from Nairobi’s Eastleigh and South C neighbourhoods, who were then incarcerated at the city’s Kasarani stadium for a ‘screening’ process to root out anyone who was in the country illegally.

What all of these security responses have in common is a predilection of blaming ‘the other’, and particularly Somali people, for attacks in the country. Yet, the politicisation of recent attacks only unmasks more fundamental afflictions in Kenya that exist irrespective of al-Shabaab or, for that matter, the conflict in neighbouring Somalia. These include significant regional and ethnicised political divisions, a polarised politics that thrives on scare-mongering and fear, a lack of public trust in policing agencies, and an ossified security apparatus needing reform.

Military adventures in Jubaland and the targeting of Somali populations in Kenya have not strengthened security and have probably worsened an already grave situation. Rather, the safety and security of all Kenyans will only be guaranteed through a serious and sustained effort from its political leaders to address the country’s many long-standing challenges.

By Dr Jeremy Lind
This blog was originally published on African Arguments on  11 July 2014.