Reducing inequality within and between countries


Dring ongelijkheid in en tussen landen terug

The Sustainable Development Goals (SDGs) gave more attention to sustainable growth and structural transformation than the Millennium Development Goals (MDGs). As such, the SDGs more closely reflect the Millennium Declaration of 2000 than the MDGs do, and reflect a more integrated approach to development in which economic, social, and ecological concerns are more balanced. However, to make the set of SDGs workable, it is not enough to make the various impacts on poorer groups more visible, and to suggest corrective measures in terms of public and development aid expenditures. It is also necessary to analyse and take action on the economic or social processes that are causing the enormous (and often growing) inequalities, especially income inequality.

The most direct reference to income inequality is Goal 10: Reduce inequality within and between countries. However, the targets of SDG 10 are rather weak. The first (and only time-bound) target is aimed at states: By 2030, progressively achieve and sustain the growth of the bottom 40 per cent of the population at a rate higher than the national average. This is followed by various general targets that promote inclusion and strive to ensure equal opportunity by, for example, eliminating discriminatory laws. Another target is to adopt policies, especially fiscal, regarding wage and social protection and so progressively achieve greater equality. However, the only time-bound target completely misses the fact that increases in inequality are especially created at the top end of the income scale. The modest suggestion, made by many scholars and development practitioners, that the negotiators of the SDGs use the Palma Ratio (the income share of the top 10 per cent related to the income share of the bottom 40 per cent) to track inequality, has regretfully not been accepted. The weak treatment of inequality in the SDGs does a disservice to the ideas behind the SDGs, as tackling inequality is becoming a greater challenge than tackling poverty.

Which measures are necessary to stem the growing inequality? For this it is useful to consider what drives inequality. Important international drivers include: international trade and investment agreements, an international financial system that disadvantages developing countries, and a global governance system that does not acknowledge the position of the poorer countries and restrains their policies. However, evidence has also shown that endogenous drivers (wrong macroeconomics; trade, industrial and labour market policies; fiscal and public expenditure policies which favour the rich; untargeted social policies; and the absence of a social floor) can considerably shape income inequality at the national level. From reviewing all these drivers it is clear that the SDGs, thanks to the way they have been formulated, are not able to stem the growing inequality in the world.

That being said, during the preparation of the SDGs civil society was very active. Thanks to civil society and some governments, the SDGs are now embedded in the Human Rights Declaration and in the other international instruments relating to human rights and international law, and it has been accepted that a follow-up and review process should be an integral part of the SDGs.

Opportunities to deal with growing inequality still exist. The Statistical Commission of the UN has set verifiable indicators for the targets of the SDGs, while member states are encouraged to develop national strategies. These are part of a review process coordinated by the High Level Political Forum on Sustainable Development, based on SDG progress reports. These review processes will not only be informed by governments and international agencies, but also by civil society.

Many lofty words in the declaration of the SDGs are devoted to reducing inequality. Active civil society and academics can thus call governments and the UN system to account regarding growing national and international income inequalities. These actors can demand measures which go beyond the weak, time bound, and general targets of the SDGs, and which are in line with the overall spirit of the SDGs and the 2030 Agenda on Sustainable Development. This could then form the basis of a Global Social Contract for an effective development partnership. The underlying notion of a Global Social contract is that globalization and financialization, if unchecked as it is often now, will lead to greater inequality between countries and within countries. With respect to the inequality between countries, one has only to look at the slow progress of a number of least developed countries, which see their income gap with emerging and developed countries widening. Growing inequality and fewer secure jobs in both developing and developed countries also attests to the influence of unchecked globalization and financialization. National and international review processes of the SDG should lead to a Global Social Contract to stem growing inequality, which the SDGs proclaim to do, but which are currently ill reflected in the targets related to SDG 10 on reducing inequality.

Achieving the SDG 10 on inequality implies for the Netherlands three strands of action. First, reducing income inequality, and more importantly, wealth inequality and inequality of opportunity within the Netherlands itself. Second, contributing to equality between nations by fostering a transformative development agenda for the poorest countries. This implies a continued commitment to 0.7 {bfb8b4827b15e0df3d636cc4328af00f95317b5e6a44a4c67b5ed085bc570bb6} Aid-GNI target, ensuring that resources in poor countries are not syphoned off through unfair tax deals and illicit transfers, and supporting a more balanced international financial system that allows space for poorer countries to develop. Third, ensuring that inequality is reduced in developing countries through the process of transformative development. This can be done (among other ways) by strengthening the rule of law and human rights, and by supporting civil society organizations that give a voice to the poorest (trade unions, farmers and women’s organization) and which can thus foster a national social contract.

Rolph van der Hoeven

Rolph van der Hoeven

PhD Development economics, VU University Amsterdam
Professor on employment and development economics, International Institute of Social Studies (ISS) in The Hague
Member of the Committee of the International Advisory Council (AIV) to the Dutch government

International Labour Organization (ILO)