Do global socioeconomic inequalities really matter?

By Lucas Juan Manuel Alonso Alonso.

 

“Image: Colin Harris at www.flickr.com. (Image: Jared

Rodriguez / Truthout): Tackling Inequality”

A wide social and economic disparity would lead countries to:

  1. weak business structure,
  2. low democracy quality,
  3. high level of corruption,
  4. unproductive and/or over-dimensioned state structures,
  5. lack of equal opportunities in the economic and social spheres…

If that situation lasts too long, will not only lead to exploitation but also prevent the creation of middle classes, thus making any credible attempt to develop the social-economic environment of these countries is doomed to failure.
An increase of social inequality indicates a setback in the progress of a country’s people. Such a situation is indicative of a reduction in the Human Development Index. Therefore, a country can be progressing economically at the expense of a decline in human development.
Obviously, this situation cannot be understood as progress of a country because economic growth has to be a vehicle that supports human development. It has no sense to talk about economic growth without to take into account its contribution to human development.

In the past few years, we have experienced a huge setback in the indexes related to social progress in many developed countries. Take, for instance, the issue of basic human needs and we might well ask: How many people in developed countries are below a minimum nutrition and basic medical care?How many people in developed countries are below the poverty line?Particularly the more vulnerable groups, such as:

  • Child poverty (it is on the rise in several developed countries, some countries within the euro-zone are a good case in point)
  • Abject poverty (the same as that described in the preceding point)
  • Growing number of food banks in many advanced economies…

About issues like satisfaction with housing, access to electricity, personal safety…etc. It raises questions such as:
How many people in developed countries are satisfied with the availability of good affordable housing?
How many people in developed countries, as a result of higher energy prices, are suffering energy poverty?

And obviously as a consequence of the global deep crisis triggered by an economic system based mainly on financial speculation jointly with inappropriate economic measures and structural reforms, the income gap between a country’s richest and poorest people is enlarging and thus, access to basic social and economic rights is under serious threat in some developed countries.

B) Economic Growth & Human Development:

Some countries may have a similar per capita GDP and marked differences in their social progress indicators. Therefore, a good question to ask is: To what extent is GDP contributing to improve a country’s social progress? A key issue for policymakers should be to carry out necessary investments to promote human development with greater equity.  As it says on page 20 of the 2013 Human Development Report:

…Investments in human development are justified not only on moral grounds, but also because improvements in health, education and social welfare are key to success in a more competitive and dynamic world economy…

In the light of this sentence, I think some important questions need to be considered: What kinds of investments in human development are being carried out in some developed countries? Isn’t it a short-sighted policy? Isn’t it necessary a shift in attitudes? Can we say that we are on the path of progress?

It is also a mistake to think that growth is the only solution for economic prosperity because, among other things, resources are limited on a global scale. Therefore, we cannot rely on continued economic growth but in a more just distribution of resources because in this way it would generate more competitive countries (societies with a more generalized purchasing power).

Economic growth does not seem to be the problem or the solution related to a country’s socio-economic progress, but a fairer distribution of wealth… isn’t it a logical conclusion?

Obviously, a long-term economic growth is a positive sign for a country but to the extent that that growth is not based on industries that are vulnerable to a bubble generation.

C) Jobless, Employment Quality & Competitiveness:

Unemployment is worse than create low wage jobs

This is a constantly-repeated mantra within many advanced economies. But, in my view, such a situation can be an option in a few very specific cases, only for short periods of time, and in economies in transition and can never, therefore, be a variable to formulate long-term economic policy. Wages must be worthy to improving the living conditions of the people because this fact will lead to the creation of middle classes which would strengthen purchasing power and domestic business structures.

Advanced economies should compete through the quality and added value in differentiated products rather than trying to gain competitiveness through a strategy of low wages

Precarious and poorly-paid work, labour flexibility “in excess”, less costly hiring, cheaper dismissal, different modalities of hiring… This kind of employment policies lead to a reduction of social security contributions, higher rates of poverty, inequality and social exclusion and, as a result, to less consumer spending for a large segment of the country’s population. Large socio-economic inequalities lead to serious social conflicts, unstable governments and countries (Mediterranean European countries are an unfortunate example of this), and this lead to the collapse of foreign investment (especially direct investment).

Social differences have been reduced in China over the last years. China has gone from being the world’s factory to become a major consumer, both in the domestic and international markets. The growing middle class is making China more competitive. We have there an example of the positive effect in reducing huge social inequalities (countries increase their purchasing power, encourage consumption, and gain competitiveness in the international market). We have an opposite example in the European Union countries (mainly Mediterranean countries) where a policy of low-wages is generating enormous social inequalities and making these countries uncompetitive in global markets when it comes to labour costs.

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Image: Colin Harris at www.flickr.com.(Image: Jared Rodriguez / Truthout):Tackling Inequality

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