UN Warns Of Growing Inequality Triggering New Great Divergence – Analysis
By Santo D. Banerjee
In the run-up to 2020, the UN has warned that despite remarkable progress on laying a solid foundation for human development, Thailand, like many other countries, is facing challenges in tackling inequality. This is also a theme on which the 2019 Human Development Report (HDR) from the United Nations Development Programme (UNDP) focuses.
The report entitled Beyond income, beyond averages, beyond today: inequalities in human development in the 21st Century warns that a new generation of inequalities is opening up, around education, and around technology and climate change – two seismic shifts that, if unchecked, could trigger a ‘new great divergence’ in society of the kind not seen since the Industrial Revolution.
However, says UNDP Administrator, Achim Steiner, “inequality is not beyond solutions”.
Thailand has a Human Development Index (HDI) of 0.765 in 2018, which puts the country in the high human development category, notes the report. Featuring at the 77th place in world ranking (out of 189 countries), Thailand is the developing country that has the most progressed in the world in its HDI ranking over the period 2013-2018, up by 12 ranks. This, says the report, reflects the country’s continued improvement in life expectancy at birth, years of schooling, and income per capita.
However, when discounted for inequality, Thailand’s HDI declines by 16.9% to 0.635. If not addressed, cautions the report, it will only get harder to correct the widening trajectory of inequality which is reinforced by climate change and technological disruptions which tend to hit the poorest population the hardest and earliest. “This calls for urgent action.”
The report analyzes inequality in three steps: beyond income, beyond averages, and beyond today. But the problem of inequality is not beyond solutions and the report offers a range of policy options to tackle it.
The 2019 Human Development Index (HDI) and its sister index, the 2019 Inequality-Adjusted Human Development Index, set out that the unequal distribution of education, health and living standards hinders countries’ progress. By these measures, 20 per cent of human development progress was lost globally through inequalities in 2018. The report recommends policies that look at, but also go beyond, income, including:
Early childhood and lifelong investment: Inequality begins even before birth and can accumulate, amplified by differences in health and education, into adulthood. For example, children in professional families in the United States are exposed to three times as many words as children in families receiving welfare benefits, with a knock-on effect on test scores later in life. Policies to address inequality, therefore, must also start at or before birth, including investing in young children’s learning, health and nutrition.
Productivity: Such investments must continue through a person’s life, when they are earning in the labour market and after. Countries with a more productive workforce tend to have a lower concentration of wealth at the top, for example, enabled by policies that support stronger unions, set the right minimum wage, create a path from the informal to the formal economy, invest in social protection, and attract women to the workplace. Policies to enhance productivity alone are not enough, however. The growing market power of employers is linked to a declining income share for workers. Antitrust and other policies are key to address the imbalances of market power.
Public spending and fair taxation: the report argues that taxation cannot be looked at on its own, but it should be part of a system of policies, including public spending on health, education, and alternatives to a carbon-intensive lifestyle. More and more, domestic policies are framed by global corporate tax discussions, highlighting the importance of new principles for international taxation, to help ensure fair play, avoid a race to the bottom in corporate tax rates, especially as digitalization brings new forms of value to the economy, and to detect and deter tax evasion.
Averages often hide what is really going on in society and while they can be helpful in telling a larger story, much more detailed information is needed to create policies to tackle inequality effectively. This is true in tackling the multiple dimensions of poverty, in meeting the needs of those being left furthest behind such as people with disabilities, and in promoting gender equality and empowerment. For example:
Gender equality: Based on current trends, it will take 202 years to close the gender gap in economic opportunity alone, cites the report. While the silence on abuse is breaking, the glass ceiling for women to progress is not. Instead, it is a story of bias and backlash. For example, at the very time when progress is meant to be accelerating to reach the Sustainable Development Goals (SDGs) by 2030, the report’s 2019 Gender Inequality Index says progress is slowing.
A new “social norms index” in the Report says that in half of the countries assessed, gender bias has grown in recent years. About fifty per cent of people across 77 countries said they thought men make better political leaders than women, while more than 40 per cent felt that men made better business executives.
In Thailand, gender inequality remains prevalent. After gender disaggregation, female HDI is 0.763 compared to male HDI of 0.766. This is due to lower years of schooling and lower income per women. Furthermore, women only account for 5.3 per cent in the Thai parliament, well below East Asia and Pacific’s average of 20.3 per cent.
Therefore, policies that address underlying biases, social norms and power structures are key. For example, policies to balance the distribution of care, particularly for children, are crucial, says the report, given that much of the difference in earning between men and women throughout their lifecycle is generated before the age of 40.
Looking beyond today, the report asks how inequality may change in future, looking particularly at two seismic shifts that will shape life up to the 22nd century:
The climate crisis: As a range of global protests demonstrate, policies crucial to tackling the climate crisis like putting a price on carbon can be mis-managed, increasing perceived and actual inequalities for the less well-off, who spend more of their income on energy-intensive goods and services than their richer neighbors. If revenues from carbon pricing are ‘recycled’ to benefit taxpayers as part of a broader social policy package, then such policies could reduce rather than increase inequality.
Technological transformation: Technology, including in the form of renewables and energy efficiency, digital finance and digital health solutions, offers a glimpse of how the future of inequality may break from the past, if opportunities can be seized quickly and shared broadly. There is historical precedent for technological revolutions to carve deep, persistent inequalities – the Industrial Revolution not only opened up the great divergence between industrialized countries and those who depended on primary commodities; it also launched production pathways that culminated in the climate crisis.
The change that is coming goes beyond climate, says the report, but a ‘new great divergence’, driven by artificial intelligence and digital technologies, is not inevitable. The HDR recommends social protection policies that would, for example, ensure fair compensation for ‘crowdwork’, investment in lifelong learning to help workers adjust or change to new occupations, and international consensus on how to tax digital activities – all part of building a new, secure and stable digital economy as a force for convergence, not divergence, in human development.
“This Human Development Report sets out how systemic inequalities are deeply damaging our society and why,” said UNDP Administrator, Achim Steiner. “Inequality is not just about how much someone earns compared to their neighbor. It is about the unequal distribution of wealth and power: the entrenched social and political norms that are bringing people onto the streets today, and the triggers that will do so in the future unless something changes. Recognizing the real face of inequality is a first step; what happens next is a choice that each leader must make.”
Read the full report: http://www.hdr.undp.org/