 PANEL DISCUSSION Beware of the wealth divide FRIDAY 12 OCTOBER 2007
While globalization and economic growth in both developed and developing countries have created wealth, they have also widened the gap between haves and have-nots. The wealth gap is also growing on an international level between the poorest countries and those able to participate fully in the global economy. While there are ethical grounds for acting to reduce the divide, there are practical reasons as well, namely the risk of conflict, instability, and a crisis of confidence in institutions, participants in a debate on the wealth divide heard. While the panel was hard put to come up with concrete solutions, the consensus was that the approach would have to draw on all elements of society: governments, businesses, NGOs, multilateral organizations and private individuals. As Barbara Fiorito put it, “It’s not ‘or,’ it’s ‘and.’ “ One tool for reducing inequalities is redistribution of wealth through social welfare policies financed through taxation. But it isn’t necessarily applicable everywhere. While traditional and consensual in many parts of Europe countries, in nations like the US and developing countries such as those of Latin America, redistributive social programs haven’t caught on. “Latin America is very lukewarm on redistributive policy, yet the market doesn’t distribute wealth equally,” Nora Lustig noted. This leads to a vicious circle, Lustig said. Because populations see few benefits coming their way from state-sponsored programs, they in turn resisted paying taxes. In order to build the necessary trust in these societies to allow them to generate resources for redistribution, transparency and accountability mechanisms needed to be put into place, she argued. In the meantime, statistics from even relatively well-off countries paint a grim picture. In Brazil, Lustig noted, the mortality rate of children from the poorest fifth of the population in their first year is 300% greater than those from the richest fifth. Europe is not spared such misery either – some 78 million Europeans are living under the poverty line, and in Romania, the poor live on less than $2 per day, Fintan Farrell reported. Farrell viewed current European Union economic policy as problematic in that it neglected to regard social cohesion as an economic factor. He said this was the result of corporations’ influence on democratic systems, which meant “decisions seem to be made based on a very narrow view of what economics is.” “Economic growth doesn’t automatically lead to social cohesion,” he argued, adding that narrow policymaking criteria were shortsighted in that a lack of social cohesion ultimately carried a price. “All groups need to be concerned, because all are affected by a lack of social cohesion. We will not solve poverty by focusing only on poverty,” he said. Developed nations’ trade policies were another source of inequality between countries, Fairtrade’s Fiorito said. The worst culprits were the US and the EU, whose agricultural export subsidies essentially lead to the dumping of goods onto international agricultural commodities markets, pricing producers in developing countries out of the picture. “Poor countries rely on agricultural exports. The more equitable trade can be, the greater their chances of lifting out of poverty,” she said. As it stands today, subsidized European sugar and US cotton are being sold at prices below the actual production cost of equivalent products from countries like Mali where labor and raw materials cost a tiny fraction of what they would in the developed world. This was a case of preaching free trade while practicing protectionism, participants in the debate heard. If developed countries adopted less hypocritical trade policies, “trade agreements could work to help as much as they now hurt,” Fiorito said. Ultimately, participants agreed the recipe for keeping the wealth divide in check must combine government, corporate, nonprofit and private philanthropic ingredients. State involvement in some form of redistribution, preferably targeted at enabling the poor to become economic actors, was deemed necessary because market mechanisms had proven insufficient. On a policy level, it is imperative to incorporate the notion of social cohesion into economic policymaking at national and international levels. The private sector can help through mentoring and sharing expertise, but also by taking a hard look at the inequalities of corporate remuneration. And finally, citizens can do their part by making informed, socially responsible choices when electing leaders and then hold them accountable. ______________________________________________ |