Worsening inequality is a threat to the achievement of the global Sustainable Development Objectives. To turn the situation around, the governments of developing countries must invest heavily in public services, says Philippe Orliange.
A career diplomat, Philippe Orliange has been director of Strategy, Partnerships and Communication at the French Development Agency since 2014. He answered questions from Cécile Barbière from EURACTIV France at the European Development Days in Brussels.
Today, the fight against inequality appears to be an issue of fundamental importance if we are to attain the Sustainable Development Goals. This was not necessarily the case a few years ago. What has changed?
The question of inequality has become so important because societal cohesion broadly depends upon it. It is not normal for 1% of the population to possess as much wealth as the other 99%.
Today, the international community has integrated the question of inequality into the global agenda, so it has become a politically legitimate subject.
Nobody mentioned inequality in the Millennium Development Goals, which were adopted in 2000. But now, we are in Brussels for the European Development Days, and a whole debate has been organised on the subject. Nobody will tell you, “no, this is not the issue”. It is the issue.
There is also a moral side to the question. We cannot say that we are building a shared world in which nobody will be left behind, while accepting this unreasonable monopolisation of wealth. This alone is reason enough to act.
We now also know that inequality is bad for economic growth. A number of studies from the IMF prove this to be true. And finally, the victims of inequality are at higher risk of exposure to the effects of climate change.
So not only is inequality morally reprehensible, but it is also economically inefficient. And the effect is cumulative.
Since 2000, development policies have largely concentrated on reducing poverty, which has declined in the world. On the other hand, inequality has got worse. How can we turn this around?
What we have seen over the last ten to 15 years is indeed a decline in world poverty. This decline was enabled by public policies promoting growth, job creation, etc. So we can act. Poverty is not inevitable, and nor is inequality.
At the same time, the very rich are getting richer, while the middle classes and the poorest have stagnated, despite the progress in areas like public services.
With the fight against inequality now a recognised political issue, public policies now have to pay close attention to their effects on equality, particularly fiscal policies.
Some fiscal policies are abnormally regressive, making the poor pay far more than the rich and exacerbating inequality. For example, the tax burden on workers in middle income countries, or the tax on essential consumer products, penalise the poor much more than the rich.
We see these policies in many countries, not just in the developing world. National fiscal and social policies, as well as the rules concerning access to public services, must take the fight against inequality into account.
The idea of correcting inequality and redistributing wealth is the foundation of the Financial Transaction Tax. Do you think that this kind of innovative financial tool can be put to effective use in the fight against inequality?
The Financial Transaction Tax (FTT), and any other redistribution tool, is an important lever for raising development funding, but also for correcting the inequalities that exist between, and within, countries.
But on questions like this, political consensus is everything. At national and European level, it is clear that consensus is hard to come by – and even harder at a global level.
Can development actors exert any real influence on how inequality is handled in public policy, which is largely the domain of governments?
Aid donors must also be involved, by offering their support to institutional projects to strengthen tax collection, for example.
And there is also the question of access to basic public services. This is a sector in which development assistance can have a real impact in leveling inequality. In Colombia, for example, the AFD is supporting the government’s review of its social protection system.
But the societal vision of the governments we work with is often at the heart of the problem. We cannot ask agencies and development banks to do things that the national authorities cannot or will not do.
Development is financed by a combination of the fiscal revenue of developing and emerging states ($2,500 billion) and external public development financing ($250 billion), including $150 billion of official development assistance from donors. Ending inequality cannot depend purely on the allocation of the $250 billion of public financing and the $150 billion of development aid.
If national policies are regressive, if public spending brings the greatest benefits to the privileged members of the population, inequality will persist. So the political will to act must be there.
So integrating the fight against inequality in the global agenda is also a way to make governments take ownership of their responsibilities?
Redistribution of wealth among the population of a given territory does not happen by itself. We cannot simply wait for a “trickle-down effect” to bring wealth from the top to the bottom. This is explicitly mentioned in the Sustainable Development Goals.
The concentration of wealth in the last ten to 15 years makes this an urgent public policy issue. Developing countries should not necessarily go about it in the same way as the European welfare states did in the 1930s-40s. But states can certainly play a bigger role than they have done in the recent period of ultra-liberalism.
When you add to the 17 global priorities of the MDGs the need for transparent, efficient institutions that work well for everyone, you begin to appreciate the importance of public policy.
That does not mean that we can do without strong private actors. But it does mean that if governments lack sufficient political legitimacy and organisational ability to work for the common interest, the common good, then the world may become yet more unequal, and thus less sustainable and more vulnerable.