The problem with inequality
This blog originally appeared on The Huffington Post.
This year at the World Economic Forum (WEF) inequality topped the bill as the most discussed issue. Inequality comes in many forms wealth, income, gender, country, age religion, etc. It’s such a priority that it’s Goal Number 10 of the UN Sustainable Development Goals- ‘to reduce inequality in and between countries’. So why is inequality such a problem? Surely in our capitalist society, you work hard you get rewarded, right? This belief is starting to be shattered all across the world and manifesting in shocks like Brexit and Trump.
Let’s go back 4 years to the WEF in 2013, Christine Lagarde, Head of the International Monetary Fund, warned us all that inequality will lead to populist and nationalist tendencies. We’ve seen this come to fruition in 2016 with the anti-establishment rhetoric, and ‘protest’ votes. What is worrying is that these votes indicate a significant see-change in global thinking on what is best for society. Individualistic attitudes are emerging rather than a collectivism approach. We’re moving away from collaboration and partnership towards protectionism and the isolation of countries. This is due in large part as a result of rising wealth inequality.
No one listened to Lagarde then and it’s exacerbated since. Oxfam’s latest report, ‘An economy for the 99%’, found that eight of the world’s richest people (all men...) hold the wealth of 3.6 billion people, that about half of the worlds entire population. Economic growth seems to have favoured those the system is already working for and it falls down for not being inclusive of those left at the bottom of the pyramid.
Franklin D. Roosevelt once said, “The test of our progress is not if we add more to the abundance of those who have much; it is whether we provide enough for those who have too little”.
Whilst globalisation and the capitalist system, and some argue the Millennium Development Goals, have done a wonderful job of raising millions of people out of poverty, it’s also sadly been at the expense of the global commons, our oceans, air, forests, wildlife, natural habitats and ecosystems. Now we face anti-globalisation, anti-establishment, anti-capitalist sentiment. Are we moving 180 degrees? How can we be pro-capitalism and against globalisation? Surely the two go hand in hand. Can ‘America first’ be self-sustaining? And, will this in fact actually be good for sustainability objectives? For example will we see less imports and more locally produced goods? Or will the system be at risk at collapse?
Laissez-faire capitalism’s ‘free for all’ attitude has not led to the kind of society we want to live and work in. The rich have gotten richer and the middle class is eroding. Ironically it’s those who attend Davos discussing this issue of inequality who are in this wealthy elite and have benefited the most. While many criticise this, it is this elite that wields the most power and influence to enact change, who better than world and business leaders to discuss and take action on ‘responsive and responsible leadership’. The problem with inequality is that it’s bad for everyone and even the wealthy may see themselves affected as the effects of a Trump administration and Brexit take hold. The disenfranchised have spoken and change is happening. Unfortunately we do not live in a meritocracy just yet but how do we get there?
My hope is that we are starting to realise than economic progress doesn’t always necessarily mean financial gain only. Stagnant economic growth was also discussed at Davos, but our mechanism to measure growth is outdated as it’s based on Gross Domestic Product (GDP). It’s a metric based on consumption, one could argue that it is in direct contradiction to sustainability; less waste, less resource use, less materialism. What about how we measure education, community cohesion, crime, healthcare, family, wellbeing and happiness? Lots of research has shown that increases in GDP have not equated to increases in median wages, and, after a certain level of income (depending where you live clearly) increases in your salary do not make you any happier. That’s a fact. Instead of trying to fix a broken system, we need to challenge the system. Bhutan might be on to something with Gross National Happiness, it might be a bit hippy for some, but perhaps we can strive for a middle ground like the Social Progress Index. This measures all those things that make life worth living. If we must continue live by the mantra what gets measured gets managed this is a viable solution. Let’s measure what matters and we may start to see some progress on inequality, and the subsequent societal changes we want to see in the world.
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Nicola Ruane is a One Young World Ambassador from the UK. She is passionate about sustainable capitalism and finance as a mechanism to change the world for the better. Moving from the trading floor to a role pioneering the CSR programme of a major global bank in EMEA, Nicola is now leading Corporate Sustainability Reporting in financial services within a Big 4 firm.