By Maurice Chammah
CAIRO: Economic inequality is on the rise worldwide — the rich are richer than ever before and their distance from the poor is greater — yet the character of that inequality is changing, according to Branko Milanovic, an economist at the World Bank.
“In the past, more than a half of global inequality was due to the inequalities within countries,” Milanovic explained at a conference Saturday. “Poor peoples’ incomes were not very much different from each other. The gap between them was very, very small.”
Now, poor people in rich countries have an income vastly higher than their counterparts in poor countries. The Occupy Wall Street protesters, who declared themselves part of the 99 percent of poorer Americans, are still within the 95th percentile of “world income distribution,” Milanovic said.
“What we have now is the world of migrants,” he told researchers at a Cairo forum titled “Inequality in the Arab Region,” organized by the Economic Research Forum.
“By moving to a different place, you can increase your income many-fold,” he said.
The reason for the difference between countries, added Francisco Ferreira, another researcher for the World Bank, has to do with opportunity. In the 1990s, economists took on philosophical trends in thinking about individual responsibility and justice. They ended up looking more at how opportunity is distributed within a given society and between them.
“Equality of opportunity,” he said, “is attained when advantage is distributed independently of circumstances.”
“The equality that matters most is equality of opportunity,” he continued, particularly if you look at “perception.”
Political instability does not come from inequality of income and education, but from the opportunities people have to better their situation. “The chances they have,” he concluded; “They are not to blame for them.”
This difference in levels of opportunity can also exist within countries. “Urban households appear to enjoy superior characteristics than rural ones,” explained Nadia Belhaj-Hassine, a senior economist at the Economic Research Forum.
This would explain migration from rural areas to cities within countries like Egypt, but Milanovic sees the real effects in international migration. “Citizenship explains some 60 percent of variability in personal incomes globally,” he said, “and citizenship is a morally arbitrary circumstance, independent of individual effort.” This means that migration, though “politically the most contentious,” is the inevitable result of inequalities of opportunity between countries.
So how can countries create economic opportunities and decrease migration? Several researchers looked to Brazil for ideas.
Naren Prasad, a development economist at the International Labor Organization, described how Brazil simplified its tax structure for micro-enterprises in order to attract informal workers to the formal sector. The largest South American country, which saw a rapid turnaround from hyperinflation in the 1980s to huge growth in the 90s, instituted what Prasad calls a “social protection floor,” which involves “providing a basic income security” to children, the unemployed, the poor, and the elderly.
“The more you spend on social transfers,” he said, the more “those transfers are able to decrease inequality.”
“Some ways of organizing societies encourage people to innovate, to take risks, to save for the future, to find better ways of doing things, to learn and educate themselves, solve problems of collective action and provide public goods,” added Carlos Pareira, a professor at Michigan State University. “Others do not.”
Hanan Nazier, a professor of economics at Cairo University, thinks that social benefits like those in Brazil are not enough to address Egypt’s economic problems. “In the Arab region, where public spending on education is relatively high…still, at the end of the day…the ranking of these countries drops substantially,” he said.
“You could have a significant percentage of public spending go to education and healthcare,” Nazier added, “but it’s about how it’s being distributed. Does it go to the targeted groups or not?”
Prasad agreed. “You can’t do economics purely. There is always a political dimension to it,” he answered, adding that researchers should keep in mind the political dimensions of their policy proposals.
“The money is there,” he said simply. “It’s just a matter of political will.”
Nevertheless, the researchers agreed that more studies of inequality of the Arab world are needed, rather than examples from other countries like Brazil. In addition, a new focus on migration and how individuals seek to address the “inequality of opportunity” for themselves will be the new direction of inequality research.
Economists and researchers, Milanovic suggested, must look at the “development of people and not just the development of countries.”
