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Inequality a major challenge for low, middle and high income countries

01 October 2014

​Experts at UNCTAD's Trade and Development Board picked up the inequality debate following the Public Symposium in June.  

Structural reforms to tackle inequality are critical to the success of the post-2015 development agenda, said participants at UNCTAD's annual Trade and Development Board (TDB).

A wide range of member States and experts from civil society, academia, multilateral institutions and the private sector returned to the issue several times throughout the meeting, emphasising that the current trend of ever-widening inequality was unsustainable.

The income share of the top 1 per cent of earners in the USA is now 20 per cent, the same as in 1925, said Giovanni Cornia, professor at the University of Florence, and a leading expert on the subject.

Between 2000 and 2010 most countries saw an increase in their Gini coefficient, with China's now at 45. While faster economic growth initially leads to greater inequality in developing countries, a Gini coefficient of 35 to 40 is associated with lower rates of growth, said Mr Cornia.

Sanya Reid Smith, Senior Researcher at the Third World Network, presented the Report of the Public Symposium to the Board. She welcomed the Symposium, which was titled "A Better World Economic Order for Equality and Sustainable Development Post-2015", as a valuable opportunity for civil society to exchange ideas and contribute to policy dialogue.

Picking up on issues raised by civil society at the Symposium, Ms Reid Smith expressed concern about how multilateral trade and investment agreements had made it more difficult for developing countries to achieve food security, diversify their economies and invest in public services. For example, cotton subsidies in developed countries continued to drive African cotton growers out of business, TRIMS (Trade-Related Investment Measures) restricted developing countries' ability to pursue active industrial policies, and the TISA (Trade in Services Agreement) gave foreign firms access to markets for key public services.

At a separate session of the TDB, WTO Director-General Roberto Azevedo acknowledged that some of these issues had resulted in the current impasse at the WTO, with members unable to agree on the implementation of the new rules decided at the Bali Ministerial in December 2013. He said that WTO member States had made progress on issues concerning Least Developed Countries, agriculture and trade facilitation over the summer and were due to meet on 6 October to agree to adopt the new measures.

Throughout the meeting both developed and developing countries emphasised the risk that widening inequality poses to long-term growth. Some developing countries pointed out that sudden trade liberalisation can lead to unemployment and increase income inequality. At the opening session the European Union representative said inequality was a "universal concern for low, middle and high income countries" and that the global community needed a "job-centred sustainable development agenda".

Sangheon Lee, senior economist at the ILO, linked widening inequality to economic stagnation: "Investment-led growth will have limits without increased consumption," he said.