The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

World leaders find a consensus on inequality, but what’s the plan?

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With the path of austerity, tax policies, and investment opportunities written by and for the wealthy, how much longer will we continue to undermine people trying to work their way out of poverty?

This post originally appeared on the Huffington Post.

World leaders gathered in Washington, DC at the World Bank and International Monetary Fund (IMF) spring meetings earlier this month to discuss the state of the global economy. The good news is that the leaders of these iconic institutions are on record acknowledging that growing inequality is a threat to economic growth and to serious efforts to eliminate extreme poverty. Yet neither institution offered concrete steps to address it.

In two major plenary panels, it was undisputed that we live in a world of extremes. About 85 people now own approximately half of the world’s wealth—assets equal to those of 3.5 billion of the world’s poorest people.

What’s becoming clear is that in today’s global financial system, the rules are rigged in favor of the very rich, and hard-working poor families around the globe are finding it impossible to make ends meet. If we continue down the same path of austerity, tax policies, and investment opportunities written by and for the wealthy, we will continue to undermine the best efforts of people trying to work their way out of poverty. We will also continue to limit social mobility and restrain growth.

In a session “Sharing Prosperity, Delivering Results” with World Bank President Jim Kim, Director of Earth Institute Jeffrey D. Sachs, and World Bank Economist Kaushik Basu, the overall message was clear that moral conscience to address inequality is finally lining up with the economic proof. As Dr. Sachs stated, “Morals are not mush. There is no excuse for extreme poverty.”

To address inequality, Dr. Kim suggested that we should recruit more people in pinstripe suits to talk about more about the billions and trillions of dollars needed for health and education programs to fight extreme poverty, which still represents only a small portion of income for the world’s wealthiest. This would have an enormous positive impact on the world’s poorest people. We could make a difference simply by employing measures that would shut down off-shore tax havens and end corporate tax dodging, which costs developing nations $100 billion per year.

The World Bank’s willingness to focus on the bottom 40 percent is more than welcomed, but the assumption is that if we can measure progress among the bottom 40 percent, we are intervening successfully to address inequality. Not all would agree.

As Oxfam showed in our January report, “Working for the Few,” we cannot address inequality by only focusing on the “have-nots.” It is essential to include the “haves.” Focusing only on the bottom 40 percent would not address the wider impacts of inequality like political capture and its impact on democratic governance.

I could not help but noticing that the Bank refuses to say anything about the top 10 percent. Taxes, for example, were completely missing from the discourse. While the IMF has, for the moment, overcome the Bank in terms of proposing concrete actions to tackle inequality and talking about the top 10 percent, this new IMF narrative still needs to be turned into actions and to signal the end of austerity policy. A recent report by our friends from the European Network on Debt and Development (Eurodad) on IMF conditionality shows there is still a discrepancy between positions held by the IMF in Washington, DC and on the ground.

However, with the right policy initiatives in place, the IMF and World Bank can easily leverage trillions of dollars to narrow the gap, and achieve great steps to end extreme poverty by 2030 – the goal President Kim seeks. We could do this by:

  • Putting inequality and poverty at the center of discussions on the state of the global economy;
  • Measuring the gap between the richest 10 percent and the poorest 40 percent in each country;
  • Advising countries to invest more in free and public health and education and to make their fiscal system more progressive;
  • Supporting a goal on inequality in the new post-2015 global development framework;
  • Reforming the World Bank’s private sector lending practice to ensure they prioritize results for the most vulnerable and not just wealthy investors;
  • Ending support for the IMF’s austerity measures that cut public services for the poor; and
  • Finding a role for the IMF in helping to address unfair domestic and international tax policies that favor the rich and cause developing nations to lose an estimated $100 billion a year to corporate tax dodging.

These two institutions are charged with worrying about the state of the global economy and the welfare of the world’s poorest. Given past history, witnessing the World Bank and IMF clearly advocating for policy interventions to address the threat of accelerating inequality is pretty amazing. But as we have seen, rhetoric will only take us so far. The social and political forces that sustain the current system are powerful and will resist change. We need action, discipline, and political will to stay on track and make progress.

The path we take will make a huge difference in the state of the economy 15 years from now. We can build a fairer world, but it needs to start today.

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