Defeating inequality in the world economy - a global plan of action

3-4 June 2016

The Socialist International Commission on Inequality held its first meeting on 3-4 June 2016 in Brussels, hosted by the Socialist Party of Belgium, PS. The Commission had been established by the SI to put forward new ideas, innovative concepts and policies to defeat inequality in the world economy. With a view to drawing on the accumulated experience at the helm of government on matters related to the issues in the remit of the Commission, its membership includes a number of current and former heads of state and government and other leaders drawn from all continents.

Attending the meeting were: leader of the host party and chair of the Commission Elio Di Rupo, former Prime Minister of Belgium and an SI Vice-President; George Papandreou, SI President and former Prime Minister of Greece; Luis Ayala, SI Secretary General; and Commission members Laura Chinchilla, former President of the Republic of Costa Rica; Eero Heinäluoma, former Deputy Prime Minister of Finland, former Finance Minister and former Speaker of the Parliament, and SI Vice-President; Ricardo Lagos, former President of the Republic of Chile; Marian Lupu, former President of the Republic of Moldova, former Minister of the Economy, Leader of the Democratic Party of Moldova, PDM, and SI Vice-President; Richard Parker, Professor of Economics and Public Policy at the University of Harvard, former advisor to Senator Kennedy, former President of Americans for Democratic Action, ADA, from the Democratic Party, USA; Anand Sharma, former Foreign Minister and of Trade and Commerce of India, Deputy Leader of the Indian National Congress and Deputy leader of the INC parliamentary group in the Indian Parliament; Mohamed Bazoum, Minister of the Interior of Niger and President of the Party for Democracy and Socialism of Niger, PNDS, participating on behalf of Commission member HE Mahamadou Issoufou, President of the Republic of Niger; and Ajay Bramdeo, representative of the African Union, on behalf of Commission member Nkosazana Dlamini-Zuma, Chairperson of the African Union Commission. The Commission also includes Saleem Mandviwalla, former Finance Minister of Pakistan, Senator of the Pakistan People’s Party, PPP, and Chairperson of the Committee on Finance of the Senate of Pakistan.

Over the course of the two-day meeting, participants were in agreement that inequality represents one of the most serious challenges undermining our democracies, our societies and our common future, and that the main objective of the Commission was to define concrete steps that the social democratic movement could take to reduce inequality. In this first meeting, participants identified a number of overarching concepts in relation to inequality, and underlined that a coordinated global effort would be necessary to confront and reverse increasing economic inequality within and between societies, countries and regions of the world.

Participants were unanimous in their support for the notion that access to education is a powerful tool to reduce inequality in future generations. Reducing inequality requires the defence of free education in the developed world, where it is coming under increasing threat, and a redoubling of efforts to expand education provision in the developing world, with particular emphasis on those previously denied education in the past, namely the poorest in society and girls. Commission members observed however that the young generation in many countries was already the most highly educated in history, but continued to struggle due to the lack of opportunities for meaningful and secure employment. Education for all is a prerequisite for a more equal society, but not a cure for all the diverse causes of inequality.

Concern was thereby expressed over the prevalence of jobless growth, which has led to many of those who are able and qualified to work being denied the opportunity. Discussions on employment also incorporated the related issue of trade and workers' rights, which are closely linked to inequality. The erosion of workers' rights is a major cause of global inequality and trade agreements need therefore to include basic standards of rights for workers, which will also enable democratic governments to push back against the efforts of huge transnational companies to use their economic power to exert influence over governments, leading to a worsening in working conditions.

A clear link was identified between action on climate change and addressing inequality, which represent the two most crucial tasks in the 21st century. The inequalities in the world economy are also reflected in the disparity in per capita emissions between developed and developing countries, and their responsibility for historical emissions. It is also the case that the principle well known to climate change negotiations of common but differentiated responsibilities can be applied to tackling inequality. Although action on inequality is necessary everywhere, due to diverse starting points and stages of economic development the exact nature of this action is highly differentiated.

The differentiated approach that would be required in order to tackle inequality was a key feature of the discussions, with participants bringing local perspectives on the most pressing issues facing their countries and regions. This was an ample demonstration of the importance of the diverse composition of the Commission, which is a great strength. It was stressed that there is no one size fits all approach to tackling inequality, and that therefore the conclusions of the Commission must respect the different challenges faced in different continents.

Participants from the EU and the US noted the impact of the great recession on levels of equality, as a result of post-recession growth accumulating disproportionately in the hands of the already wealthy. The problem of wealth concentration in the hands of the richest one per cent persists, and is relevant on both a regional and global level. One proposed solution to this injustice was the exploration of ways to increase taxes on capital, which is currently taxed at a lower rate than income in many jurisdictions.

In Latin America, the problem of inequality is of paramount importance, as a result of a failure to significantly reduce inequality despite economic development and rising average incomes. For the members of the Commission, this demonstrates why in many ways measures such as GDP per capita are given too much pre-eminence when it comes to determining which economies are successful. Once annual incomes get beyond a threshold of approximately $20,000 per capita, there is a much stronger correlation between the level of economic equality and general well-being than between total income and well-being and this was one of the motivating factors behind the support of the Commission for efforts to give additional prominence to the Gini coefficient in order to embed income distribution as a measure of development.

The concept of economic justice is a vital principle for many developing countries, particularly in Asia, where 60% of the world's population live, and development remains the key to poverty reduction. There, raising incomes is a vital first step to reducing inequality. Nonetheless, participants stressed that inequality is not simply a question of income but also very much relates to the provision of food security, healthcare and education.

Commission members from Africa raised the issue of the link between conflict, insecurity and inequality.  Inequalities on an international level exacerbate poverty, which is a source of conflict. A lack of security also undermines efforts by democratic governments to implement the policies that would bring about a reduction in inequality. These challenges are particularly acute in the Sahel region of Africa.

As a result of this first round of discussions on tackling global inequality, the Commission members agreed on a series of fundamental policies that need to be put into effect to deliver a reduction in inequality. These included the need to end tax havens; implement more progressive taxation; explore ways to tax capital at a higher rate than wages where applicable; create a link between GDP and Gini coefficient as a measure of prosperity; reaffirm the crucial role of education as a prerequisite for reducing inequality; end discrimination on the grounds of gender, nationality and ethnicity; reform international institutions in order that they reflect contemporary realities; couple economic justice with climate justice and a reduction in emissions; intensify the struggle against corruption; tie minimum wages to median income; and pursue conflict resolution to bring the stability needed to reduce inequality.

The Commission will hold its next meeting in Niamey, the capital of Niger, at the invitation of Commission member HE Mahamadou Issoufou, President of the Republic, in the first half of September. The Niamey meeting will build, deepen and continue the discussions, advancing in the preparation of a comprehensive report on inequality. The forthcoming SI Council in Geneva in July will include discussions on the theme of inequality, during which the global membership of the SI will have the opportunity to contribute to this debate and the development of the Commission’s report.