Why a Focus on Inequality in Fragile States Is Wrong
With the appointment of the United Kingdom's prime minister, David Cameron, as chair of a new UN committee tasked with establishing a new set of UN Millennium Development Goals (the existing ones expire in 2015), debate on the issue is expected to heat up in the months ahead.
Many in the development field think the reduction of inequality in poor countries should be a high priority, but this shows a misunderstanding of the problems the poor face in these countries—and what steps must be taken to help them.
Inequality has become a major issue around the world over the past few years. The financial crisis and its aftermath show how widening inequality threatens the vitality of democracy across the developed world. The Arab Spring shows the myriad advantages narrow elites have across the Middle East to enrich themselves at the expense of everyone else. Growth that benefits only a sliver of populations in many developing countries shows how large the differences are in access to opportunity across the developing world.
As Claire Melamed and others have argued, inequality can reduce growth rates, slow down poverty reduction, and increase political instability—all of which ought to matter to people working in development.
But fragile states, which include most of the world's poorest countries (as well as a number that are reasonably well off because of their natural resource wealth), have more fundamental problems than inequality. Divided by stark ethnic, religious, clan, or caste differences, and lacking governments able to "get things done," they need to focus their limited capacities and resources on increasing stability and getting the state to work better. In such places, enhancing "horizontal social cohesion" (the complex cultural, psychological, and social glue that ties people together) and developing stronger institutions are both more important than reducing inequality.
History shows that the most successful countries at promoting development and poverty reduction were both cohesive and equipped with capable governments. Places like China, Vietnam, South Korea, and the rest of East Asia have improved the lives of over a billion poor people over the past two generations not because they sought to reduce inequality (in many cases it increased while poverty was dropping) but because they sought to develop dynamic nations and considered all (or almost all) their citizens an essential part of this process.
The higher the level of social cohesion, the less likely a country will have the identity and spatial differences that contribute so much to poverty in the poorest states. The more cohesive a country, the more likely it will have a leadership with an interest in introducing programs that help the poor because elites see impoverished people as "one of us" and think poverty holds back the whole nation.
The more robust the government the more likely it will be able to offer a wide range of quality public services and ensure equal access to them—no matter who is in charge. Governments able to implement policy effectively are much better positioned to focus on reducing inequality and designing programs that target poverty than those whose reach barely extends across a territory.The MDGs will only prove useful to fragile states when they focus more on capable governance and social cohesion.
Where neither is present, the poor are at their most disadvantaged. Lacking access to many public services (including, often, the rule of law and good schools) and faced with elites who are ambivalent—or worse—about their situations, the poor have little hope of improving their lot no matter how hard they work.
This does not mean inequality does not matter. But efforts to reduce inequality are more likely to gain traction when these two elements have been tackled first.
Brazil, Mexico, and other Latin American have introduced the most innovative poverty reduction programs over the past decade or so—and not earlier—because they are more cohesive than at any time in their histories. Whereas elites once saw social exclusion as a natural product of racial differences and very much in their own self-interest, today there is a much greater commitment to inclusion and a much better understanding of the practical and ethical importance of helping the poor. In Brazil, for instance, leading business people created a partnership called Todos Pela Educação (Education for All) to push for improvements in schooling because they were unsatisfied with government performance in the sector, and saw the deficiencies as a major disadvantage compared to Asian competitors.
Chile has introduced the region's most comprehensive poverty reduction program, the Chile Solidario Programme, because it has the region's most capable government.
The push to place inequality at the top of the development agenda echoes many similar attempts to impose a one-size-fits-all strategy on poor countries. And like other ideologies (such as the Washington Consensus), it may make sense at times. There are, however, many poor countries whose contexts require other solutions.
The Millennium Development Goals will only prove useful to fragile states when they focus more on improving how states and societies work. The current set of goals has, in contrast, mainly focused on improving the lives of individuals (by reducing poverty, increasing schooling, reducing child mortality, and so on). As a result, they have proven much more useful to states that already work reasonably well than to fragile states. Whereas the former have governments that can use the MDGs to prioritize where they should invest money, the latter are still struggling to forge a basic political compact and build a set of functioning government bodies.
Indeed, no fragile state has achieved a single Millennium Development Goal. The proportion of the world's poor living in fragile states is projected to rise from 20 percent in 2005 to more than 50 percent by 2014. They are now home to one-half of all children not in primary school and one-half of all children who die before reaching their fifth birthday.
Formulating a set of MDGs that focuses on improving how states and societies work rather than improving the conditions of individuals is much harder to do. Many important issues are hard to quantify. Comparisons across countries often do not work well. There is a shortage of reliable data. Difficulties in measurement partly explain why aid agencies find it so hard to focus on issues such as politics despite wide recognition that they ought to do so.
But there are a few areas that could be targeted now, and others that could be used with improved measurement tools. Improving governance and investment environments should be a priority. There are many widely available indicators, including the World Bank's governance indicators, its Doing Business standards, and the Goldman Sachs Growth Environment Score, that could be used as a starting point.
Horizontal social cohesion needs to be taken into account. One way would be to examine horizontal inequities (i.e., inequalities between culturally formed groups). Another would be to look at spatial inequities (i.e., inequalities between different parts of a country). A third would attempt to measure the degree of political mobilization based on ethnic, religious, or clan identification, with the aim to create political systems that reduced this tendency. Longer term, a way to measure horizontal social cohesion better than existing tools ought to be sought.
Equity should matter, but not the equity of outcomes. Better to focus on the equity of access to public services and opportunity. Measuring differences in access to schooling, roads, jobs, and so on would highlight social exclusion, show how uneven development hurts the poor, and provide information that can change how governments and donors spend their money.
Indicators need to be chosen in a way that allows each country the flexibility to shape its development path. Better governance, for instance, can be achieved in many ways, not all of which may show up under the World Bank's system. Many Asian countries, for instance, have done quite well despite performing badly on these.
Aid agencies are increasingly focusing their money on fragile states. Some, such as Australia, have committed half their budgets to them. These countries have proven to be a wicked problem for donors in the past because they are unable to creatively rethink their own paradigms for how societies and states work and evolve. In order to succeed, they will need to prioritize more fundamental issues than inequality.
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