Warning for Wales as G20 Inequality Rises

Even if we can save the global economy from its current crisis, a new Oxfam report shows how the proceeds of growth are still often failing to reach the poor, and how the negative impacts of unsustainable growth models could hurt millions for generations to come. However, growth does not automatically lead to less inequality.

Oxfam’s new report “Left behind by the G20?” delivers a stark warning for Wales and the world’s most developed countries as it reveals inequality has increased in 14 of the 18 G20 member countries since 1990 – including the UK.

Even the poster-children of the new order are faced by significant challenges. China now has as many billionaires as the US but also more than 200 million people living on less than a $1 a day. South Africa is now regarded as a “high middle-income country”, yet has 8 million people living below the poverty line. Two decades ago – more than 90% of the poorest men, women and children lived in the so-called “low-income” countries. Today over three quarters of the world’s poorest people now live in so-called “middle income” countries like Brazil and India.

Inequality has increased fastest in Russia, China, Japan and South Africa – but it has also risen in the UK, including in Wales, where the gulf between the rich and poor is also widening.

Although Wales has a smaller gap between the very richest and very poorest than in some other parts of the UK (due in part to having very few people in the ‘very rich’ category) – in the last decade, the richest 10 per cent of Welsh people have experienced much bigger proportional rises in their incomes than any other group. The income of the richest tenth now matches that of all those on below-average salaries combined.

Oxfam’s research shows clearly how even when the tide is rising – it does not necessarily lift all boats. It shows that economic growth still too often fails to benefit poor people. Even with stronger economic growth in South Africa during the next decade, our report shows how over a million additional people could fall into poverty, and how by 2020 it is estimated that the average top executive will be paid a staggering 214 times the average wage.

Aside from the moral argument about individual lives lost or potential wasted – inequality, of many different kinds, not simply on income – is linked to weaker and less accountable public institutions, social unrest, crime, and lower well-being. Women and girls continue to face discrimination and injustice globally, depsite the wealth of evidence showing how investing in their education and work opportunities is one of the best paths to development.

Reducing inequality is not only the right thing to do; it also makes sound economic sense. While rising inequality has in the past been viewed as an inevitable result of economic progress, our report identifies a growing body of evidence, including from the International Monetary Fund, which shows that inequality in fact acts as a brake on growth.

There is no one size fits all approach to tackle the challenge. But as our report argues – some obvious and common sense lessons stand out: progressive taxes and redistributive transfers make a huge difference; investment in universal and free public services – particularly education and health increase social mobility and reduce future inequalities; a focus on women and girls is not only necessary in its own right but crucial in reducing overall income and wealth inequality; redistribution of land can also be a crucial factor. And it will be crucial to develop new sustainable patterns of production and consumption that generate livelihoods and ensure people have enough to eat – whilst remaining within our planet’s ecological limits.

As the Welsh Government prepare a new cross-government plan to tackle poverty, instigate programmes to kickstart economic growth, and draft a new Sustainable Development Bill – Carwyn Jones and his Ministers must focus on using these opportunities to tackle Wales’ growing inequality – both social and economic – and put us on the path to a more sustainable economy, at the same time as building the resilience of Wales’ poorest communities to the storm that is already upon us.

Stephen Doughty is Head of Oxfam Cymru