OF Discussion Board n°21 – 29 October 2021

Question asked : « Inequalities seem to accelerate in every part of the world due to Covid and otherwise. Unlike in the climate debate, in social issues we do not have a proper threshold for catastrophe. This leads to a possible overestimation of social resilience and leaves the issue as such largely untackled. Drawing on the particularities of your region or on your area of expertise, what should/can be done in priority? »

Thanks for those of our contributors who ventured to react to the this question posed in this Discussion Board.

Editorial – Rowing together to trim down the Gini coefficient
by Virgile Perret & Paul H. Dembinski

Beyond the health consequences of the pandemic, evidence shows that the COVID-19 crisis may result in increasing the levels of poverty and inequality for years, if not generations. This outcome is not inevitable. However, insufficient responses to the crisis deepen inequalities both between and within countries and intensify public discontent, paving the way to “social turmoil and unrest”, as stated by Bruno Valerio.
The costs of the pandemic are being borne disproportionately by poorer categories of society since low-income households are more exposed to health risks and more likely to experience job losses and sharp declines in wellbeing. At the same time, the pandemic is a boon for the wealthy: in response to the economic collapse in March and April 2020, central banks injected enormous amounts of liquidity into financial markets, keeping asset prices high while economic activity slowed down. Some of the biggest winners are those with high stakes in the technology sector.
Against this background, Tara Kan Bhala suggests using the Gini coefficient as a measure of how close a country or the world is to economic upheaval: “The Gini coefficient gauges the income inequality of a region, where 0 corresponds with perfect equality and 1 corresponds with perfect inequality. Perhaps nations begin seriously reforming economic policies when their Gini coefficients are above 0.4 (United States) and red lights start flashing trouble when a country scores above 0.5 (South Africa, Brazil).”
But how tackle inequality? According to Etienne Perrot, “the adequate responses must address both ownership rights through anti-trust regulations to counter the abuse of a dominant position, policies through redistributive taxes, and education so as not to confuse emulation and competition.” Other policy responses may include “reforms of the transparency and other features of firm governance, broader acceptance of countries’ right to control cross-border capital movements”, as pointed out by Andrew Cornford.
To implement these policies, the first condition is that inequalities should be on the political agenda, which is not the case everywhere, as Yuriy Temirov illustrates with the case of Ukraine. But policy measures alone are not sufficient to trim down inequalities. They have to be complemented by a cultural, transformative process for learning to “row together” (Fratelli tutti) – as stated by Domingo Sugranyes – to increase our socioeconomic resilience.

 

« … perfectly predictable socio-economic inequalities … ”

The pandemic only reveals perfectly predictable socio-economic inequalities. Pope Francis had alerted the international community as soon as the first vaccines appeared. The causes of these glaring social inequalities mix the institutional side through the right of property, the politics increasingly tempted by nationalism, and the spiritual bathed in the materialistic individualism of modernity. The adequate responses must therefore address both property right through anti-trust regulations to counter the abuse of a dominant position, policies through redistributive taxes, and education so as not to confuse emulation and competition, distinguishing between the elite and the financial success.

Etienne Perrot
Jesuit, Dr. Economics sciences, editorial board of the magazine Choisir (Geneva), editorial adviser of the journal Études (Paris)

« … the Gini coefficient as a measure of how close a country is to economic upheaval… ”

In the global climate crisis, anything over 2°C above the average pre-industrial temperature leads to unmitigated disaster. In a similar vein, I suggest we use the Gini coefficient as a measure of how close a country or the world is to economic upheaval. The Gini coefficient gauges the income inequality of a region, where 0 corresponds with perfect equality and 1 corresponds with perfect inequality. Perhaps nations begin seriously reforming economic policies when their Gini coefficients are above 0.4 (United States) and red lights start flashing trouble when a country scores above 0.5 (South Africa, Brazil). Of course, these watershed levels need further research, but it would be enlightening to have an idea of the income inequality thresholds of social disaster.

Kara Tan Bhala
President and Founder of Seven Pillars Institute for Global Finance and Ethics

« … public support will be essential to act to avert a total catastrophe … ”

Despite its importance, GDP as an indicator should no longer be the only way we measure economic success. Fairer economy would mean tackling health inequalities, and getting to grips with issues that prevent individuals from certain ethnic or socioeconomic backgrounds meeting their full potential. We need to embrace means of improving wellbeing and advancing social mobility, build on promoting social inclusion as well as addressing poverty. New plans must be put in place to achieve a more sustainable economy in a more equal and socially just society, and this cannot just be an aspiration: it must be seen as critical to our survival. In recognizing the profound challenges, public support will be essential to act to avert a total catastropheThe corona virus is still alive and risk lies in whether this will be possible.

Archana Sinha
Head, Department of Women’s Studies, Indian Social Institute, New Delhi, India

« … rowing together (Fratelli tutti) …”

I don’t see a theoretical answer to this extremely vast question. My reaction can only be in terms of (modest) action-oriented commitment: “rowing together” (Fratelli tutti), i.e. trying to identify social projects of high solidarity value which help people to emerge from poverty on their own capabilities, and look for means – money, goods, time – in order to increase the scope and impact of such communities. We need business and people in business to get much more decidedly involved in these kinds of projects. This is, among many other organisations, what we try to do with The Voluntary Solidarity Fund (VSF International www.thevsfinternational.org) and VSF Spain (www.vsfespana.org). Everybody is welcome to join.

Domingo Sugranyes
Director of a seminar on ethics and technology at Pablo VI Foundation, past Executive Vice-Chairman of MAPFRE international insurance group

« … an effective wealth tax and a global minimum corporate tax … ”

With the Covid-19 pandemic the gap between the rich and the poor, in particular the income gap, has increased as Pope Francis, among others, has stated in several occasions. It is undeniable that the trend had already started several decades ago, however with the Covid-19 inequalities have reached record levels that do necessitate strong internal reforms. If no actions will be taken, such as an effective wealth tax and a global minimum corporate tax, the possibility of social turmoil and unrest will be inevitable. In Italy, political parties are literally unable to agree and set the slightest kind of agenda for a proper “patrimoniale” (wealth tax or asset tax), preferring to keep the country into an extremely dangerous status quo.

Valerio Bruno
Researcher in politics and Senior Research Fellow at the Centre for Analysis of the Radical Right (CARR)

 

« … fiscal measures, transparency, control of cross-border capital movements … ”

Much attention has been given to the wealth as well as the income dimension of the inequalities – the associated rents of the minority at one end, and the much lower and often stagnating incomes of the remainder. The latter comprises not only the working class but also parts of the middle class. Much commentary has also concerned the opportunities to hide wealth – and thus reduce tax exposure – provided by cross-border financial liberalisation and offshore financial centres. Policy responses to the inequalities should include fiscal measures, including improved taxation of the wealth of individuals and firms, reforms of the transparency and other features of firm governance, broader acceptance of countries’ right to control cross-border capital movements, and changes in legal definitions designed to facilitate controls over firms’ domestic and cross-border access to different economic activities and industries and thus to restrict regulatory arbitrage and opaqueness in firms’ operations.

Andrew Cornford
Counsellor, Observatoire de la Finance; past staff member of UNCTAD, with special responsibility for financial regulation and international trade in financial services

« … imaginative countermeasures of income … ”

The fundamental dynamic of any economy is summed up in the dictum “to those who have shall be given and they shall have more than they can use, and from those who have not shall be taken even what they have”. Covid also has set it in motion. Where the effects are beneficial – e.g. the reduction in travel by air – it should be encouraged. Further good news is that the deprivation inflicted by Covid on the deprived has been met – at least in places like Geneva – not by the usual blame, scorn and exclusion, but by imaginative countermeasures of income support and new forms of communication like Zoom.

Edouard Dommen
Specialist in economic ethics, former university professor and researcher in UNCTAD and president of Geneva’s Ecumenical Workshop in Theology.

« … first we have to think about youth … ”

The social deprivation problems are persistent and this fact routinizes somehow their existenceand hinders the definition of a social resilience threshold. Differentiated priorities emerged in South/Eastern Europe after the successive waves of crisis but first we have to think about youth since no country can sustain without giving hope to its members through a micro/macro strategy that includes:i. immediate recovery plan with emergency income support for the vulnerable groups ii. long-lasting work-related policies and investments on youth employment (work-based training, tax reliefs for innovative enterprises) iii. strategies of sharing the riskswith interregional cooperation and job retention schemesiv. protection and support of childhood integrity (tackling invisible work and poverty with financial benefits for low-income families and proper child/health-care, along with future-centered support such as home learning environment and early schooling interventions).

Christos Tsironis
Assoc. Prof. of Social Theory at the Aristotle University of Thessaloniki

« … in Ukraine, social inequality will not become a priority soon … ”

In Ukraine, social inequality has two primary sources: the legacy of the « socialist » totalitarian past and deformed oligarchic capitalism. At the same time, the initial period of transformation with the exacerbation of the problems of social inequality has dragged on dangerously. In 1991–2014, the domination of the interests of oligarchic groups over national interests acted as a brake on reforms. After the Revolution of Dignity, there was a political will to implement unpopular reforms, but they had to be carried out in conditions of the population’s fatigue from reforms, in the realities of Russian aggression. The promotion of reforms by Servants of the People is complicated by populism.In Ukraine, social inequality will not become a priority soon: at this stage of transformation, this issue cannot be a priority; the authorities do not have a correct understanding of the hierarchy of priorities; society’s perceptions of equality/inequality are distorted by collectivism and paternalism.

Yuriy Temirov
Assoc. prof., Dean of Faculty of History and International Relations, Vasyl Stus Donetsk National University