David Woodward is an independent consultant on development issues, author of Debt, Adjustment and Poverty in Developing Countries (1992) and The Next Crisis? Direct and Equity Investment in Developing Countries (2001), and is co-editor of Global Public Goods for Health (2003) For the occasion of The Development Studies Association Annual Conference 2013 16 November 2013, Birmingham Panel 25: Inequality and the Post 2015 Agenda, organised by the Broker http://thebrokeronline.eu/Articles/Inequality-is-politics

1. Inequality and the Post-2015
Agenda
David Woodward
Development Studies Association Annual Conference,
Birmingham, 16 November 2013

2. National Gini Coefficients:
Frequency Distribution (c2005)

3. National Gini Coefficients:
Frequency Distribution (c2005)
Interquartile
range

4. National Gini Coefficients:
Frequency Distribution (c2005)

5. National Gini Coefficients:
Frequency Distribution (c2005)

6. Global Income Distribution, 2005
Branko Milanovic (2012) Global Inequality Recalculated and
Updated. Journal of Economic Inequality 10(1):1-18, March.
Income pc (multiple of world average)

7. Global Income Distribution, 2005

8. Global Income Distribution, 2005

9. Global Income Distribution, 2005

10. Global Income Distribution, 2005

11. Global Income Distribution, 2005
Top 1%: 10.4%
(7 million people)
Bottom 60%: 10.1%
(4,200 million people)

12. Global Income Distribution, 2005
Income pc of top 1% =
260 times bottom 10%

13. Global Palma Index, 2005
Top 10%: 55.5%
Bottom 40%: 4.1%

14. Global Palma Index, 2005
Top 10%: 55.5%
Palma Index = 13.54
Bottom 40%: 4.1%

15. Global Palma Index, 2005
Top 10%: 55.5%
Palma Index = 13.54
Bottom 40%: 4.1%
60% of countries < 2.0
(Cobham & Sumner, 2012)

16. Woodward, D. (2013) "Incrementum ad
Absurdum: Global Growth, Inequality and Poverty
Eradication in a Carbon-Constrained World",
article submitted to World Economic Review.
http://werdiscussion.worldeconomicsassociation.org/w
NB all graphs use log scale

17. rising
declining

20. Decelerating
increase
Accelerating
decline

21. Composition of Poorest World Decile

22. Composition of Poorest World Decile

23. Poverty Eradication in a “Business-asUsual” World?
• Treat China and the rest of the world separately
• Extrapolate global decile income pc growth
relative to global GDP pc
• Assume (conservatively) lowest income is half
mean of lowest (non-China) decile
– (or 1% poverty can be dealt with by income transfers)
• Estimate
– Level of GDP pc required to eradicate poverty (+ GDP)
– How long to reach this income level at 1993-2010
global growth rate

24. Results ($1.25-a-day)
• Eradicating poverty
– requires GDP pc > $110,000 (2005 PPP)
• 11x 2010 level
• 3.3x high-income OECD average
– increasing global GDP by a factor of nearly 15
– takes >100 years at 1993-2010 global growth rate
• By comparison
– Poverty gap = 0.6% of global GDP (PPP)
– Poverty eradication = 0.04% of increase in GDP

25. Results ($5-a-day)
• Eradicating poverty
– requires GDP pc > $1.35m (2005 PPP)
• 135x 2010 level
• 40x high-income OECD average
– increasing global GDP by a factor of >170
– takes >200 years at 1993-2010 global growth rate
• By comparison
– Poverty gap = 6.7% of global GDP (PPP)
– Poverty eradication = 0.04% of increase in GDP

26. Progress to 2030 (Regional Approach)
• $1.25-a-day poverty <1% in Europe/Central
Asia and East Asia Pacific
• 1-4% in Middle East/North Africa and Latin
America/Caribbean
– NB wide country variations (esp. EAP)
• South Asia 12%
• Sub-Saharan Africa 37% (cf 2015 goal: 28%)
• Total poverty 700 million (2.5-3bn at $5pd)

27. A Gini Goal?
• Advantages
– Widely used
– Covers the whole income distribution
• Disadvantages
– Significance not intuitively obvious
– No clear ideal level (cf poverty, child mortality)
– Too sensitive to the middle of the distribution cf
extremes

28. A Palma Goal?
• Advantages
– Simple
– Clear meaning
• Disadvantages
– No “ideal” level
– No account of distribution within 10/50/40% bands
– Based on observed empirical regularity in country
data, which may not apply globally

29. A Convergence Goal?
• A target for narrowing gaps between income
deciles (eg by a quarter/a third/half)

30. A Convergence Goal?
• Advantages
– Intuitively clear
– Covers the whole distribution
• Disadvantages
– Multiple targets
– No account of distribution within deciles (esp. top)
• could supplement with target for top 1% share in top
decile.

31. Convergence Goal: an Illustration
(Gap Reduction ¼)

32. Gaps between Global Income Deciles (%)

33. Gaps between Global Income Deciles (%)
Greatest absolute
reduction at extremes

34. Convergence Goal: an Illustration
(Gap Reduction ¼)

35. Convergence Goal: an Illustration
(Gap Reduction ¼)
-16%
+0%
+16%
+37%
+40%
+53%
+65%
+78%
+94%
+122%

36. Convergence Goal: an Illustration
(Gap Reduction ¼)
All but top c 15%
gain income share
-16%
+0%
+16%
+37%
+40%
+53%
+65%
+78%
+94%
+122%

37. Convergence Goal: an Illustration
(Gap Reduction ¼)
All but top c 15%
gain income share
Poorest c 17% more than
double income share
-16%
+0%
+16%
+37%
+40%
+53%
+65%
+78%
+94%
+122%

38. Convergence Goal: an Illustration
(Gap Reduction ¼)
All but top c 15%
gain income share
Poorest c 17% more than
double income share
-16%
+0%
+16%
+37%
+40%
+53%
+65%
+78%
+94%
+122%
Top decile income
grows 1% pa less than
global GDP pc

39. Convergence Goal: an Illustration
(Gap Reduction ¼)
Top 10%
55.5%  46.6%

40. Convergence Goal: an Illustration
(Gap Reduction ¼)
Top 10%
55.5%  46.6%
Bottom 40%:
4.1%  7.4%

41. Convergence Goal: an Illustration
(Gap Reduction ¼)
Top 10%
55.5%  46.6%
Bottom 40%:
4.1%  7.4%
Palma index:
13.5  6.3

42. Convergence Goal: an Illustration
(Gap Reduction ¼)
Top 10%
55.5%  46.6%
Bottom 40%:
4.1%  7.4%
Palma index:
13.5  6.3
Highest except
Jamaica, Namibia,
South Africa

43. How do we do it?
• Income transfers?
– Needs are too great
– National resources inadequate
– International transfers not financially sustainable
– Politically untenable
– Logistically problematic

44. How do we do it?
• Employment/livelihoods in developing countries
• Requires
–
–
–
–
a better development model – economic transformation
a more supportive international environment
a more pro-development global system
more democratic global economic governance
• as well as
– a successful exit from the financial crisis
– an effective, pro-development solution to climate
change
• All absent from Post-2015 discussions (as MDGs)

45. Transformation Requires Investment
• Economic transformation = expansion,
diversification and increased productivity
• Requires investment
– in the right sectors
– commercially viable/competitive
– productive
– job-creating
– forward/backward linkages

46. Investment Requires…
• Demand growth (+external/domestic rebalancing)
– less restrictive macro policies
– wage growth proportional to productivity increase
• Technology
– access
– opportunity and capacity to adapt
• Infrastructure
– transport, communications, energy, social….
• Finance
– financial sector focused on intermediation, productive
investment
– mobilising diaspora resources – best of both worlds?

47. A Developmental State
• Solid tax base and collection capacity
• Adequate/appropriate infrastructure
investment
• Active industrial policy
• Productive deployment as well as production
of human capital

48. Global Economy
"Everyone is entitled to a social and international order in
which the rights and freedoms set forth in this
Declaration can be fully realised." (UDHR, Article 28)
“Everyone has the right to a standard of living adequate
for the health and well-being of himself and of his family,
including food, clothing, housing and medical care and
necessary social services” (UDHR, Article 25.1)
ie an entitlement to an international order conducive to
poverty eradication

49. Global Economy
• International financial system
– Financial stability
– Policy coordination
– Crisis prevention and effective resolution
– Management of tax competition
• International trade system
– Trade barriers, subsidies, etc
– Policy space for industrial policy
– Access to, and opportunity to adapt, technologies

50. Global Economic Governance
• Coherence/consolidation/codification
• Democratisation (cf national level)
– a system that will serve the interests of the
majority of the world population
• Time for a new Bretton Woods?