Thursday, October 16, 2014

Oxfam on inequality

Two interesting posts on inequality from Oxfam minds here and in a new blog on the subject here.  I was surprised by the blog entry Ducan Green refers to: the idea that we don´t know much about the poor is rather surprisingly (hasn´t Claire Melamaid seen this book for example?).  The problem is that, despite Piketty and all, we still know very little about the global rich: who they are, where they invest, how do they relate to the rich in other countries and how they influence the political process.

More importantly, there are many ways in which policies to reduce inequality at the top will benefit the people at the bottom in many, many countries.  Just three examples: (a) the most obvious is taxation: while it is true that taxing the rich may not benefit automatically the poor... it is clearly a necessary condition.  Latin America could not have expanded social policy in recent years if it was not because of higher rents from oil and natural resources which no longer go to the very rich.  (b) More interestingly, weakening the rich will also reduce their political influence, therefore improving the quality of democracy in many countries.  To use the terminology from Acemoglu and Robinson (even if it is always rather problematic), extractive institutions are to a large extent reproduced by the rich... and have high costs for the poor.  (c) More significantly and more connected to the work I am doing with Juliana Martínez Franzoni (see, for example, this paper), universal social policy will favour the poor and the middle class and, by promoting cross-class alliances will create pressures to increase taxes for the rich.  This is why true universalism (which is defined by similar, high-quality services for all) should be at the heart of an equitable development agenda.

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