WASHINGTON, April 25, 2012 – India’s economic growth, projected to slow down to around 7 percent in 2012, is the envy of many nations.
But there’s another side to India’s booming economy: Economists worry that the gap between the country's rich and poor is widening as well.
Brazil, meanwhile, is celebrating the fact that 31 million people have moved into the middle class over the past decade. All the while, the country’s famously high level of inequality continues to decline.
And then there are the Northern European countries of Sweden and Finland, long known for their egalitarianism, where the inequality curve has been pointing upwards in recent years.
What is going on and what, if anything, can governments do to promote stable and harmonious societies in a global economy?
Leading economists gathered at the World Bank in April to discuss challenges countries face as they try to balance economic growth or recession with disparities that can lead to social unrest.
“Inequality has come back to the center of the development agenda in the post-crisis world,” Otaviano Canuto, the World Bank’s vice president of poverty reduction and economic management, said in his opening remarks. “Wealth inequality is seen by many as the most serious challenge facing both developed and developing nations.”
Holding children back because they lack economic and educational opportunity is not just morally wrong, Canuto said, “but also an obstacle to progress.”
Inequality politically sensitive matter
Kaushik Basu, the chief economic advisor in India’s Ministry’s of Finance, joked that for years, India solved its inequality problem “by not measuring it.” Now, however, growing disparities can no longer be swept under the rug, he said.
Poverty in India declined an impressive 7 percent over the last five years, but while the incomes of the country’s poor are rising, they cannot keep pace with the swelling incomes of the rich. Such gaps, “cannot be tolerated,” Basu said.
Transferring money from the rich to the poor can help even out differences, but it can also scare capital and skilled workers away.