Syndicate content

economics

Tackling inequality is a game changer for business and private sector development (which is why most of them are ignoring it)

Duncan Green's picture

Oxfam’s private sector adviser Erinch Sahan is thinking through the implications of inequality for the businesses he interacts with.

Mention inequality to a business audience and one of two things happens. They recoil in discomfort, or reinterpret the term – as social sustainability or doing more business with people living in poverty. Same goes for the private sector development professionals in the aid community (e.g. the inclusive business crowd).

A good example is the UN Global Compact, which steers companies on how to implement the SDGs. They completely side-step the difficult implications of inequality on business and redefine the inequality SDG as boiling down to social sustainability or human rights / women’s empowerment goal. All good things that we at Oxfam also fight for, but these can all happen simultaneously with increasing concentration of income and wealth amongst the richest – i.e. rising inequalityWe know that rising inequality is one of the great threats to our society and economy. So why is business and the aid world so uncomfortable with tackling it head on?

Man picks tea leaves at Kitabi Tea Processing FacilityInequality is a relative rather than an absolute measure. This often makes it a zero-sum game – to spread wealth and income more equally, someone probably has to lose. But the intersection of business, sustainability and development has become locked into an exclusive focus on win-win approaches where there are no trade-offs and everyone gets their cake and eats it too. Addressing inequality often hits the bottom line – meaning changes to the prices paid to farmers, wages paid to workers, taxes paid to government and prices charged to consumers. But there is hope. Through a new lens (or metric) that should drive how business addresses inequality: share of value.

Don’t confuse this with Creating Shared Value, which is focused on the win-win (without commenting on how the created value is shared). What I’m proposing is a measure that compares businesses on how they share value with workers, farmers and low-income consumers. In fact the concept dates back to the original principles underpinning the fair trade movement some decades ago.

Quote of the week: Angus Deaton

Sina Odugbemi's picture

Angus Deaton at a press conference at the Royal Swedish Academy of Sciences"Statistics are far from politics-free; indeed, politics is encoded in their genes. This is ultimately a good thing."

- Angus Deaton, a British-American economist. In 2015, he was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of consumption, poverty, and welfare. The Nobel Prize website writes, "To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices. More than anyone else, Angus Deaton has enhanced this understanding. By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics."

Policy to research to policy in difficult places

Humanity Journal's picture

This post was written by Alex de Waal, the Executive Director of the World Peace Foundation and a Research Professor at The Fletcher School. It is a contribution to an online symposium on the changing nature of knowledge production in fragile states. Be sure to read other entries by Deval Desai and Rebecca TapscottLisa Denney and Pilar Domingo, Michael WoolcockMorten Jerven.

UNAMID Police Officer Patrols IDP Camp in DarfurThere’s a commendable search for rigor in social science. But there’s also an illusion that numbers ipso facto represent rigor, and that sophisticated mathematical analysis of the social scientific datasets can expand the realm of explanatory possibilities. Social scientific researchers working in what the Justice and Security Research Programme calls “difficult places”—countries affected by armed conflict, political turbulence and the long-lasting uncertainties that follow protracted crisis—should be extremely cautious before setting off on this path.

There’s a simultaneous search for policy relevance: for bridging the gap between the academy and the executive. We want our research to be useful and to be used; we want policy-makers to listen to us. But we risk becoming entrapped in a self-referential knowledge creating machine.

The holy grail seems to be to emulate economists and epidemiologists, whose highly technical analyses of real world data—and in the case of the latter, double-blind clinical trials—set a gold standard in terms of methodological rigor, alongside a truly enviable record of influencing policy and practice. But before embarking on this quest, it would be advisable to examine what social scientific scholarship might look like, if it actually reached this goal.

Quote of the Week: Thomas Piketty

Sina Odugbemi's picture

Thomas Piketty"This idea, according to which no one will accept to work hard for less than $10m per year... It's OK to pay someone 10, 20 times the average worker's salary but do you really need to pay them 100 or 200 times to their arses in gear?"

- Thomas Piketty, a French economist who works on wealth and income inequality. He is the author of the best-selling book Capital in the Twenty-First Century (2013), in which he argues that the rate of return on capital (wealth) in developed countries is persistently greater than economic growth. Other things being equal, he states, faster economic growth diminishes the importance of wealth in a society, while slower growth increases it. To counter the steady concentration of wealth, Piketty proposes a global tax on wealth. Piketty is also a professor at the École des hautes études en sciences sociales (EHESS), professor at the Paris School of Economics and Centennial professor at the London School of Economics.
 

Quote of the Week: Thomas Piketty

Sina Odugbemi's picture

Thomas Piketty"The success of my book shows there are a lot of people who are not economists but are tired of being told that those questions are too complicated for them." [...] “ What pleases me is that this book reaches ‘normal’ people, a rather wide public.”

- Thomas Piketty, a French economist who works on wealth and income inequality. He is the author of the best-selling book Capital in the Twenty-First Century (2013), in which he argues that the rate of return on capital (wealth) in developed countries is persistently greater than economic growth. Other things being equal, he states, faster economic growth diminishes the importance of wealth in a society, while slower growth increases it. To counter the steady concentration of wealth, Piketty proposes a global tax on wealth. Piketty is also a professor at the École des hautes études en sciences sociales (EHESS), professor at the Paris School of Economics and Centennial professor at the London School of Economics.

Have technology and globalization kicked away the ladder of ‘easy’ development? Dani Rodrik thinks so

Duncan Green's picture

Dani RodrikEconomic transformation is necessary for growth that can lead to poverty reduction. However, economic transformation in low-income countries is changing as recent evidence suggests countries are running out of industrialization options much sooner than once expected. Is this a cause for concern? What does the past, present, and likely future of structural transformation look like? Read on to find out why leading economist Dani Rodrik is pessimistic and what some possible rays of light are. 

Dani Rodrik was in town his week, and I attended a brilliant presentation at ODI. Very exciting. He’s been one of my heroes ever since I joined the aid and development crowd in the late 90s, when he was one of the few high profile economists to be arguing against the liberalizing market-good/state-bad tide on trade, investment and just about everything else. Dani doggedly and brilliantly made the case for the role of the state in intelligent industrial policy. But now he’s feeling pessimistic about the future (one discussant described it as ‘like your local priest losing his faith’).

The gloom arises from his analysis of the causes and consequences of premature industrialization. I blogged about his paper on this a few months ago, but here are some additional thoughts that emerged in the discussion. He’s also happy for you to nick his powerpoint.

Dani identified two fundamental engines of growth. The first is a ‘neoclassical engine’, consisting of a slow accumulation of human capital (eg skills), institutions and other ‘fundamental capabilities’. The second, which he ascribed to Arthur Lewis, is driven by structural differences within national economies – islands of modern, high productivity industry in a sea of traditional low productivity. Countries go through a ‘structural transformation’ when an increasing amount of the economy moves from the traditional to the modern sector, with a resulting leap in productivity leading to the kinds of stellar growth that has characterized take-off countries over the last 60 years.

Simulated Manufacturing Employment SharesManufacturing has been key to that second driver. It is technologically dynamic, with technologies spreading rapidly across the world, allowing poor countries to hitch a ride on stuff invented elsewhere. It has absorbed lots of unskilled labour (unlike mining, for example). And since manufactures are tradable, countries can specialize and produce loads of a particular kind of goods, without flooding the domestic market and driving down prices.

But that very dynamism has produced diminishing returns in terms of growth and (especially) jobs. Countries are hitting a peak of manufacturing jobs earlier and earlier in their development process (see graph). And it could get much worse – just imagine the impact if/when garments, the classic job-creating first rung on the industrialization ladder, shift to automated production in the same way as vehicle production.
 

"Journalism and PR: News Media and Public Relations in the Digital Age"

Sina Odugbemi's picture
journalist and public relations on cameraThe communication business worldwide is, at bottom, a collaborative tussle between two tribes: the tribe of journalists working for newspapers, magazines and broadcast stations versus the tribe of publicists and communicators who work for different organizations, and those personalities important and rich enough to afford full time support. For decades, if not centuries, there was no doubting which tribe was stronger. Journalists had the whip hand simply because they were the gatekeepers. They controlled access to mass publics, they shaped reputations, and they decided what mattered and what did not. When I was active in the media, both in Lagos and London, my colleagues and I disdained PR practitioners. They were supplicants, always imploring us to use a press release, always anxious about how a boss or the organization they worked for would be portrayed by our newspaper.

Well, according to John Lloyd and Laura Toogood, the pecking order is changing. In a new book published by the Reuters Institute for the Study of Journalism, University of Oxford, United Kingdom, the authors make the following case:
 

Public relations is booming at present, and its mechanisms and practices are being adopted by corporations and companies across the globe. Journalism in the developed world is undergoing a series of radical changes, and is available in a greater choice of forms than ever before. The first, however, is highly profitable: while newspaper, magazine, and some forms of broadcast journalism struggle to discover a stable model for making profits. This will not change soon.

Newspapers and magazines under pressure are thus pulling their editorial closer to public relations and advertising to secure funding, both in the carriage of native advertising and in using public relations narratives. The internet, which increasingly carries all media, blurs the distinctions which had taken physical form in the pre-digital era. (p. 129)

Davos: New Briefing on Global Wealth, Inequality and an Update of that 85 Richest = 3.5 Billion Poorest Killer Fact

Duncan Green's picture

This is Davos week, and over on the Oxfam Research team’s excellent new Mind the Gap blog, Deborah Hardoon has an update on the mind-boggling maths of global inequality. 

 
 



Wealth data from Credit Suisse, finds that the 99% have been getting less and less of the economic pie over the past few years as the 1% get more. By next year, if the 2010-2014 trend for the growing concentration of global wealth is to continue, the richest 1% of people in the world will have more wealth than the rest of the world put together.


Measurements of wealth capture financial assets (including money in the bank) as well as non financial assets such as property. It is not just inefficient to concentrate more and more wealth in the hands of a few, but also unjust. Just think of all the empty properties bought by wealthy people as investments rather than providing housing for those in need of a home. Think of the billionaire chugging out carbon emissions flying around in a private jet, whilst the poorest countries suffer most from the impacts of climate change and the poorest individuals living want for a decent bicycle to get to school or work.
 

A Seismic Shift in Improving the Behaviour of Large Companies? Guest Post from Phil Bloomer

Duncan Green's picture

PhilBloomerMy former boss, Phil Bloomer is now running the Business and Human Rights Resource Centre (check out its smart new multilingual website). Here he sees some signs of hope that the debate on corporate responsibility is moving beyond trench warfare over voluntary v regulatory approaches. Fingers crossed.



‘Mind the gap’ is a refrain that any visitor to London’s Underground trains will have had drilled into their brains. In development and human rights, one of the most controversial issues is how to deal with the dangerous governance gap that has opened up between the powerful globalising forces in our economies, often led by large companies, and the often weak capacity of societies to cope with the problems and damage these forces can create.

A fortnight ago came a seismic shift in this debate. The UN Human Rights Council adopted a resolution to create an international binding treaty for transnational corporations. This comes three years after the adoption, by consensus, of the more voluntary, UN Guiding Principles on Business and Human Rights. Most observers put this major tremor down to rising frustration at the apparent glacial pace of implementation of the Guiding Principles by governments (only the UK, Netherlands and Denmark have so far agreed National Action Plans), and few companies are stepping up. The age-old, and sometimes theological, divisions between opposing panaceas of state-regulation v voluntary codes may be returning.

Are We Measuring the Right Things? The Latest Multidimensional Poverty Index is Launched Today – What do You Think?

Duncan Green's picture

I’m definitely not a stats geek, but every now and then, I get caught up in some of the nerdy excitement generated by measuring the state of the world. Take today’s launch (in London, but webstreamed) of a new ‘Global Multidimensional Poverty Index 2014’ for example – it’s fascinating.

This is the fourth MPI (the first came out in 2010), and is again produced by the Oxford Poverty and Human Development Initiative (OPHI), led by Sabina Alkire, a definite uber-geek on all things poverty related. The MPI brings together 10 indicators, with equal weighting for education, health and living standards (see table). If you tick a third or more of the boxes, you are counted as poor.

Pages