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Inequality is Inefficient, Since it Constitutes an Impediment to Growth, Development and Sustainability

In the framework of its 37th session to be held in Cuba, ECLAC will present a new institutional document with its development proposal for the countries of Latin America and the Caribbean.
Press Release |
6 May 2018
Cover The Inefficiency of inequality PSES 37

The social gaps and lags that Latin American and Caribbean countries suffer today have a negative impact on productivity, fiscal policy, environmental sustainability and the spread of the knowledge society. In other words, inequality is inefficient, it is an impediment to growth, development and sustainability, ECLAC indicates in a new institutional document that it will present during its thirty-seventh session.

The study entitled The Inefficiency of Inequality emphasizes that pro-equality policies not only produce positive effects in terms of social well-being but also help create an economic system that is propitious for learning, innovation, higher productivity and environmental protection.

The document will be officially unveiled to the member countries and associate members of the Economic Commission for Latin America and the Caribbean (ECLAC) in the context of its most important biennial meeting, due to take place in Havana, Cuba on May 7-11. In it, the organization insists on the need to move toward a new development pattern that allows for achieving a virtuous circle between growth, equality and sustainability for present and future generations, without leaving anyone behind – as set forth in the 2030 Agenda and its Sustainable Development Goals (SDGs), approved by the United Nations in 2015.

Since 2010, ECLAC has positioned equality as a foundational value and non-negotiable ethical principle based on a rights perspective, putting it at the center of development, which is in keeping with this topic’s growing relevance in citizen demands and policy debates. This can be seen in the institutional documents presented at the four previous meetings: Time for equality: closing gaps, opening trails (2010), Structural change for equality: an integrated approach to development (2012), Compacts for equality: towards a sustainable future (2014) and Horizons 2030: Equality at the centre of sustainable development (2016).

Now, with The Inefficiency of Inequality, the United Nations regional commission reaffirms that the region needs to foster an environmental big push as the strategic pillar of industrial and technological policy, the creation of public goods and services, the transition toward less segregated territories and cities, advancement toward the digital economy, and a change in the energy matrix.

“The political economy of highly unequal societies and the culture of privilege are obstacles to progress in development with equality. The region still bears the colonial vestiges of a culture of privilege that normalizes social hierarchies and highly unequal access to the fruits of progress, political participation and production assets. We must consolidate a culture of equal rights, which is the direct opposite of the culture of privilege,” Alicia Bárcena, ECLAC’s Executive Secretary, stated in the document’s foreword.

Equality, productivity and democracy are complementary strategic goods (and one cannot be substituted for another), even more so in a world such as ours today that is experiencing sharp economic, political and environmental tensions, the senior United Nations official stressed.

The document indicates that equality is efficient because it creates inclusive institutions and a culture that rewards innovation and effort, and not economic actors’ social class, ethnicity, gender or political connections. In addition, it enables access to capacities and opportunities on equal footing, in a context of technological revolution; strengthens democracies, which are those that provide more of the public goods and positive externalities that technical change requires, economic and political stability, and care for the environment; and, in the global economy, it helps expand aggregate demand and reduce the intensity of domestic and external conflicts by promoting development.

In its study, ECLAC presents figures and indicators that reveal the current international context, characterized by inequality, the technological revolution, external vulnerability, weakened employment and economic instability resulting from excess financialization.

For example, it indicates that Latin America and the Caribbean is the world’s most unequal region, with an average Gini coefficient of 0.5 compared with 0.45 for Sub-Saharan Africa, 0.4 for East Asia and the Pacific, and 0.3 for the countries of the Organization for Economic Cooperation and Development (OECD). In addition, it is estimated that tax evasion in the region amounts to 6.7% of its Gross Domestic Product (GDP) in terms of income tax and the value-added tax alone, while in the social arena gaps in access to education, the high rate of teenage motherhood, and ethnic-racial discrimination continue to perpetuate inequalities.

There are also notable territorial inequalities between the different socioeconomic levels in aspects such as life expectancy, infant mortality, the illiteracy rate and access to drinking water in the home, to mention just a few. This is compounded by an economic model based on the extraction of natural resources, reduced and low-quality investment in infrastructure, gaps in the obtainment of sanitation, electricity and Internet, as well as the high costs resulting from the destructive effects of extreme climatological events that stem from climate change.

For these reasons, ECLAC reaffirms that the task that lies ahead for the region is to move toward sustainable development in its three dimensions: social, economic and environmental. To achieve this, it is necessary to revitalize investment and fully insert the region in the fourth industrial revolution, with a central focus on decarbonization and decoupling growth and environmental impact. “Moving toward this new development pattern requires the concurrence of a macroeconomy for development, social policies that strengthen equality and capacities, and industrial and technological policy designed around the environmental big push,” the organization indicates.


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