Online Bulletin no. 23
“By lifting the “small boats” of the poor and the middle class, we can build a fairer society and a stronger economy. Together, we can create greater shared prosperity – for all.” Christine Lagarde, Managing Director, International Monetary Fund [1]
The advantages of an egalitarian society
Several studies tend to show that equality is beneficial for all members of a society. In this issue of the Bulletin, the Comité explores and promotes this topic.
Since its creation, the Comité has based its actions and reflections on the mandate given to it under the Act to combat poverty and social exclusion.[2] Its first priority is to propose actions intended to increase the disposable income of people in situations of poverty and social exclusion. Although it has made the struggle against poverty and social exclusion its main objective, the Comité recognizes the importance of building a society that is more egalitarian and conducive to better social cohesion.
An idea embraced by international bodies
Several voices tell us that inequalities of all kinds are, in general, detrimental to everyone, at every level of society. Among those voices, some are more surprising than others, because they come from bodies that are not in the habit of making such socially-oriented affirmations. For example, over time, the International Monetary Fund and the World Bank have adopted positions that in some cases contributed to increasing inequalities and to harming the situation of population groups who, from the economic point of view, are the most vulnerable. These bodies now admit that they underestimated the effects of some measures on economic growth and social inequalities. In fact, in recent publications, they point out that increases in inequality are a threat to sustainable economic growth.
In the words of the World Bank: “Such inequalities are associated with high financial cost, affect economic growth, and generate social and political burdens and barriers. But levelling the playing field is also an issue of fairness and justice that resonates across societies on its own merits.” The Bank adds that: “[...] The evidence that equity-enhancing interventions can also bolster economic growth and long-term prosperity is wide-ranging. To the extent that such interventions interrupt the intergenerational reproduction of inequalities of opportunity, they address the roots and drivers of inequality, while laying the foundations for boosting shared prosperity and fostering long-term growth. Reducing inequalities of opportunity among individuals, economies, and regions may also be conducive to political and societal stability and social cohesion. In more cohesive societies, threats arising from extremism, political turmoil, and institutional fragility are less likely.”[3]
Speaking for the International Monetary Fund (IMF), its Managing Director, Christine Lagarde, affirms that a reduction in excessive inequalities would be a gain for everyone.[4] According to a study published by the IMF, a one percentage point increase in the income share of poor and middle class people could bring about a GDP increase verging on 0.4 points over five years, while the same increase among wealthier people would correspond to a decrease of 0.08 GDP points. That represents a difference of almost 0.5 points. The IMF further says, “Our findings suggest that—contrary to conventional wisdom—the benefits of higher income are trickling up, not down.” Thus, inequality reduction is a positive step from both the economic and social points of view.
In a publication on global inequality,[5] UNICEF points out that countries where the level of inequality has increased have experienced slower annual GDP growth per capita. UNICEF also mentions that a former chief economist at the World Bank has pointed out that income distribution is as important as growth in reducing poverty and that redistribution is a legitimate objective of governmental policy to offset the market tendency to concentrate resources. Thus, a fairer distribution tends to have more rapid impacts than growth on the reduction of poverty. Still relying on World Bank statements, UNICEF says that a more equitable distribution is not an impediment to growth. In fact, it tends to stimulate consumption, increase productivity and contribute to maintaining growth itself.
It is not wealth that makes societies
happy; it is equality of conditions.[6]
The UNICEF report, supported by the work of Wilkinson and Pickett, also points out that income inequality slows down economic growth, gives rise to health and social issues (mental illness, abuse of illegal drugs, criminal behaviour, violence, etc.), generates political instability and contributes to the aggravation of social inequalities. Wilkinson and Pickett have shown that numerous elements deteriorate when inequalities increase in a country: life expectancy, social cohesion and mobility, anxiety, infant mortality, obesity, confidence levels, etc. According to these two epidemiologists, negative health indicators affect not only the poorest but also the richest.[7]
Moreover, in egalitarian countries, people show greater civic-mindedness, take greater care of public property and have a better quality of life, regardless of their level of income or schooling.
Other organizations, including the United Nations Development Program (UNDP) and the Organisation for Economic Co-operation and Development (OECD), speak of inclusive growth. For the UNDP, “[...] inclusive growth is about social and economic policies that focus on ensuring that citizens are included—as workers, entrepreneurs and consumers of public and private goods. In addition, growth will not be inclusive if some groups are discriminated against, overtly or covertly.”[8]
The OECD affirms that several elements other than income level can impact subjective well-being. The elements that can act on people’s satisfaction with their life include, in particular, health, level of schooling, personal safety and work conditions. Thus, inequality of opportunity is considerably detrimental to growth and well-being, as are inequalities in health, which cause diminished quality of life, and income inequalities.[9]
Québec voices
In Québec also, several actors are speaking out for more equality, including the Institut du Nouveau Monde, which affirms that poverty and inequalities have a very high cost, not only in terms of human capital and diminished well-being, but also in financial terms, a weight supported by taxpayers as a whole. Furthermore, there is a negative relationship between inequalities and the size of the middle class. Briefly put, it is better to aim for equality.[10] According to the Institut, if the income of the richest 1% in 2012 had remained at the same level as in 1982, the average increase of $1,600 for each taxpayer would correspond to a total increase of more than $10 billion.[11]
Finally, it can be noted that in 2011, the Montréal Direction de santé publique (DSP) published a report on health inequalities in Montréal[12] in which it is noted that households with an income below the Market Basket Measure threshold have a high risk for health problems; they are more likely than others to run into obstacles with respect to access to care, to have poor housing and to be unable to allocate an adequate portion of their budget to a healthy diet. The problem is a lack of money, which is evidenced by the dramatic increase in recourse to Montréal food banks.
The DSP also notes that education, employment and income levels, quality of the physical environment and access to care profoundly impact health. Social inequalities are reflected by the birth weight of babies, the incidence and prevalence rates of illnesses and the associated mortality risks. These elements can cause life expectancy differences of several years.
The DSP goes on to say that the various levels of government have the power to adopt and apply policies that promote increases in incomes, democratization of education, construction and renovation of public housing and the delivery of social and health services that are both preventive and curative.
A desired effect: improved social cohesion
The Council of Europe defines social cohesion as “the capacity of a society to ensure the well-being of all its members—minimizing disparities and avoiding marginalization—to manage differences and divisions and ensure the means of achieving welfare for all members.”[13] The essential characteristics of social cohesion are the following: shared allegiances and solidarity, strength of social relationships and shared values, feeling of shared identity and of belonging to the same community, mutual trust and reductions in differences, inequalities and social exclusion. Social cohesion is an ideal toward which every society that is concerned about the well-being of its members should aspire.
Given all the negative consequences and all the positive effects of equality recognized by the bodies named above, one can hope that society as a whole will multiply its efforts to bring about a more egalitarian world, in which improved wealth sharing will contribute to improved social fabric, to improved “community life” for all classes of society and to ensuring more sustainable economic growth. Our leaders must take note of the advantages offered by equality and adopt more policies aimed at reducing inequalities.
1
[1]. INTERNATIONAL MONETARY FUND. Address given on June 17, 2015. Online version: www.imf.org/en/News/Articles/2015/09/28/04/53/sp061715 (consulted on June 6, 2017).
[2]. CQLR, Chapter L-7.
[3]. WORLD BANK. Poverty and Shared Prosperity 2016, Overview, 22 pages.
[4]. INTERNATIONAL MONETARY FUND. IMF SURVEY,June 17, 2015. Online version: www.imf.org/en/News/Articles/2015/09/28/04/53/sonew061715a (consulted on June 6, 2017).
[5]. UNICEF. L’Inégalité mondiale, August 2012, 35 pages. (Full version in English only.)
[6]. Kate PICKETT and Richard WILKINSON. Pourquoi l’égalité est meilleure pour tous, 2013, Les Petits matins, 512pages.
[7]. Interview with Richard Wilkinson. Online version: www.mondequibouge.be/index.php/2014/03/%C2%AB-l%E2%80%99egalite-est-benefique-pour-tous-meme-pour-les-riches-%C2%BB/ (French only, consulted on May 4, 2017).
[8]. UNITED NATIONS DEVELOPMENT PROGRAM. Online version: www.undp.org/content/undp/en/home/ourperspective/ourperspectivearticles/2011/11/23/inclusive-and-sustainable-growth-is-the-answer-ajay-chhibber-.html (consulted on June 6, 2017).
[9]. ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. Report on the OECD Framework for Inclusive Growth, 2014, 62 pages.
[10]. INSTITUT DU NOUVEAU MONDE. Les inégalités, un choix de société? Mythes, enjeux et solutions, 2015, 58pages. (French only.)
[11]. Nicolas ZORN. Blogue de l’Institut du Nouveau Monde, Online version: www.inm.qc.ca/blog/dinegalites-10-milliards-de-plus-99/ (French only, consulted on June 6, 2017).
[12]. AGENCE DE LA SANTÉ ET DES SERVICES SOCIAUX DE MONTRÉAL, DIRECTION DE SANTÉ PUBLIQUE. Rapport du directeur de santé publique 2011 ─ Les inégalités sociales de santé à Montréal, 2012, 160 pages. (French only.)
[13]. COUNCIL OF EUROPE. New Strategy and Council of Europe Action Plan for Social Cohesion. Online version: www.coe.int/t/dg3/socialpolicies/socialcohesiondev/source/2010Strategy_ActionPlan_SocialCohesion.pdf (consulted on June 6, 2017).