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Tackling Inequality and Social Justice: A Global Imperative

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Abstract

A second major weakness of traditional economic policy is the continuing lack of effective programs to make income distribution within and between countries fairer. Many distinguished economists and philosophers have strongly advocated action to target inequitable distribution, but their recommendations have made little headway against the resistance of political and practical status quo. Chapter 5 reviews the recently renewed concerns with inequality within and among nations, particularly focusing on the plight of developing countries. For advanced countries, rising inequality in recent decades has become more apparent and is problematic for all OECD countries. Some have implemented effective social welfare policies to counter these effects, but all must recognize and adapt to the global and national impact of technological change and globalization. The recent work of Thomas Piketty and Joseph Stiglitz arguing for this direction of effort is particularly important. Developing countries, particularly in sub-Saharan Africa, face much graver problems than OECD countries and have much less capacity to tackle them. The chapter makes the case that the driving aim of aid for less developed countries, regions and populations should be to promote PFM capacity and responsibility of national government as a basis for sustainable development and fulfillment of the UN Sustainable Development Goals, aimed among other things at alleviating poverty. But so far, aid under these initiatives has been relatively ineffective, Modern technology combined with application of international standards of PFM practice can do much to empower developing and emerging market countries. Ghanaian experience over two decades is used to illustrate both the severe problems and the possibilities of success within a national PFM reform strategic framework. Project and program failure in this area will have major consequences not only for the least developed countries but for global security and prosperity.

Keywords

  • Inequality
  • Trickle-down
  • Justice
  • Capabilities
  • Capital
  • Sustainability
  • PFM
  • Governance
  • ICT
  • Demography

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Chart 5.1

Notes

  1. 1.

    Keynes (1930) Economic Possibilities for Our Grandchildren.

  2. 2.

    Robert Skidelsky and Edward Skidelsky (2012) have suggested, first that “[t]he awkward question Keynes did not face was how far the rich should go in postponing the arrival of their own “Bliss” to help the poor” (p. 23), which they label ‘Keynes’ mistake’. They provide a definition of what Keynes might have defined as the common good and suggest a set of policies that could move toward an explicit government commitment to achieve the common good rather than just continuing material growth. However, too many factors in the current democratic institutional framework are likely to work against initiating such a reform program in the near future and the task of gaining political and public support would also need to be explicitly considered, as this book discusses.

  3. 3.

    Data on developing countries is not of high quality, which limits definitive assessment. However, Cristoph Lakner (2016) a colleague of Branko Milanovic, used available data to argue that inequality in developing countries “remains at a higher level than during the 1980s…and is substantially greater in the developing than in the developed world”. See also Jason Hickel citing World Bank data https://www.theguardian.com/global-development-professionals-network/2016/apr/08/global-inequality-may-be-much-worse-than-we-think. Measurement of inequality, particularly in less developed economies, raises a host of problems regarding reliable measurement.

  4. 4.

    Sen links the proposed framework to the concept of Nyaya in classical Sanskrit jurisprudence literature, where realization of justice is seen as a matter of judging society in its entirety not just its institutions and rules.

  5. 5.

    These characteristics are similar to those of fundamental science and research—and free-rider effects have likely limited the level of investment in all such potentially game-changing, but highly uncertain, forms of public policy including reducing inequality.

  6. 6.

    Alan Auerbach and Lawrence Kotlikoff ( https://newrepublic.com/article/131517/weve-measuring-inequality-wrong ) argue that for the US inequality should be measured by after-tax spending and taking into account lifetime spending, not at a point in time. Their analysis shows that spending inequality is much smaller than income inequality because of the progressivity of the tax system—and argue against more progressive taxation. There is no doubt that many issues regarding measurement need to be considered, but both globally and in the US data showing growing inequality present a strong case for a major effort to investigate the problems in greater depth, including more analysis of the most appropriate set of measures to address the problems and propose solutions.

  7. 7.

    See http://davidharvey.org/2014/05/afterthoughts-pikettys-capital/

  8. 8.

    See also discussion of various forms of capital in Chap. 4.

  9. 9.

    See discussion of memes and paradigms in Chap. 1.

  10. 10.

    See https://unstats.un.org/sdgs/report/2016/The%20Sustainable%20Development%20Goals%20Report%202016.pdf (PDF)

  11. 11.

    As a practitioner in this area for many years, I consider that PFM reform has experienced a low priority in this competition for funds in large part because it cannot be characterized by so-called SMART indicators of performance in comparison with programs that have easily measurable outcomes such as power generation, roadworks or child mortality-related programs.

  12. 12.

    See pp. 270–274, where he lays much of the blame on the Bretton Woods Institutions—the IMF and World Bank—who were given joint leadership roles in guiding implementation. But he says they “reveal split personalities, championing the MDGs in public speeches, approving programs that will not achieve them, and privately acknowledging, with business as usual, that they cannot be met!” (p. 271)

  13. 13.

    Initiated by the IMF and the World Bank in 1999 and required governments in low income countries to prepare formal papers describing the macroeconomic, structural and social policies to be undertaken over the medium-term to promote growth and reduce poverty. By January 2014, 126 full and 59 interim PRSPs had been prepared. Mechanisms for ensuring coordination have not been clearly elaborated and PRSPs have since been replaced with country strategies and planning documents.

  14. 14.

    An outline of policy can be gained from the websites of each organization. At a summary policy level neither organization articulates the need for high priority to be placed on improving PFM as a means to ensuring sustainability. In practice, both have encouraged PFM reform for many years and the Bank has lent a significant amount to computerization of accounting systems, which have been supported by PFM technical assistance from both organizations as well as from bilateral sources and the multilateral development banks.

  15. 15.

    As indicated in UNDESA (2015), the evolution of the Aid Effectiveness agenda up to the 4th High Level Forum and key aid management issues are covered in Allan (2013).

  16. 16.

    Other SDGs have changed the notion of development partnership in different ways: MDGs 4, 5 and 6 are put in more general terms, as are MDGs 2 and 3, and likely this move is more in accord with improving coordination with work that is already underway and flexibility of goal setting at the national level.

  17. 17.

    This term is now standard in development assistance documents to emphasise shared responsibility for results between recipient and donor countries. The language is aspirational, but it denotes a significant objective.

  18. 18.

    My comments in this chapter, while based partly on experience with the World Bank in PFM reform associated with its GIFMIS project from 2010 through to the present, is drawn from several sources, including published Bank and IMF reports.

  19. 19.

    Progress in using country systems, the importance of ICT in helping to establish greater use of country systems, the necessity of doing so as part of improving PFM , and practical difficulties of implementing the Paris Declaration on Aid Effectiveness are described in Allan (2013).

  20. 20.

    As emphasized by William Dorotinsky and Joanna Watkins (2013) the term GIFMIS is overused to describe Government Financial Management Information Systems (GFMISs), which very often simply represent automation of budgeting, accounting transactions without covering the full range of PFM functional requirements or integrating planning, budgeting, accounting, reporting and auditing on a single database. The Ghana project has not yet fulfilled all of these aims (as indicated in the text) but is being designed as an integrated system, which will serve as the platform for implementing its PFM reform strategy.

  21. 21.

    This project was built on earlier efforts to develop an integrated PFM Reform Program (PUFMARP) incorporating a computerized Budgeting and Public Expenditure Management System (BPEMS), which was initiated in 1996 and supported by the World Bank, DFID, the EU and CIDA (see review of PUFMARP by Mary Betley and others (2012).

  22. 22.

    See also Robert Engelman (2016).

  23. 23.

    The present way of providing support is largely due to limited resources available either for technical assistance or for IMF surveillance and oversight of fund support programs. Both the IMF and World Bank tend to provide technical support on a regional basis by providing a single advisor to cover several countries and periodic high-level support to advisors through short ‘missions from HQ or a regional office. These policies are also sometimes fuelled by concerns that long-term advisors may be ‘captured’ by the administration and become less effective over time. The present system is far from being effective.

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Allan, W. (2017). Tackling Inequality and Social Justice: A Global Imperative. In: The Last Empires. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-59960-1_5

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