Ethics and values lie at the very heart of Agenda 2030,

and the STGs can be seen as a vision for how we want to

share the earth's resources among the whole of humanity.

We know that the earth's resources are finite and that

the human population is on track to reach

approximately 10 billion by the middle of this century.

Ethically, it's hard to argue that any one individual has

more or less right to development than any other person on earth.

Thus, at least in theory,

all should have equal right to the earth's resources.

It's clear, however, that there is currently tremendous inequality among

the global human population not only with respect to access to resources,

but also with respect to the rights of individuals.

And this inequality plays out with respect to most if not all of the STGs.

Inequality in access to fertilizers for example,

has clear implications for food security, SDG number two.

Similarly, inequality plays a role in SDG three, access to healthcare,

SDG four access to education,

SDG five gender equality,

SDG seven access to energy,

SDG eight access to decent work, and so on.

Addressing inequality is however so essential to achieving

sustainable development that inequality has earned an SDG in its own right.

Number 10, which focuses on reducing inequality in all of its forms but where

many of the indicators used to assess progress

against the goal deal with income inequality.

While SDG number 10 focuses primarily on income inequality,

which is the difference in annual income received by individuals or countries per year.

We sometimes express economic inequality in

terms of wealth which is the total assets owned.

Obviously, when one is very poor,

increasing income or wealth is related to increasing well-being

as greater access to money usually equates to increased food security,

increased access to healthcare,

education, and so on.

However, the direct relationship between income or

total wealth and well-being breaks down at higher levels of income.

In other words, income or wealth are not in themselves

adequate metrics for assessing societal development or human well-being.

This is, of course, one of the reasons why a target in SDG 17 is to develop

metrics that can supplement

traditional economic metrics for assessing societal development.

Wealth inequality is largely driven by

the unequal ownership of capital in its many forms,

not just financial capital,

but also human, natural, physical,

and social capital all of which contribute to human opportunity and well-being.

There's been a general increase in net private wealth in recent decades.

On the other hand, net public wealth that is public assets minus

public debts has declined in nearly all countries since the 1980s.

In other words, wealth has become more

concentrated in private hands in recent decades than it was earlier.

Not only has wealth and income become more concentrated in private hands,

but it is also now concentrated in fewer hands than it was a few decades ago.

Here, we see a graph showing the percentage of national income that was earned by

the wealthiest 10 percent of the population in various countries since 1980.

If we take the USA and Canada as an example,

we see that in 1980,

the richest 10 percent of the population received 34 percent of national income.

In 2016, the wealthiest 10 percent received 47 percent.

The pattern is the same in most countries although the rate of change in

terms of income and wealth inequality differs from country to country.

When we look at the distribution of wealth globally,

we see that the wealthiest one percent of humanity owns about half of

all household wealth in the world and that

the poorest 70 percent owns less than three percent of the total wealth.

Income inequality has important implications for society.

Research has related greater equality in income to higher average life expectancies,

lower homicide rates, decreases in obesity,

better educational outcomes, fewer teenage mothers,

lower imprisonment rates, lower levels of mental illness,

and higher levels of trust in the societies.

We still do not understand all of the causal links

between inequality and the societal parameters.

Nevertheless, the fact that these relationships exist gives us a good reason to

seek a better understanding of inequality

and how we might be able to reduce it in the future.

I, therefore, talked to Kate Raworth,

Senior Visiting Research Associate from the Environmental Change Institute at

Oxford University and author of

Doughnut Economics: Seven Ways to Think Like a 21st Century Economist.

I asked her about the historic theory and belief about inequality and economic growth.

Kate, a lot of people have told me that inequality is inevitable when you have growth,

but when growth becomes high enough then that inequality will disappear.

Can you tell me what's behind that story?

Yeah, it's a fascinating story.

This widespread belief that's been held in economic policymaking for over half a century,

it goes back to 1955 when the brilliant American Economist, Simon Kuznets,

gathered together a little bit of data on the UK, the U.S., and

Germany looking at how income inequality had changed over

time as those countries grew and when he plotted the data on the page,

he was really surprised by what he found because it looked as if to say

that inequality at first increased and then it decreased and he was surprised.

He thought that by logic,

the rich would get richer,

not the poor catching up.

And he didn't understand it.

In fact, he gave lots of caveats when he first published his work.

The trouble is his caveats got pushed to the side and the little upside down

U-shape that he described got drawn and labeled as the Kuznets curve.

And then it took on a life of its own and came to be

used almost as a mantra in policymaking that when it comes to inequality,

first as countries grow,

it's going to get worse before it gets better again.

In fact when development economics took off,

there was a belief among one of its founding fathers that development must

necessarily be an egalitarian process so Kuznets curve had

huge grip on policymakers minds that we have to concentrate

income in the hands of the wealthy because

only that will kickstart growth in the economy.

Equality was something that we had to wait for later.

So if it's on the curve, isn't it right.?

Well, no it's not true because the fascinating thing is that

Thomas Piketty particularly came in his book Capital in the 21st Century.

He came back and he looked at the data Kuznets had collected and he

said this story is indeed true for these countries at that moment in time.

But it was a very particular moment in time Kuznets was

measuring pre-war to post-war in the UK, the U.S., and Germany.

Now, war has the tendency to destroy the capital of the wealthy and post-war,

governments in these countries invested massively in public redistribution,

and public healthcare and education and public goods.

So it was war and public spending that actually bend the curve down,

not the inherent workings of the market.

Subsequently, when people have looked for this Kuznets curve,

they haven't been able to find it.

And the experience of East Asia, for example,

since the 1980s shows some countries that were very low income countries.

They grew very fast,

but they kept inequality down,

and they had falling poverty rates.

So this somehow defied the prediction of a curve.

And then in many of today's richest countries,

many OECD countries, inequality has widened again,

even if they continue growing.

So, in many of these countries,

inequality has its highest level that it's been in 30 years.

Both of these experiences completely defy the predictions of the Kuznets curve.

It turns out that curve does not exist.

Countries can go through many different kinds of

relationship between economic growth and inequality.

And I think the real insight is that this is not a law of economic motion.

We don't have to have things getting worse before they can get better.

It's a question of economic design, and that,

I think, is an exciting opportunity for 21 century economic thinking.

Economic design, you mean economic policies?

It was after all policy in some ways I guess that meant that

inequality declined after the war in the countries that you were talking about.

So it's economic policies you're talking about?

Absolutely. In the design of institutions.

And first of all, not believing that it's normal for inequality to get worse,

but thinking inequality is an outcome of economic institutions that we create.

In the 20 century,

the focus on distributional issues was very much on redistributing incomes.

But I think we need to go deeper than that.

I mean, the goal of SDG 10 is for the poorest 40 percent of people in

society to have their income growing faster than the national average by 2030.

That's a phenomenal turnaround of the way economies happen now.

So we need to go deep into the economic structures.

And I think for the 21 century,

instead of merely redistributing incomes,

we need to look at redistributing the sources of wealth creation.

Now, these are at the level of individual human being.

Wealth lies in our health and our education.

So it's a big thumbs-up for the SDG goals

to focus on investing in the health and education of all,

but also ownership of housing.

Many countries have housing markets where

landlords dominate and charge extractive levels of rent.

That can be redesigned to funnel cooperatively owned a community owned housing.

The real excitement, I think,

comes in terms of access to energy and access to ideas.

In the 20 century, energy came from coal-powered fire-stations.

In the 21 century,

it comes from renewable energy,

which is distributed through networks by design.

So it's asking for far more distributed design ownership of energy systems,

and some countries already have this.

In Germany, for example,

has high levels of household ownership of Germany's future energy system.

So this can be replicated throughout low and high income countries.

And in terms of ideas,

instead of having a system which is dependent

upon intellectual property rights and patents,

we can promote open source design and

the creative commons where ideas are shared online open source.

It's a very different design of the fundamental structures of an economy.

And I believe these are really important ways in which

the 21 century economy is going to be far more distributive by design,

and this will help create far more equitable economic progress.

Okay. So what you're actually saying is that you think that if we have

these redistributive systems within our economic system,

that this might actually be a way to help

the lowest income earning peoples to get a faster rate of income?

Absolutely. I will take the experience in East Asia.

After the war, Japan had a very dramatic land reform ensuring that many,

many small holders owned plots.

When Japan then opened its economy up to the world,

the poorest people benefited massively because they

had a claim in the wealth creating process.

And I think that can be extended from land to access to energy and

ideas to redesign enterprises rather than being shareholder owned.

They can be employee owned or cooperatively owned.

There are many new innovations that are being tried out in countries all over the world,

countries rich and poor,

that show a more equitable design of

the great institutions far more effectively shares income with the poorest.

But Kate, all of this is about people, about individuals.

What about countries? There's also inequality between countries.

Right. And when we talk about inequality,

we need to be clear whether we're looking within

an individual country or talking about inequalities between countries.

Both matter of course.

When it comes to between countries,

the inequality at the global scale is

greater than the level of inequality in any one country alone.

So it also requires attention.

And one shocking fact that was written by the Global Financial Integrity NGO,

they found in 2012,

for all the money,

all the finance that was flowing into the world's lowest income countries,

twice as much is flowing out of them

again because for all the money that comes in is aid,

a lot was flowing out from corporations using tax havens,

from debt repayments, unfair terms of trade.

So when it comes to looking at tackling inequality in the world,

we need to think about the relations that are set in

between high and low income countries in terms of debt,

finance, aid, remittances, trade relationships,

and the use of tax havens.

Again, we need to restructure or redesign institutions of

the global economy to ensure far more value created remains within

the lowest income countries if they are to have a chance of earning

enough money and generating economies that can meet the needs of all of their citizens.

So, in fact, one of the really interesting leavers in terms of

reaching the Sustainable Development Goals could

actually be something like our trade agreements?

Oh, absolutely. It's crucial because

trade agreements determine the terms on which countries open up their economies.

As any country has witnessed,

they can have dramatic effects on which sectors flourish and which die.

And so, it's crucial not only to focus on

meeting the individual goals of the Sustainable Development Goals,

but to think about the institutional relationships

between countries that aren't so clearly set out in the SDGs,

but fundamentally will determine whether or not we can

indeed eradicate poverty on a scale of ambition the SDGs have by 2030.

But the bottom line really is we're not going to achieve

sustainable development without some pretty serious reformation of our economic system.

Oh, yes. And on that,

I would say don't believe last century's myths that there are

laws of economic motion that inequality has to get worse before it gets better,

that pollution also has to get worse before it gets better.

It's not true. These are questions of economic design,

and that's why it's an incredibly exciting time to be

an economist and to jump in and ask,

how can we design a redesign economic institutions so that we do

indeed meet the needs of all within the means of the planet and achieve these SDG goals?

Kate, it's not only an exciting time to be an economist.

It's an exciting time to be here.

Having to deal with the SDGs is absolutely fantastic.

So thank you very much for being here with me.

Thank you.

Inequality is in many respects,

the elephant in the room when it comes to achieving sustainable development.

Historically, economic prosperity has been based on

how we use the global environment and the earth's resources.

We now know however that these resources are finite.

Already the activities of

the approximately seven billion humans living on

earth are affecting the function of the planet as a whole.

If all of these seven billion people had incomes matching

those in developed countries and spent them with similar consumption patterns,

the human impact on planetary processes could potentially

result in the earth being a much less hospitable planet for humanity.

And we know that this population of seven billion will within

about three decades likely grow to around 10 billion individuals,

each of whom have a right to development.

All of this means that business as usual when it comes

to using resources is clearly not an option.

There's an urgent need to decouple our understanding of development and

prosperity from resource use and traditional metrics of material wealth.

In addition however, there is a seldom iterated,

but always present issue of to

what degree sustainable development will require

a redistribution of wealth or rights to resources.

This tension has plagued the climate negotiations within

the United Nations Framework Convention on Climate Change, UNFCCC,

since their inception with developing countries

fearing that their agreeing to restrictions on emissions of

greenhouse gases will deprive them of

the development opportunities that developed countries have already exploited.

The tension between developed countries,

whose development led to the current levels of greenhouse gases in the atmosphere,

and developing countries has not been totally relieved.

However, with the adoption of the Paris Agreement in 2015,

it has been accepted that countries will be allowed to

contribute differentially to the reduction of

greenhouse gas emissions and that the developed countries will aid

developing countries in achieving development without excess release of greenhouse gases.

Thus, the adoption of the Paris Agreement and

the continued process of combating human-caused climate change give us hope that

progress towards developing a just distribution of global resources will

also be possible as we pursue fulfillment of the Sustainable Development Goals.

Inequality

The Sustainable Development Goals – A global, transdisciplinary vision for the future

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