U.N. sounds alarm on worsening global income disparities
UNITED NATIONS Wed Jan 29, 2014 11:50am EST
The UNDP warning echoes remarks from U.S. President Barack Obama in his annual State of the Union address on Tuesday, in which he said there was a widening gap between rich and poor in the world’s biggest economy and that while the stock market has soared, average U.S. wages have barely budged.
The UNDP report said income inequality increased by 11 percent in developing countries over the two decades between 1990 and 2010. The majority of households in developing countries — more than 75 percent of those nations’ populations — are living today in societies where income is more unequally distributed than it was in the 1990s, the report said.
The widening income gap comes as some major developing countries – such as China andIndia – have seen strong economic growth and an overall increase in national wealth. But that wealth has not been evenly distributed, which has contributed to greater inequality in those societies.
“The sharpest increases in income inequality have occurred in those developing countries that were especially successful in pursuing vigorous growth and managed, as a result, to graduate into higher income brackets,” the UNDP report said.
“Economic progress in these countries has not alleviated disparities, but rather exacerbated them,” it said.
In an interview with Reuters, UNDP chief Helen Clark made clear that this negative trend is reversible and that one of the key components is creating quality employment opportunities.
“The key thing is the focus on jobs – jobs, jobs, jobs,” Clark said, adding that it was important for governments to pay attention to ways of improving the skills of its labor force.
She also touched on the subject of the widening income disparities in countries like Chinaand India, which have seen significant levels of economic growth in recent decades.
“It’s the nature of the growth,” she said. “If it’s uneven growth … it does create tensions within society because people can see that others are doing much better than them.”
“The China example shows that you get fast growth and poverty reduction, but you also get the growing inequalities,” Clark said. “And this is of concern to China’s leadership.”
The report said there was evidence that increases in inequality over the last two decades were mainly due to trade and financial globalization processes that weakened the bargaining position of labor.
Clark said one of the problems with globalization is that it “has proceeded in a very deregulated world.” She advocates more regulation of international trade and financial flows but without eliminating risk and the ability of companies to generate profits.
“It’s a balance,” she said. “You have to leave room for risk.”
(Reporting by Louis Charbonneau, editing by Tom Brown)
Hong Kong (CNN) — China’s urban rich are making far more than they officially report, suggesting the wealth gap in the world’s second largest economy is much higher than previously thought, according to a new study.
The China Society of Economic Reform released a survey Monday that found “gray income” was 6.2 trillion yuan (U.S. $1 trillion), or 12% of GDP. “Gray income” can range from illegal cash from kickbacks to unreported income and gifts.
“The result has highlighted expanding social inequalities and policy issues surrounding official corruption and income distribution,” said Wang Xiaolu, who led the research for the CSER, in an article in Caixin Online. “The richer the household, the more likely it receives shadow income.”
The study comes a day after Bo Xilai, a once high-flying politician, was sentenced to life in prison for bribe-taking,15 years for embezzlement and seven years for abuse of power. Bo is appealing the verdict.
The CSER surveyed 5,344 urban families in 18 Chinese provinces. The results suggest the top 10% of households earn nearly 21 times more than the poorest 10%. The National Bureau of Statistics places income disparity far lower, saying China’s wealthiest make 8.6 times more than its poorest. “China is in a dangerous zone as one the most unequal countries in the world,” Wang wrote.
The survey found that rich families gain 80% of their wealth from business and on average “have decent gains” in stock markets, whereas most middle and lower income families lose cash in the capital markets, Wang said. “We can’t rule out that some of these business gains are problematic, or even illegal, because many survey takers count kickbacks as business gains,” he wrote.
Much of the high gray income is linked to the loose credit handed out between 2009 and 2010, Wang wrote, as well as the rapid increase of government investment during the same period.
“To stop widening income disparity and unfair allocation, in addition to anti-corruption campaigns, there needs to be gradual but firm progress in economic, political and social reform that moves the country closer to the rule of law with public scrutiny over administrative power,” he said.