Does inequality matter? This chapter from the 2005 Human Development Report, from the United Nations Development Programme (UNDP), sets out the reasons why inequality is important and looks at its different dimensions. It shows how interlocking inequalities in income, health and education disadvantage the poor and argues that even modest moves towards greater distributional equity could advance human development and accelerate progress towards the Millennium Development Goals (MDGs).
Inequality is a fundamental issue for human development. Extreme inequalities in opportunity and life chance have a direct bearing on human capabilities. Deep human development disparities persist between rich people and poor people, men and women, rural and urban areas and different regions and groups. These inequalities create mutually reinforcing structures of disadvantage that follow people through life cycles and are transmitted across generations. This is wrong for both intrinsic and instrumental reasons. Inequality violates basic precepts of social justice, but it is also bad for growth, bad for democracy and bad for social cohesion.
For many of the MDGs, evidence shows that a ‘trickle down’ approach to reducing disparities and maintaining overall progress will not work. Unless inequality is corrected, the principles of the MDGs will not be translated into progress at the required rate.
- Despite their roots in ideas about global justice and human rights, the MDGs do not directly address inequality; they are distribution neutral, and progress is measured by aggregating and averaging change at a national level.
- Their quantifiable targets lend themselves to policy responses rooted in technical and financial terms, while the real barriers to progress are social and political.
- Although absolute poverty and inequality are different concepts, they are intimately related. Progress towards the reduction of absolute poverty is heavily conditioned by inequality, not just in income but also in health, education and politics.
- The disparities hampering progress towards the MDGs are systemic and reflect complex hierarchies of advantage and disadvantage that are transmitted across generations, as well as public policy choices.
- Current patterns of progress are slowing the overall advance towards achieving the MDGs because the smallest gains are being registered among the households that account for the biggest part of the problem.
Increasing poor people’s share of growth should be a central part of strategies for achieving the MDGs and wider human development goals.
- Even modestly progressive growth can have a powerful impact on poverty. The quality and composition of growth matter as much as the quantity.
- Plans for achieving the MDGs at national level, including the Poverty Reduction Strategy Papers, should include measures for redressing extreme inequalities.
- The MDG agenda needs to go beyond national averages to address the structural inequalities linked to wealth, gender, location and assets that are hampering progress in human development.
- Specific policy interventions likely to have an impact are closing gaps in educational opportunity; fiscal transfers to raise the income of the poor; and a public investment focus on the markets in which poor people operate.
- Governments should expressly commit themselves to targets for reducing inequality and gaps in opportunity, in addition to aggregate MDG targets.
- Action is required at the international level to honour commitments to overcome extreme international inequalities made in the Millennium Declaration and create an enabling environment for human development.
